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FEAR NOT Brave Investors
Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.
Leverage, Inflation and Banks
The Week That Was – What Lies Ahead?
A week gone and for many the Archegos collapse is a memory lost, though we still had a margin selling still going on from parties such as Credit Suisse who admitted to losing around $7.2 billion on the collpase. In such an environment we saw both the S&P 500 and Dow achieve new highs. In this climate the small cap Russell 2000 closed down on the week, while the Nasdaq 100 closed higher, but still short of record highs. What is perplexing is that traditional measurements show money managers invested only 50% at these lofty levels and the S&P has effectively not allowed a pull back since the strong US Jobs report released Good Friday. Here we are heading into a new earnings season starting this week with the money center banks.
In the background we have mounting inflationary pressures globally. The RBA, ECB and the Fed have been somewhat dismissive of inflationary risks. There are many theorys here from the peanut gallery, from end of the world implosion to we are locked in a deflationary spiral.
We are seeing inflation increase globally. U.S. Producer Prices jumped a full 1.0% in March meaning y-o-y Producer Price Inflation to 4.2%, the strongest advance since 2011. The postitive take is inflationary elements like this do also add a flow on for investment. The ISM Non-Manufacturing (services) Index surged to a record high 63.7, with all 18 industry groups reporting higher prices (up from 67% in December). The ISM Non-Manufacturing Price Index jumped to 74, the high going back to July 2008. In China we saw inflation rise at both the consumer and producer level. Even Canada, an economy that has been particuarly bad hit saw its Ivey PMI jump to the highest since April 2018 at 72.9.
There is the prospect of an overheating U.S. economy, but remember we are coming off a low base and the lockdown has decimated many sectors of the economy and people’s lives. The tech relevaton that the lockdown has enabled has also trnasformed the tradional economy that we measure future outcomes off.
We still need to add almost 20 million jobs in the US alone to get back to par. Europe is in worse shape, so overheating at this point isnt a concern for most policymakers. The unparalleled government monetary inflation has inflated many price levels and distorted asset markets BUT that was intended as to increase confidence in the ‘guts’ of the economy, homeowners and 401k holders. This point is missed by the uber bear community. From here is the big question. The RBA stability report gives us an insight into central banker thinking, they concluded Australian banks are in strong financial position coming out of pandemic and have abundant liquidity and funding,
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 tis continuos dip feed? At this point the Central Banks have kicked that answer down the road.
After the monthly and weekly employment data the market will be going though whether the recent stimulus rounds are working with in the background of the Federal Reserve Continuing to downplay inflation risk.. We continued to see more rotation from tech to value stock, but a slower pace.
Why the angst in the bond market? The FOMC presented new economic projections including a forecast of 6.5% for gross domestic product this year with PCE inflation going to 2.4% this year, but falling to 2% next year. Powell reiterated that the Fed sees only a temporary pickup in inflation this year because of the base effects against last year’s numbers when prices fell. The Fed will target an average range of inflation around 2%, meaning it could exceed that threshold for some time which is a change to the Fed’s ground rules. The majority of Fed officials did not see any interest rate hikes through 2023. With the passing of the $1.9 trillion splurge a FOMO surge lifted stocks last week but now all eyes on yields dampened the enthusiasm.
What concerns bond holders and impacts stocks over the past weeks is the Fed appears to be too Blaise about inflation. This view got added weight when crude oil hit the highest prices since 2019 after OPEC decided to stay pat on production for April. But since then Crude has fallen over 12% in just a week from those highs. Hence why Powell has said “We’re going to wait to see signs of actual inflation or the appearance of other risks that could threaten the achievement of our goals. And we’ve seen that the economy can sustain exceptionally low levels of unemployment without inflation.”
There is a view that Powell also refuses to be dictated to and set the bond bullies up for failure. The V reversal this month suggests that. Air needs to come out of the market, particularly Tech, this is best illustrated by the ARK Funds and Semi-Conductor SMH ET’s (see below). From here we have another massive $1.9 Trillion stimulus. Is that enough to keep asset prices elevated, hard to fight the Fed and that kind of cash floating around. Watch the argument from analysts that higher yields mean the economy is growing, stocks are value versus hyperinflation is on its way.
After being up over 90% Bitcoin reversed sharply from $44,000 to over $60,000. One could argue bonds and crypto are at the opposite ends of the spectrum, but all they in 2021? Astonishing and symptomatic of so many confluences which we will discuss later. These added further price pressures on food and energy come after we discussed inflationary pressures are building in the US, and a truly tidal wave of Treasuries is in the pipeline. Not hard to grasp Bond market nervousness.
