Two things are certain it seems $SNAP gets crushed on warnings and Tesla and Natural Gas tears faces off punters. Prior to $SNAP’s earnings release the S&P 500 closed a tad shy of 4,000. We started off the Bank of Japan lowering its 2022 GDP growth forecast to 2.4% from 2.9% and the ECB announcing a larger-than-expected 50-basis point increase for its key lending rates. Initial jobless claims topped 250,000 for the first time since last November; the Philadelphia Fed Index in July collapsed -12.3 on a further drop in new orders. Tesla (TSLA 815.12, +72.62, +9.8% helped the algos trigger upside buys with better-than-expected earnings after yesterday’s close.
We head into tomorrow’s retail sales and more bank earnings with a Friday OPEX. The bounce also coincided with the reversal in energy futures and the strength in semiconductors, which hold a leading indicator status.
Germany is being rocked by the Energy crisis and its reliance on cheap Russian gas. German gas giant Uniper SE is in talks with the government over a potential bailout package of as much as 9 billion euros Bloomberg reports.
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
Live on YouTube
This week we have inflation data and more Central Bank action as a result yields, energy prices and the EURUSD USDJPY are in focus.
We talk through to today’s action and where to now ….
In today’s post market wrap live from the trading room traders discuss the patterns through the options and futures markets that have played out perfectly from last week to today. We discuss trading psychology, risk management and trader development in today’s markets. Listen to our technical and market psychology read on the day. Join the Traders Community Podcast crew @traderscom @knovawave @Mahdavi4 @MetaJohnny1 plot out 2022.
Around the table today was packed with the Fed, geopolitics, domestic political influence and distortions, reading sentiment, patterns and order flow. After hours earnings and chart pattern review. This is a high-risk market.
- NYMEX WTI crude oil futures settled the session down 3.4% to $96.49/bbl.
- Natural gas futures fell 1.2% to $7.79/mmbtu.
- Unleaded gasoline futures fell 3.7% to $3.15/gal.
- WTI off the 2022 high price of $129.44. The highest in 2008 was $147.27.
- EIA Forecasts US LNG Exports will Increase 22% in 2022 to 11.9 Bcf/d and to 12.6 Bcf/d in 2023
- EIA Raises 2022 Oil Production Forecasts, says OPEC Production Returned to Pre-Pandemic Levels
- Rystad Energy said the war-induced uncertainty is likely to continue to impact gas prices. “The gas market remains highly volatile, and news driven,” said Rystad analyst Fabian Rønningen. This week, in particular, “the market remains anxious for clarity on rules governing ruble payments for Russian gas supplies.”
Commodities and FX
- The U.S. Dollar Index slipped 0.2% to 106.89.
- Gold futures settled $13.20 higher (+0.8%) to $1,713.40/oz.
- Silver Futures 18.730 0.011 0.06
- Copper Futures 3.3105 0.0120 0.36
- Corn Futures 573.00 -17.00 -2.88
- Wheat Futures 808.75 -10.75 -1.31
- Bloomberg Commodity Index 115.86 -1.70 -1.45
- Bitcoin USD 23046 -88 -0.38
- Ethereum USD 1578.99 -7.74 -0.49
- Ripple USD 0.3640 -0.0032 -0.87
US Indices & S&P 500 sector watch:
- DJIA 32036.90 162.06 0.51
- Nasdaq Composite 12059.61 161.96 1.36
- S&P 500 3998.95 39.05 0.99
- Russell 2000 1836.69 8.74 0.48
- NYSE Composite 14871.13 92.67 0.63
- CBOE Volatility 23.11 -0.77 -3.22
- NYSE Adv 1938 Dec 1196 Vol 891 mln
- Nasdaq Adv 2550 Dec 1794 Vol 4.5 bln
- The energy sector (-1.7%) was one of two to close in negative territory. The other sector that closed with losses was communication services (-0.2%).
- Communication services was held down by AT&T (T 18.92, -1.56, -7.6%), T-Mobile (TMUS 133.18, -4.27, -3.1%), and Verizon (VZ 47.65, -1.42, -3.0%), which all traded down after AT&T beat on earnings but lowered its free cash flow guidance.
