March 5-11, 2023

FEAR NOT Brave Investors

Where have we been and where are we going? Join our weekly market thread on Traders Community…

The Week That Was – What Lies Ahead?

Contents

Click on the links below to navigate to the relevant section.

• Part A: Stock markets
• Part B: Bonds
• Fed and Banks
• Part C: Commodities
• Energy – Oil and Gas
• Gold and Silver
• Part D: Foreign Exchange
• Geopolitics and Economics
• Economy Week ahead

Editorial

The bond market is directing traffic, clear as day if you want to sit back and watch with open eyes. Further to that the 2/10 Treasury and Bund spreads are the fuses within. A wonderful life for Central Bankers who continue to play with no thought to the damage being done to main street as they raise rates, and some would say not know why. Out of the ramblings or otherwise from central bankers’ their impact on the ebbs and flows of markets, further influenced via optionality’s and algorithms, like one big casino at times.

Treasury were again the conduit for the stock and forex markets. The 10-yr note yield spat 4.00%, to finish down 11 basis points to 3.96% Friday. The 2-yr note yield fell five basis points to 4.86%. The U.S. Dollar Index fell 0.5% with it to 104.50. The move set up those positioned to the constant negative chatter. The stock market reversed with bonds and closed out the week with a reactive rally.

The S&P 500 opened Friday above its 50-day moving average 3,987 igniting delta and gamma covering algorithms which we saw reflected in the VIX and CDS (we discuss further below). The main indices closed near their best levels of the day. The Dow, Nasdaq, and S&P 500 rose 1.2%, 2.0%, and 1.6%, respectively. The Russell 3000 Growth Index rose 1.9% and we saw a 1.4% gain in the Russell 3000 Value Index.

Other than utilities (-0.7%) and consumer staples (-0.4%) the S&P 500 sectors all gained on the week. Materials (+4.0%), communication services (+3.3%), and industrials (+3.3%) led reacting to China reporting stronger-than-expected Manufacturing PMI and Non-Manufacturing readings for February.

WTI crude oil futures rose 4.6% for the week to $79.79/bbl and natural gas futures surged 28.7% to $3.14/mmbtu. The U.S. Dollar Index fell 0.7% for the week to 104.50.

It is somewhat amusing to watch all the latent experts on gamma, same day options and the like. a little bit of knowledge can be dangerous among the herd. The moves have also been spectacular when the fear or greed sides are fully sated. Natural gas futures are a parody of it all. Again, there was a reason we went deep on collective market cognitive dissonance with our readers and members last week.

It was all for everyone to see in energy markets, just take Fridays WSJ gaming by OPEC and UAE on Friday and what it did to the price. Take Tesla’s price action in and around the investor day and finally the bond market reversal on Friday. Good times, as long as you’re not one of the lambs reacting to the shearer.

What also stood out to us with all the noise and the big option position going on was VIX closed Friday down 3.2 for the week to 18.49. The VIX was at 29 on November 9th, down from the October high of almost 35. Now with regard to being a head of the curve and collective market cognitive dissonance take a look at CDS price action.

• Investment-grade Credit default swap (CDS) prices dropped six this week to 71 bps (2023 low 66bps), compared to 92 bps on November 9th (September high 114bps).
• High-yield CDS sank 33 this week to 433 bps (2023 low 408bps). This compares to 540 bps on November 9th (September high 640bps).
• Investment-grade corporate yield spreads to Treasuries closed the week 32 bps lower than November 9th at 120 bps (2023 low 115bps).
• JPMorgan CDS ended Friday at 65 bps, Goldman at 83 bps,
• Bank of America at 69 bps, down significantly from November 9th levels of 90, 120, and 97 bps, respectively.
• European high-yield (“crossover”) CDS fell 22 this week to 397 bps, down from 523 bps on November 9th (September high 695bps).
• Emerging Market (EM) CDS dropped 15 this week to 229 bps. This compares to 276 bps on November 9th (September high 346bps).

What is all that telling us?

Data this week was in that slot of solid, but not too solid with a few dingers.

The bond market reacted strongly to this week’s data. The 10-yr note yield surged past 4.00%, hitting 4.07% at its high, before pulling back to 3.96% by Friday’s close. The 2-yr note yield, which is more sensitive to changes in the Fed funds rate, rose eight basis points this week to 4.86%.

