The morning was riddled with doom as stock markets cratered and then short covering came into effect off strong technical levels as volatility stalled. A clear buy signal for us is when the bulls of the highflyers are now rabid bears is to be wary. We saw positive divergence and then buying came in, the ‘Is There Is No Alternative (TINA)’ algos took hold. While the S&P closed lower for the fifth consecutive day and the Dow closed lower for the fourth consecutive day the bounce was hard enough to get the NASDAQ back in the green, will it hold after Powell tomorrow?
Enjoy live commentary from Our Trading Room at YouTube as the day wraps up – feel free to like and share
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 @mayhem4markets plot out 2022.
- WTI crude futures settled lower by 1.1%, or $0.83, to $78.11/bbl.
- February Nymex natural gas (NGG22) on Friday closed up by +0.104 (+2.73%).
- Freezing temperatures, the The National Weather Service said for New York City Monday tonight would drop to 13 degrees Fahrenheit (-11 degrees Celsius), the coldest in nearly two years. Also, the Commodity Weather Group said Monday that below-normal temperatures are likely to linger across the Great Lakes and Northeast through Jan 24.
- BNEF data showed gas flows to U.S. export terminals Friday were up +2.4% w/w at 12.2 bcf, modestly below the Dec 19 record of 13.1 bcf.
Metals and FX
- The U.S. Dollar Index increased 0.3% to 95.97
- February gold (GCG22) futures settled $1.40 higher (+0.1%) to $1,798.80/oz
- March silver (SIH22) on Monday closed up +0.053 (+0.24%).
- Bitcoin weaker at 41414 after breaking the channel and retesting 39600 low
- The Dow Jones Industrial Average -162.79 at 36068.87 (-0.5%) closed well off session lows. lower for the fourth consecutive day. All-time high at 36952.65.
- S&P index -6.74 at 4670.29 (-0.1%) declined for the fifth straight session on Monday, but only lost 0.1% after being down 2.0%. All-time high at 4818.62
- NASDAQ +6.93 at 14942.83 (+0.1%) a gain after being down 2.7% intraday. It had closed lower for four consecutive days, now down nearly 8% from its all-time high. NASDAQ bounced back after its worst week since February and the 200-day moving average (14690).
- Russell 2000 fell to 2,171.15 -0.40% -8.66 Russell 2000 closes 12% from its all-time high
- Apple AAPL $172.19▲ 0.02 (0.012%) off 168.17 low
- Apple $3 trillion at $182.86
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 today.
Ark of the Covenant not as it appears
- ARKK 84.64▲ 0.22 (0.26%)
- ARKG 54.24▼ 0.01 (0.018%)
- ARKX 17.77▼ 0.20 (1.11%)
- ARKF 36.07▼ 0.40 (1.10%)
- ARKW 106.66▼ 0.10 (0.094%)
Cboe Daily Market Ratios:
S&P 500 sector watch:
- 8 of the 11 S&P 500 sectors closed lower
- Health care sector advanced 1.0%.
- Industrials (-1.2%) and materials (-1.0%)
- Dow Jones Industrial Average -0.7% YTD
- S&P 500 -2.0% YTD
- Russell 2000 -3.3% YTD
- Nasdaq Composite -4.5% YTD
- German DAX, -0.9%
- France’s CAC -1.2%
- UK’s FTSE 100 -0.5%
- Italy’s FTSE MIB -0.75%
- Spain’s Ibex, -0.4%
- Hang Seng increased 235.16 points, or 1.08%, to 23,747.
- Shanghai stock exchange up 13.98 points, or 0.39%, to 3,593
- Indian Sensex up 553.31 points, or 0.93%, to close at 60,298 points.
- Singapore index also gained 21.50 points, or 0.67%, to 3,227.
- Japanese stock exchange was closed on Monday for Coming of Age Day, an annual holiday.
- The 10-yr yield hit 1.81% intraday before ending the session at 1.77%, or one basis point above Friday’s settlement.
- The 2-yr yield rose three basis points to 0.90%.
Following the turmoil in the market last week following the Federal Reserve System Chairman Jerome Powell took a decidedly hawkish tone today at last month’s FOMC and the release of Minutes which sent US stock markets sharply lower. That day in the Treasury market the 2-yr yield, which tracks expectations for the fed funds rate, rose seven basis points to 0.83%. The 10-yr yield settled the session four basis points higher at 1.71%, with growing expectations for a run-up to 2.00%.
IHS Markit (INFO 122.17, -3.83, -3.0%) and Albertsons (ACI 31.54 , +0.33, +1.0%) will report earnings prior to Tuesdays open.
- BlackRock Delivers Fourth Quarter Earnings in A Changing Interest Rate Environment – TRADERS COMMUNITY
- Citigroup Fourth Quarter Earnings Challenged by Consumer Banking Restructure – TRADERS COMMUNITY
- Wells Fargo Under New Management Deliver Fourth Quarter Earnings – TRADERS COMMUNITY
- World’s Biggest Bank JPMorgan Kicks Off Fourth Quarter Earnings Season – TRADERS COMMUNITY
- Big Banks JPMorgan, Citi and Wells Fargo Kick Off Earnings Season with Blackrock – TRADERS COMMUNITY
Fed’s VC Clarida is resigning two weeks early, was scheduled to resign on January 31, leaving on January 14 instead. The statement on Clarida’s early exit does not give a reason with suspicions of his trading scandal being the reasoning. It could simply be Brainard’s hearing is on the same day.
US in December added 199k non-farm payrolls jobs, less than forecasted 450k. November previous 210K revised to +249K. Wages increased more than expected and the jobless rate fell to the lowest since February 2020 to 3.9%. US Average Hourly Earnings (M/M) rose 0.6%. Change in private payrolls +211K Change in manufacturing payrolls +26K
Into New Year and U.S. domestic natural gas demand for heating has weakened Atmospheric G2 models said that warmer-than-normal temperatures in the eastern U.S. should continue to curb heating demand. Last week EIA reported a lower-than-expected draw of -31 Bcf of working gas in storage lower than expected. With the global energy crisis LNG exports continue to grow but we balance supply shortages with deliverability.
The ISM Non-Manufacturing Index for December pulled back to 62.0% (consensus 67.1%) from a record high 69.1% in November as the Omicron variant runs roughshod over the economy. The Prices Index increased to 82.5% from 82.3% in November. Earlier the ISM Manufacturing Prices Index fell to 68.2% from 82.4%. However, the services is 80% of the US economy, making it an inflation risk.
Welcome to 2022, WTI Oil futures have rallied after OPEC+ holds the status quo. We had Gasoline builds on expected year-end inventory release for tax assessment on December 31 on crude barrels. Last week EIA reported US Crude last Week crude drew -2144Kbbl (incl +2577kbbl build at Cushing). Gasoline stocks drew +10128kbbl. Utilization fell +.1% to 89.7%. Production +200k to 11,800 kbpd.
- NFIB Small Business Optimism Index for December on Tuesday.
- Big events for the market include testimony from Fed Chairman Jerome Powell Tuesday and inflation reports on consumer and producer prices.
- The week also marks the beginning of the fourth-quarter earnings season, with big banks JPMorgan Chase, Citigroup and Wells Fargo reporting Friday.
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!