Market Pre-Market Notables
- JPMorgan (JPM 108.56, -3.35, -3.0%): JPMorgan Chase misses by $0.15, misses on revs; suspends stock buybacks
- Morgan Stanley (MS 75.00, +0.02, +0.1%): Morgan Stanley misses by $0.17, misses on revs
- Taiwan Semi (TSM 82.69, +1.40, +1.7%): Taiwan Semi beats by NT$0.62, beats on revs; guides Q3 revs above consensus
- Conagra (CAG 35.50, -0.24, -0.7%): Conagra beats by $0.02, reports revs in-line; guides FY23 EPS below consensus
- Intel (INTC 37.06, -0.15, -0.4%): Intel has informed customers that it plans to raise prices on a majority of microprocessors and chip products later this year, according to Nikkei
US Markets YTD
- Dow Jones Industrial Average: -11.4% YTD
- S&P 400: -14.9% YTD
- S&P 500: -16.1% YTD
- Russell 2000: -18.2% YTD
- Nasdaq Composite: -22.9% YTD
Key After Hours
- Boston Beer Co (SAM) misses by $0.31, reports revs in-line; guides FY22 EPS below consensus; expects FY22 depletions and shipments decrease of between 2% and 8%… SAM down 8.5%
- Capital One (COF) misses by $0.09, reports revs in-line… COF down 5.1%
- Corsair Gaming (CRSR) guides Q2 revs well below consensus due to macro-economic headwinds affecting consumer spending on gaming gear, especially in Europe… CRSR down 10.4%
- Intuitive Surgical (ISRG) misses by $0.06, misses on revs; increases share repurchase authorization to $3.5 bln; increases 2022 procedure growth guidance to 14-16.5% from 12-16%; narrows non-GAAP gross margin outlook to 69-70% from 69-70.5%, but expects to be towards lower end of range… ISRG down 12.4%
- Mattel (MAT) beats by $0.12, beats on revs; guides FY22 EPS in-line… MAT down 2.8%
- PPG Industries (PPG) beats by $0.09, reports revs in-line; guides Q3 EPS below consensus… PPG down 0.2%
- Seagate Tech (STX) misses by $0.30, misses on revs; guides SepQ EPS and revs below consensus; macro-related challenges continuing into SepQ; co is reducing its production plans… STX down 10.3%
- Snap (SNAP) beats by $0.01, misses on revs; doesn’t provide Q3 guidance due to uncertainties related to operating environment; authorizes $500 mln stock repurchase program… SNAP down 26.3%
Cboe Daily Market Ratios:
Recall in January: JP Morgan quant maestro Marko Kolanovic was out with a comment near lows that didn’t go unnoticed.
“Near term we recommend buying the dip on US indices given oversold conditions… though medium term we favor EM/China/Europe on a regional basis on improving activity and easing headwinds, and the UK on valuation.”Marko Kolanovic Jan 10 2022
- We stay positive on equities and expect omicron will ultimately prove a positive for risk assets, as this milder but more transmissible variant speeds the transition from pandemic to endemic with a lower human toll,
- As this wave fades, it will likely mark the end of the pandemic
- omicron’s lower severity and high transmissibility crowds out more severe variants and leads to broad natural immunity
- signs of supply constraints potentially passing their worst point
Recall back in October he said to buy the dip because fears of higher yields were overdone adding the market could absorb higher yields. “We don’t expect a broad market selloff unless yields were to rise above 250-300 bps (US 10y), which we don’t foresee in the near term,” From there the S&P 500 rose 11.5%.
Perhaps this time it’s’ different but nevertheless the algorithms liked it that day but from then ……… not so much
U.S. Treasuries the 2-yr note yield closed down 15 basis points at 3.09% while the 10-yr note yield fell 13 basis points to 2.91%.