• US Services Sector PMI Continues Return To Expansion in February – ISM
• February ISM Manufacturing PMI 47.7, Fourth Straight Month Sub-50.0%
• FAO World Food Price Index Fell in February for Eleventh Consecutive Month
• European Manufacturing Production Rose First Time Since May 2022
• American Consumer Confidence Falls Sharply with Short-Term Income Prospects
• US Home Prices Fall Again in December FHFA House Price Index Shows
• Chicago Economic Activity Contracts Further ISM PMI Shows in February
• U.S. Home Prices in December Fell for Sixth Month, San Francisco decline Worsened – S&P CoreLogic Case-Shiller
• Texas Manufacturing Activity Contracts Further, Dallas Fed New Orders Index 9th Straight Negative Month
• U.S. Pending Home Sales Rise 8.1% in January for Largest gain in 2-1/2 Years

The Credit cycle downturn is coming to the surface.

We have the reflective destabilizing Monetary Disorder. Take a peek at China and the markets collective cognitive dissonance to the property market there, the shadow banking as just one example. Have a look around the world. The hope is the collective mass continues to evolve and survive, while each time the destruction is evident in massive disproportion shifts of wealth and attempts of mind, if not physical control of the masses. Dial that back and try and get in the minds of those trying to right the ship and the market components that matter, not what the dribblers think matter.

Here’s a thought, knowing about the power of cognitive dissonance does not necessarily protect you from its effects. Traders are only too aware of this eureka moment when you grasp it. Why some of the best trades you ever do, are the ones you don’t. In option parlance, being delta neutral sometimes is the best trade.

Key this coming week will be the commencement of the next round of such indicators that will test whether these gains were one-offs or something that is sustainable. The key will be the extent to which downside risks to the US economy have been reduced enough to influence global central banks, and how markets react.

Ahead is BOJ, RBA, BOC, Powell, CeraWeek, NPC and Jobs

Eyes will be on top macroeconomic reports that will emphasize the health of the US and global economies. Eyes and ears will be on central bankers. Potentially key testimony by Fed Chair Powell will lead the way. We also get meetings from the RBA and Bank of Canada, that may (or not given the unreliable nature of data) have prematurely turned hesitant to hike further. Governor Kuroda will mark the end of an era at the BoJ. The National Bank of Poland, BCRP (Peru) and Bank Negara (Malysia) round out the central bank calendar.

Commodity markets will be focused upon China’s National People’s Congress as it lays out new budgets, ramblings with its growth and inflation targets. Energy markets will be attending or listening in to the S&P Global’s CERAWeek event.

Bond markets will be watching the:  $40 bln 3-yr Treasury note auction results Tuesday, Wednesday the $32 bln 10-yr Treasury note reopening results at 13:00 ET; Thursday the $18 bln 30-yr Treasury bond auction results at 13:00 ET

Measuring U.S. Hotness

Key macroeconomic reports include US nonfarm payrolls and Canadian jobs. Factory Orders, January Trade Balance, January job openings and the US February Treasury Budget

Earnings reports include Ciena Corp. (CIEN) CrowdStrike (CRWD) Trip.com (TCOM), Dick’s Sporting Goods (DKS), Campbell Soup (CPB) DocuSign (DOCU) JD.com (JD), Ulta Beauty (ULTA) as the most prominent companies to report.

Multiple central Bankers are out to test their resolve, and the markets resolve.

Click here to see the Full Week Ahead List Below

Some things never change, when you think Greed is Good

Where is the fear?

Annualizing the New York Fed’s Q4 household borrowing data, Credit card debt expanded at a 26% pace and total debt at a 9.5% rate during the quarter. The Fed’s aggressive tightening cycle has had little affect on loose financial conditions.

“The United States is on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than previously forecast, as a result of rising costs for interest payments, veterans’ health care, retiree benefits and the military, the Congressional Budget Office said“

We saw the debt ceiling reached on January 19, prompting the Treasury to begin employing extraordinary measures that should prevent a technical default until early June. The expectation this is all political showboating, but what if it more than that?

Swirling greed and know it all came home to roost. FOMO (fear of missing out) and TINA (there is no alternative) ended how they always do.

Where to from here? It’s also okay to acknowledge and process any difficult emotions or experiences that you may have had during the past year. Looking back on the past year with perspective can help you to gain a greater understanding of what you have been through and how you have coped. I hope that you are able to find ways to manage any challenges that come your way and that you continue to feel fine moving forward. Embrace the chaos that is headed your way in 2023!

China; Behind the Iron Curtain

A big shift in 2022, China’s population is now falling and below that of India. China’s population fell for the first time since 1961 as births have steadily fallen in recent years despite the removal of the “one child policy”. The stalling working age population and its likely decline ahead means that potential growth in China is down from around 10% or so in the 2000s to around 4-5% now.

• “Plans by China’s Communist Party to revive a high-level economic watchdog after two decades signal President Xi Jinping push to increase oversight of the financial sector, analysts say, part of a wider tightening of control by Xi and the party. Xi… is planning to resurrect the Central Financial Work Commission (CFWC), which will be directly under central party leadership… The CFWC was introduced in 1998 during the tenure of Jiang Zemin, building a role for the party within the central bank and financial regulators but without influencing their business, state media reported at the time. It was disbanded in 2003.” Reuters (Joe Cash)
• “Xi Jinping, China’s most powerful leader since Mao Zedong, is preparing to use the upcoming rubber-stamp parliamentary session to launch a ‘forceful’ overhaul of the government by appointing his most trusted acolytes to oversee the financial, technology and other sectors. The annual National People’s Congress, which kicks off on Sunday, will replace Premier Li Keqiang, the head of government, and his team of technocrats that has been credited with steering the economy through the turmoil of the past five years… Xi pledged… that the party was planning ‘far-reaching’ changes, which aside from financial sector reform would include exerting closer control over the technology and science sectors and — perhaps most ominously for business — increased party involvement in ‘non-public enterprises’.” March 1 – Financial Times (Joe Leahy and Sun Yu in Beijing and Cheng Leng and Andy Lin)

The Market Tripod of Destruction.

• Firstly, financial asset overvaluation has swung way past any sound underlying economic wealth structure.
• Secondly over-leverage in crowded bets.
• Thirdly we have greed enthused, as always in these cycles, risk engineering, transfer and management that ignores or understands bifurcation and contagion outcomes.

Leverage has become toxic, a development that if not addressed will have deep and with far-reaching sequels. It’s not too farfetched to suggest that the markets are on the verge of a rupture that would be difficult to contain. Should the crisis of confidence dynamics that hit Britain feed into other markets a powerful global contagion could be unleashed. The markets are dislocated, and financial stability is at risk. A sobering thought is the UK is just the initial first world pension system in this cycle facing the harsh reality of a steep devaluation of assets and the prospect of widespread insolvencies and debilitating negative sentiment.

Inflation Matters

After the hotter US CPI, PPI and Core PCE we will see the last Eurozone inflation report before the ECB’s March meeting.

• Yields Jump as US Core PCE Inflation Comes in Hotter, Prior Month Revised Higher
• US Producer Price Inflation Hotter Than Expected in January, Prior Month Revised Higher
• US Consumer Inflation Moderating in January but Services Prices Still Accelerating

Inflation with Henry Kaufman

Kaufman is the legendary chief economist and head of bond market research at Salomon Brothers is someone who knows Inflation.  Henry Kaufman in an interview with Bloomberg’s Erik Schatzker Jan 14, 2022:

 “I don’t think this Federal Reserve and this leadership has the stamina to act decisively. They’ll act incrementally. In order to turn the market around to a more non-inflationary attitude, you have to shock the market. You can’t raise interest rates bit-by-bit.”

“The longer the Fed takes to tackle a high rate of inflation, the more inflationary psychology is embedded in the private sector — and the more it will have to shock the system.”

“‘It’s dangerous to use the word transitory,’ Kaufman said. ‘The minute you say transitory, it means you’re willing to tolerate some inflation.’ That, he said, undermines the Fed’s role of maintaining economic and financial stability to achieve ‘reasonable non-inflationary growth.’”

Independence – Never Take It for Granted Traders

“In aggregate, the market goes from order to disorder, and on that journey little pockets of order can form, including in commodities, bonds, stocks, currencies that circle back and reorder disorder. Then there is us the market player that reflects through order and disorder in an ever-evolving loop towards independence. It all starts with gravity and ends with equilibrium and back we go.” KnovaWave “The rules of market flux”

The Fed has kicked off its first real tightening campaign since 1994, with securities markets already at the brink of illiquidity and dislocation. Markets could soon be screaming for assurances of the Fed’s “buyer of last resort” liquidity backstop, while the Fed is prepared to begin withdrawing liquidity by selling Treasuries and MBS.

Another important aspect is the Fed doesn’t Control corporate pricing or wage decisions. Let us be clear geopolitical, climate change developments and what an out of depth, politically motivated administration are outside the Fed’s sphere of influence. There has been over $5.1 Trillion new “money” in 126 weeks, it’s a reasonable conclusion the Fed has lost control of Inflation.

Volatility

The VOLX`s underlying instrument is the Mini VIX™ Future. The CBOE Volatility Index (VIX) is an up-to-the-minute market estimate of expected volatility. The VIX is calculated using a formula to derive expected volatility by averaging the weighted prices of out-of-the-money puts and calls (options) on the S&P 500.