- 2-yr: -15 bps to 3.09%
- 3-yr: -13 bps to 3.07%
- 5-yr: -17 bps to 3.01%
- 10-yr: -13 bps to 2.91%
- 30-yr: -10 bps to 3.07%
- Into The Vortex – EIA Reports a Lower Natural Gas Build of 32Bcf with Scorching Summer Draws – TRADERS COMMUNITY
- Tesla Earnings Beat but Margins Decline, sold $936 Million Bitcoin to Raise Cash – TRADERS COMMUNITY
- Solid U.S. 20-year Treasury Bond Auction with High Yield of 3.42% on Strong International Demand – TRADERS COMMUNITY
- Around The Barrel – Gasoline Demand Destruction with Higher Prices Filtering Through – TRADERS COMMUNITY
- Weekly Initial Claims 251K (consensus 240K); Prior 244K; Weekly Continuing Claims 1.384 mln; Prior was revised to 1.333 mln from 1.331 mln This report covered the period in which the survey for the July Employment Situation Report was conducted.
- July Philadelphia Fed Index -12.3 (consensus -1.2); Prior -3.3
- June Leading Economic Index -0.8% (consensus -0.5%); Prior was revised to -0.6% from -0.4%
Index – Last – Chg – % Chg
- UK: FTSE 100 7270.51 6.20 0.09
- Germany: DAX 13246.64 -35.34 -0.27
- France: CAC 40 6201.11 16.45 0.27
- Italy: FTSE MIB 21196.59 -151.83 -0.71
- Spain: IBEX 35 8012.70 -16.20 -0.20
- Stoxx Europe 600 424.39 1.88 0.44
- Switzerland: Swiss Market 11134.74 75.25 0.68
- DJIA 32036.90 162.06 0.51
- Global Dow 3539.41 -4.05 -0.11
- ECB Raises Key Rates 50 bps vs 25 bps Expected Approves Transmission Protection Instrument – TRADERS COMMUNITY
- Gas flow through the Nord Stream pipeline has resumed but at a slower rate.
- The U.K.’s conservative party leadership race is down to Rishi Sunak and Liz Truss.
- U.K.’s June Public Sector Net Borrowing reached GBP22.12 bln (expected GBP13.20 bln; last GBP11.80 bln).
- France’s July Business Survey fell to 106 from 108, as expected.
Index – Last – Chg – % Chg
- Hong Kong: Hang Seng 20574.63 -315.59 -1.51
- Japan: Nikkei 225 27803.00 122.74 0.44
- China: Shanghai Composite 3272.00 -32.72 -0.99
- India: S&P BSE Sensex 55681.95 284.42 0.51
- Australia: S&P/ASX 6794.3 35.1 0.52
- S. Korea: KOSPI 2409.16 22.31 0.93
- Bank of Japan Monetary Policy Unchanged as Expected Raises Inflation Forecast – TRADERS COMMUNITY lowered its forecast for Japan’s 2022 GDP growth to 2.4% from 2.9% while the inflation forecast was raised to 1.3% from 0.9%.
- South Korea’s POSCO Holdings will reportedly lower stainless-steel prices in August due to a lower cost of nickel.
- South Korea’s exports through the first 20 days of July were up 14.5% yr/yr with chip exports increasing 13.2%.
- Local governments in China are expected to help developers resume projects that have been delayed.
- Japan’s June trade deficit reached JPY1.38 trln (expected deficit of JPY1.51 trln; last deficit of JPY2.39 trln) as imports grew 46.1% yr/yr (expected 45.7%; last 48.9%) and exports rose 19.4% yr/yr (expected 17.5%; last 15.8%).
- Hong Kong’s June CPI was up 1.8% yr/yr (expected 1.6%; last 1.2%).
What You Need Know About Quantitative Tightening QT Bifurcations Explained – TRADERS COMMUNITY
Most of us are familiar with QE but what is QT? When the Fed reduces its balance sheet it is known as quantitative tightening, the flipside of quantitative easing. The US Federal Reserve at its December FOMC put the world on notice that tighter financial conditions are ahead. What does it mean? The possible Bifurcations would make Mandelbrot wince.
The market will receive a few more noteworthy economic reports on Friday:
- 9:45 ET: Preliminary July IHS Markit Manufacturing PMI (prior 52.7) and preliminary July IHS Markit Services PMI (prior 52.7)
Trust you all had a great day, sleep well and get your trading plan sorted.
Any questions please feel free to ask them below. Trade Smart!