When the VIX is highly reactive, VIX related products can serve as potentially effective hedging tools, when the VIX is not very reactive, traditional hedging techniques may be a better choice.

Cboe Volatility Index call options volume on average day in February more than at any time since March 2020C Cboe data shows. Had three consecutive weeks of declines in SPX, up 3.4% in 2023, down 5% from Feb. 2.

We need to grasp all the risks to be wary off and received plenty of flak from it. We always talk here about expect the unexpected and now that is front and center, gage the market’s reaction, the market is always right and that’s why we focused on the crowd psychology aspect over the past few weeks.

“We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise.”

– MoneyNeverSleeps

Cboe Daily Market Statistics

Our weekly reminder for risk. The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off this continuous dip feed? At this point the Central Banks have kicked that answer down the road.

Part A – Stock Markets

Weekly Highlights – USA

Indices

• S&P500 rallied 1.9% (up 5.4% y-t-d),
• Dow recovered 1.7% (up 0.7%).
• S&P 400 Midcaps rose 1.8% (up 9.0%)
• Small cap Russell 2000 gained 2.0% (up 9.5%).
• Nasdaq100 recovered 2.7% (up 12.3%).

Sectors

• Utilities slipped 0.6% (down 7.5%).
• Banks added 0.3% (up 8.5%),
• Broker/Dealers rallied 1.8% (up 11.0%).
• Transports surged 3.3% (up 12.9%).
• Semiconductors rallied 3.2% (up 19.6%).
• Biotechs recovered 3.5% (up 2.4%).
• With bullion rallying $45, the HUI gold equities index surged 5.8% (down 1.5%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index gained 0.9% (up 6.6% y-t-d).
• France’s CAC40 rallied 2.2% (up 13.5%).
• German DAX equities index recovered 2.4% (up 11.9%).
• Spain’s IBEX 35 equities index jumped 2.9% (up 15.0%).
• Italy’s FTSE MIB index surged 3.1% (up 17.4%). 

Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September, 2021 adding 10 new members to the German stock index from the MDAX which will be reduced from 60 to 50 members.

 Highlights – Asia Stocks

• Japan’s Nikkei Equities Index rose 1.7% (up 7.0% y-t-d)
• South Korea’s Kospi index increased 0.3% (up 8.7%).
• India’s Sensex equities index gained 0.6% (down 1.7%).
• China’s Shanghai Exchange Index rose 1.9% (up 7.7%). 

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: +0.4% Friday (-0.3% for the week)
• Dalian iron ore futures hit an eight-month high Friday, most-traded May iron ore futures contract traded 1.04% higher at 919 yuan ($US133.10) a tonne. On the Singapore Exchange, the benchmark April iron ore firmed to $US126.4.
• Mining and energy stocks lifted the index on hopes that China’s economic recovery will spur demand. Rio Tinto jumped 1.6% to $126.43. BHP Group up 0.6% to $48.32.

Highlights – Emerging Markets Stocks 

EM equities mixed.

• Brazil’s Bovespa index declined 1.8% (down 5.3% YTD),
• Mexico’s Bolsa index jumped 2.8% (up 11.8%). 
• Turkey’s Borsa Istanbul National 100 index jumped 3.0% (down 5.4%).
• Russia’s MICEX equities index gained 2.9% (up 5.5%).

Technical Analysis

S&P 500

Daily: The daily SPX on Friday closed out the year right in the sphere of interest at the cloud twist. The market after spitting the 4100 and 38.2% retracement broke through all near support., though managing to capture the Tenkan on the last day of the year. This underscores the power from the SPX spat of June & October lows with impulse through the tenkan and Kijun energized by the daily cloud twist that fueled this rally. The completive wave came off extreme fear and bear that ended with relief. Now we have sated much of the greed phase and short fear phase. We have completed that cycle and from here we measure the alternatives.

Tracing back from highs the fuel from the top of the channel after completing 3 waves off ATH, accelerated after broke the Tenkan through to the 4600 OI where it reversed with impulse back to Tenkan. Bulls, this is likely a (ii) of a 5. Bears this is 1-2 of (i) completive V of degree. We watch if this low was a (iii), (a) or C. We have to respect the number of alternatives of degree of 5. With such trends keep it simple resistance is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

On the downside the Kijun and those June lows now critical and is our trading Bear/Bull pivot in a high vol scenario. Watch each measured 3 wave move on the 240 & Murrey Math highlighted in the podcast. The prices pulled through the downward cloud pulled by the twist ‘helium contusion’ on the completive.

For fractal purposes, SPX completed 5 waves up where it reversed with impulse. Energy fueled from the power impulse down from +1/8 ATH spit of a spit fail. On the way down (just like up) it accelerated after it broke the Tenkan through the rejected Kijun and then through the median after tapping 8/8.

Weekly: In the last week of 2022 we again closed under the Tenkan and 8/8 after the failed rally was rejected at the 50wma and +1/8. Key support is the 38% correction and the previous low. Power came from rejecting the cloud as one would expect in a 3 or C. We have Kijun. the Tenkan and 50wma all above i.e impulse right to the weekly cloud is needed for cycle switching. For that you would have to break the Kijun and 50wma.

We are playing out S&P 500 energy after it held the sphere of influence from Nov 2020 reversed higher after spitting the 38% and key lows. At the time we opined “We do have a weekly cloud twist; however, the energy is waning without sharp impulse.” We got the sharp impulse right to weekly Kijun. For major cycles we watch the S&P 500 over 4,231, the 50% retracement of losses from the Jan. 3 & June 16 close. Since 1950 there has never been a bear market rally that exceeded the 50% retracement then gone on to make new cycle lows. Is this time different, as we tested and spat those June lows?

On the way up each new high evolved after testing Tenkan key support on the way and we are now getting a retest as resistance. We reiterate this needs to be recovered for a resumption of the uptrend meanwhile the bear market plays out. Watch Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

THE KEY: Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan.  To repeat “We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.”  Keep an eye on the put/call ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as Chikou rebalances

A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets

NASDAQ 100

The down move saw Nasdaq spit the weekly Kijun and a 1-2 off tenkan we spat MM 5/8 after holding the key 61.8% Fib. We watch the Tenkan & Kijun confluence above, the breakup level and between the 38/50 Fibs. The Nasdaq is well behind the S&P pace with the weekly cloud and 50wma well above. Support the 61.8% retest.

Recall ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

Dow Jones

The Dow led the indices and closed above the weekly Tenkan after closing and testing last week. Prior test after the reaction off the June lows and sphere of influence. Support is the channel and Fibs. Tenkan and Kijun after the reaction empowered. Support is the channel and Fibs.

Russell 2000

The small cap Russell RUT bounced in double bottom off 1600 5/8 confluence which was the Nov 2020 breakup. Russell 2000 Resistance Tenkan and Kijun, note previous rejections. This is the index showing more of the fast money crowd and is trading like it. Needs to get traction in here for bulls. 7/8 & 8/8 support collapsed on the way down and is now major resistance.

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with retest & break of the triple top patterning in a pennant. From there been a fractal on each exhaustion. Pull from Chip players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX

NVidia $NVDA

NVidia’s latest slide was off earnings, back to lows at 4/8 after a failed breakup retest from May 2021. NVidia is a clear leader of #SOX #SMH look for cues there and ABC failures for changes. Above is the Key Break (mauve) and Tenkan to a flat cloud. Support the recent low at the 61.8% extension.

Apple $AAPL

Heading into another Earnings Apple held the sphere of influence after retesting 7/8 & break up. Kijun and Tenkan are about to touch, with earnings we watch for a kiss of death at the cloud as the story. Apple & other mega-cap names dominant the major indices, and a plethora of funds that hold it as a core position. The Vanguard Mega-Cap Growth ETF (MGK) delta is important to watch.

A firm rejection at $175 at +2/8 triggered a waterfall down for Apple. On the way up Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level on the way down these levels became key energy levels all the way to $132. Support held at the May break (just like NVDA) where from there it spat the cloud pulled by a flat Tenkan and Kijun as it rebalanced Chikou. The old channel break and MM 8/8 is now key. Remember the impact $AAPL has, at least short term on all the major indices.

ARKK ETF

The ARK Innovation ETF (ARKK) finally found some support at -1/8, 78% off highs and the 423.6% extension! The fund is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, it has not been a pretty slide.

The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Some work at support at 61.8% of whole move and then wrecked again. Clear crowd behavior, we saw ATH in NASDAQ & SPX, yet this couldn’t raise a bid – very telling negative divergence. $ARKK rebalanced Chikou at week’s end

ExxonMobil XOM

Part B: Bond Markets

Bond Watch

Treasuries

U.S. Treasuries sold off all week until Friday. At one point the entire curve was over 4%. Friday saw a reversal lifting the long bond into positive territory for the week while shorter tenors recovered some of their losses from the past two days. Of note eurozone’s PPI decreased 2.8% in January against expectations for a much smaller dip, slowing the yr/yr growth rate to 15.0% from 24.6% in December. Another week of under performance in the 2-yr note, putting more pressure on the 2s10s spread, which tightened by seven basis points to -90 bps.

Treasury Yield Watch

• 2-yr: -5 bps to 4.86% (+8 bps for the week)
• 3-yr: -4 bps to 4.60% (+9 bps for the week)
• 5-yr: -7 bps to 4.25% (+4 bps for the week)
• 10-yr: -11 bps to 3.96% (+1 bp for the week)
• 30-yr: -13 bps to 3.89% (-5 bps for the week)

For our complete Weekly Fixed Interest Analysis and Outlook visit our Bond Traders Weekly Outlook:

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates increased eight bps to a four-month high 6.74% (up 298bps y-o-y).
• Fifteen-year rates gained nine bps to 5.99% (up 298bps).
• Five-year hybrid ARM rates jumped 14 bps to 5.97% (up 306bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 20 bps to a 17-week high 7.17% (up 308bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index rallied 2.6% (down 4.0% y-t-d).
• Spot Gold recovered 2.5% to $1,856 (up 1.8%).
• Silver gained 2.4% to $21.26 (down 11.2%).
• WTI crude jumped $3.36 to $79.68 (down 1%).
• Gasoline jumped 16.6% (up 12%),
• Natural Gas surged 18.1% to $3.01 (down 33%).
• Copper rallied 2.9% (up 7%).
• Wheat declined 1.8% (down 11%), and
• Corn fell 1.5% (down 6%).
• Bitcoin dropped $840, or 3.6%, this week to $22,330 (up 35%).

Key Long Term Commodity Charts

Copper

Gold

WTI Oil

Energy

Natural Gas

For complete Oil and Natural Gas Coverage please visit our dedicated publications ‘Around the Barrel’ and ‘Into the Vortex.’ – Weekly Analysis and Outlook for Energy Traders and Investors

BDI Freight Index

For our complete Weekly Commodity Analysis and Outlook visit our Commodity Traders Weekly Outlook:

Charts and commentary via KnovaWave on:

• Grains: Wheat, Corn, Soybeans
• Metals: Copper, Aluminum
• Precious Metals: Gold Silver
• Lumber
• Oil and Natural gas are covered separately (see below)

Part D: Forex Markets

John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which not one man in a million is able to diagnose.”

Highlights

• For the week, the U.S. Dollar Index declined 0.7% to 104.52 (up 1.0% y-t-d).in. 2022 gains were 8.2%
• For the week on the upside, the Mexican peso increased 2.6%, the South African rand 1.6%, the New Zealand dollar 0.9%, the euro 0.8%, the British pound 0.8%, the Australian dollar 0.7%, the Swedish krona 0.5%, the Japanese yen 0.5%, the Swiss franc 0.5%, the Singapore dollar 0.4%, the South Korean won 0.3% and the Canadian dollar 0.1%. The Chinese (onshore) renminbi increased 0.81% versus the dollar (down 0.08% y-t-d).ne
• On the downside, none

For our complete Forex Weekly Analysis and Outlook visit our Forex Traders Weekly Outlook:

Charts and commentary via KnovaWave on the US Dollar, Euro, Japanese Yen, British Pound, Euro Pound, Swiss Franc, Canadian Dollar, Australian Dollar, New Zealand Dollar, Turkish Lira, Mexican Peso. Currency dynamics are complex. There are myriad facets to analyze and contemplate that influence all markets.

Cryptocurrencies

Bitcoin

Bitcoin continues to churn following the FTX collapse. BTC had been stuck in the sphere of influence in continuation awaiting a catalyst, and it came. Continues to perform technically to perfection. Impulse begets impulse. To understand panic, understand greed. $BTC tested the top of a rising channel after the preceding sharp downturn which was the downside breakout of an earlier bearish flag, after breaking downside a H&S top and then down it went….

Recall Bitcoin exploded higher following it’s correction impulsively upon completing 5 waves up at +2/8. Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we have seen extreme volatility.

Looking back Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking. The high over $68,000 came after the launch over the Bitcoin ETF. From that high we have 2 main alternatives a V of a 1 of a V. For bears it a completive five with impulse right to the 50wma – an incredible 26% fall in a Friday night session. That’s impulse!

Ethereum

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

Major banks kicking off earnings this quarter, including BlackRock (BLK), Citigroup (C), First Republic Bank (FRC), JPMorgan Chase (JPM) and Wells Fargo (WFC).

Major US Banks Deliver Mixed Results in Q4, 2022

The major money cents banks released earnings with many strong results for Q4. Mainly from the interest rate spreads on the positive side. We see a reversal of loss reserve releases from the pandemic kitty as the economy slides into recession.

• PNC Bank Earnings Hurt by Fall in Fee Income and Higher Credit Loss Provisions
• Citigroup Record Fixed Income Sales & Trading Revenue Cushion Earnings
• JPMorgan Earnings Boosted by Higher Interest Rates but Sets Aside $2.29 billion for Loan Losses
• Another Swing and a Miss from Wells Fargo Earnings
• Bank of America Earnings Beat, Benefiting Most from the Federal Reserve’s Interest Rate Hikes

The Week Ahead – Have a Trading Plan

What Macro and Micro Risks and Opportunities Lie Ahead this week

Global Watch

Next Week’s Risk Dashboard via Scotiabank

• Powell may guide markets into the March FOMC
• China’s NPC could fiscal plans…
• …plus GDP and inflation targets
• US nonfarm payrolls still resilient?
• BoC to pass but is still in play
• Playing the odds on Canadian jobs
• BoJ’s Kuroda to exit with honour
• RBA sheds prior pause, likely to hike again
• Peru’s central bank expected to stay on hold
• Bank Negara to stand pat amid currency risk
• CPI: Latam, Asia-Pacific, Norway, Switzerland
• UK, German macro reports

Central bank Watch

Eyes and ears will be on central bankers. Potentially key testimony by Fed Chair Powell will lead the way. We also get meetings from the RBA and Bank of Canada, that may (or not given the unreliable nature of data) have prematurely turned hesitant to hike further. Governor Kuroda will mark the end of an era at the BoJ. The National Bank of Poland, BCRP (Peru) and Bank Negara (Malysia) round out the central bank calendar.

This Week’s Interest Rate Announcements (Time E.T.)

• Monday, March 6, 2023
• 22:30 RBA Interest Rate Decision (Mar)
• Wednesday, March 8, 2023
• 10:00 National Bank of Poland Interest Rate Decision
• 10:00 BoC Interest Rate Decision
• Thursday, March 9, 2023
• 02:00 Bank Negara (Malysia) Interest Rate Decision
• 18:00 BCRP (Peru) Interest Rate Decision
• 21:30 BoJ Interest Rate Decision

For our complete Central Bank Analysis and Outlook visit our Central bank Watch:

Economic Data Watch

US Data Focus

• Monday: January Factory Orders (consensus -1.8%; prior 1.8%) at 10:00 ET
• Tuesday: January Wholesale Inventories (consensus -0.4%; prior 0.1%) at 10:00 ET, $40 bln 3-yr Treasury note auction results at 13:00 ET; and January Consumer Credit (consensus $22.90 bln; prior $11.60 bln) at 15:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior -5.7%) at 7:00 ET; February ADP Employment Change (consensus 195,000; prior 106,000) at 8:15 ET; January Trade Balance (consensus -$69.0 bln; prior -$67.40 bln) at 8:30 ET; January job openings (prior 11.012 mln) at 10:00 ET; weekly crude oil inventories (prior 1.17 mln) at 10:30 ET; $32 bln 10-yr Treasury note reopening results at 13:00 ET; and March Fed Beige Book at 14:00 ET
• Thursday: Weekly Initial Claims (consensus 198,000; prior 190,000), Continuing Claims (prior 1.655 mln) at 8:30 ET; weekly natural gas inventories (prior -81 bcf) at 10:30 ET; and $18 bln 30-yr Treasury bond auction results at 13:00 ET
• Friday: February Nonfarm Payrolls (consensus 205,000; prior 517,000), Nonfarm Private Payrolls (consensus 203,000; prior 443,000), Unemployment Rate (consensus 3.4%; prior 3.4%), Average Hourly Earnings (consensus 0.3%; prior 0.3%), and Average Workweek (consensus 34.6; prior 34.7) at 8:30 ET; and February Treasury Budget (prior -$38.80 bln) at 14:00 ET

Global Data Focus

• OPEC:
• Canada:  Jobs numbers, foreign trade figures and business confidence data. Bank of Canada will decide on interest rates.
• Brazil:
• Mexico:
• Europe: Eurozone final estimate of fourth-quarter GDP and January’s retail sales, and Germany will be publishing final inflation figures for February, industrial output, and retail trade. Italy’s domestic trade; Switzerland’s inflation and unemployment rate; Turkey’s jobless rate and industrial output; and Russia’s consumer price index. The National Bank of Poland is projected to keep its benchmark reference rate unchanged at 6.75% for the sixth consecutive meeting.
• UK: ONS will be updating monthly GDP figures, manufacturing production, construction output, and foreign trade data. Halifax house price index and the construction PMI survey.
• China: Annual session of the National People’s Congress is expected to implement a significant government reshuffle, while policymakers will be announcing official growth targets for 2023. Trade figures for January and February, set to determine the impact of the country’s reopening effort on the initial export growth. China will also unveil consumer and producer price data for February.
• Japan: Bank of Japan is forecast to leave its ultra-loose monetary policy untouched after the central bank’s Deputy Governor and Governor nominee discarded immediate changes to interest rate levels and the yield curve control policy.
• India: Industrial production figures for January.
• South Korea: Inflation for February,
• Australia: RBA is expected to deliver a sixth consecutive 25bps rate hike, lifting its cash rate to 3.6% and disregarding the slowdown in the Australian GDP in Q4 and cooled inflation in January. January’s trade balance.
• New Zealand:

Earnings and Event Watch

US Stocks Watch

Investors (and algos) will focus on the conference calls and outlooks. Last quarter everyone expected the worse, we saw critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals. 

Events

Notable conferences running during the week include: Morgan Stanley TMT Conference, Loop Capital Investor Conference, Oppenheimer 33rd Annual Healthcare Conference, BofA 2023 Asia Pacific Telecom, Media and Technology Conference, Bank of America Consumer & Retail Conference, Barclays Global Healthcare Conference, J.P. Morgan’s Industrials Conference, William Blair 7th Annual Tech Innovators Conference, Citi Global Consumer Conference, and UBS Global Consumer and Retail Conference

• Monday. PDS Biotech (PDSB) will present Phase 2 data on VERSATILE-002 at the ESMO Targeted Anticancer Therapies Congress 2023. Chevron (CVX) CEO Mike Wirth will give an opening address at S&P Global’s CERAWeek event. Wirth will talk about the competitive landscape in the energy industry and technology innovations. Uber Technologies (UBER) CEO Dara Khosrowshahi will participate in a fireside chat at the 2023 Morgan Stanley Technology, Media and Telecom Conference.
• Tuesday – Nike (NKE) and LVMH Moët Hennessy’s (OTCPK:LVMHF) Tiffany will launch a collaboration that includes a special-edition shoe and several sterling silver accessories. Peloton Interactive (PTON) CFO Liz Coddington will participate in the Morgan Stanley Technology, Media & Telecom Conference.
• Wednesday – Mattel, Inc. (MAT) will host a Virtual Investor Presentation
• Thursday – Apple (AAPL) will hold its annual meeting. The White House is expected to release a proposed budget on March 9. General Electric (GE) will hold an investor conference The Federal Trade Commission will hold a closed door meeting to consider a nonpublic enforcement action. Shares of Black Knight (BKI) have been volatile amid reports the FTC could challenge its merger with InterContinental (ICE).
• Friday – Shareholders with NioCorp (NB:CA) will vote on the proposed SPAC merger with GX Acquisition Corp II (GXII).The SXSW festival will begin in Austin, Texas. Roku (ROKU), Stagwell (STGW), and SunPower (SPWR), CI&T (CINT), and Amazon (AMZN) are some of the companies making promotional appearances at the festival.

Earnings

Earnings Highlights This Week:

• Monday includes Nutanix (NTNX) Lordstown Motors (RIDE), Ciena Corp. (CIEN), WW International (WW), and Shift Technologies (SFT)
• Tuesday includes Sea Limited (SE) CrowdStrike (CRWD) Trip.com (TCOM), Dick’s Sporting Goods (DKS), Casey’s General Stores (CASY), Squarespace (SQSP), Soundhound AI (SOUN), Ferguson (FERG), Thor Industries (THO), and StitchFix (SFIX)
• Wednesday includes Campbell Soup (CPB) Brown-Forman Corporation (BF.B) (BF.A), MongoDB (MDB), Continental AG (OTCPK:CTTAY), Korn Ferry (KFY), Tattooed Chef (TTCF), Express (EXPR), and Yext Inc. (YEXT)
• Thursday includes DocuSign (DOCU) JD.com (JD), Ulta Beauty (ULTA), Vail Resorts (MTN), BJ’s Wholesale Club Holdings (BJ), The Gap (GPS), The Toro Company (TTC), IDT Corporation (IDT), Duluth Holdings (DLTH), Wheels Up Experience (UP), Solo Brands (DTC), and Zumiez (ZUMZ)
• Friday includes The Buckle (BKE) Bird Global (BRDS), Driveshack (OTCQX:DSHK), and Embraer SA (ERJ)

IPO Wrap

US IPO Week Ahead:

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2022.

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