Raise your eyes and look at the stopped car in front of you you may want to hit the brakes.The pandemic is not close to our greatest worry, nor is energy it seems. The runaway credit bubble in the era of delusion and entitlement has multiple unintended consequences or are they intended? The stockmarket has lost rationality the danger is should the bubble pop the consequences of a historic debt crisis in a deeply divided nation and unprepared social and geopolitical backdrops could be earth shattering as the Fed disregards asset inflation and bubble dynamics.
Of note during the Arctic Blast with the EV mania and the Biden Admin Green deal push we noted the spike in spot Texas electricity prices pushing the cost of electricity not on fixed plans to unheard of levels. Bloomberg reported on recharging a Tesla from about $18 to $900. Yes the price spike was fleeting but it should remind the sane amongst us the broader issue of the disconnect between the push toward electrification and our massively inadequate energy infrastructure. This is the area that needs investment, not just for our glorious EV but for all energy and possible disasters like we just saw.
Comments from Yellen and others on the same page suggest that low rates conveniently push potential debt instability far out into the future. The Fed is poised to expand its balance sheet, by adding liquidity to the tune of $1.5 TN this year with no regard for rampant asset price inflation and bubbles. Now the new administration has control of the blank checkbook and is determined to us it with no long-term thinking or planning; everything is short-term focused. Washington is gambling with our nation’s future, from kicking cans down the road to rolling drums down a hill.
- Part A: Stockmarkets
- 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
PART A – Stock Markets
Highlights – USA
- S&P 500 rose again 2.7% (up 9.9% y-t-d),
- Dow rose 2.0% (up 10.4%).
- S&P 400 Midcaps increased 0.9% (up 15.8%),
- Small cap Russell 2000 Fell 0.5% (up 13.6%).
- Nasdaq100 surged 3.9% (up 7.4%).
- Utilities gained 1.4% (up 3.1%). Banks increased 1.5% (up 25.9%), and Broker/Dealers rose 1.8% (up 21.3%).
- Transports advanced 1.2% (up 19.3%).
- Semiconductors rose 1.7% (up 17.9%). Biotechs fell 2.6% (down 5.4%).
- With bullion rising $15, the HUI gold index gained 2.4% (down 5.5%).
Highlights – Europe Stocks
- France’s CAC40 gained 1.1% (up 11.1%).
- German DAX equities index increased 0.8% (up 11.0%).
- Spain’s IBEX 35 equities index was little changed (up 6.1%).
- Italy’s FTSE MIB index dropped 1.1% (up 9.9%).
- U.K.’s FTSE equities index jumped 2.6% (up 7.0% y-t-d)..
Highlights – Asia Stocks
- Japan’s Nikkei Equities Index dipped 0.3% (up 8.5% y-t-d).
- South Korea’s Kospi index increased 0.6% (up 9.0%).
- India’s Sensex equities index declined 0.9% (up 3.9%).
- China’s Shanghai Exchange fell 1.0% (down 0.6%).
- Australia’s S&P/ASX 200 fell 0.1% on Friday just off a a 13-month high for its best week in nine, adding 2.4% on the week.
Highlights – Emerging Stocks
- EM equities were mostly higher
- Brazil’s Bovespa index jumped 2.3% (down 1.0%),
- Mexico’s Bolsa gained 0.9% (up 8.2%).
- South Korea’s Kospi index increased 0.6% (up 9.0%). India’s Sensex equities index declined 0.9% (up 3.9%). China’s Shanghai Exchange fell 1.0% (down 0.6%).
- Turkey’s Borsa Istanbul National 100 index sank 2.6% (down 5.7%).
- Russia’s MICEX equities index dropped 2.0% (up 6.0%).
From rebalance as a natural reversion after the bull mania we have surged with another speculative rush. This after Dow ended the second quarter with a 17.8% gain, the biggest quarterly rally since the first quarter of 1987, when it ripped up 21.6%. IS that enough to rebalnce and go higher? The S&P 500 had its biggest one-quarter surge since the fourth quarter of 1998, soaring nearly 20%. The Nasdaq Composite jumped 30.6% for the quarter, its best quarterly performance since 1999.
Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.
Biggest SPX Stock Winners and Losers Last Week
S&P 500 Index Technical Analysis via @KnovaWave
SPX rallied again to new all time highs, after testing and spitting tenkan san & 8/8 Murrey Math at the Daily Cloud & with a positive Chikou retest. We have a number of alternatives of degree (iii) or (iv) of 5, Keep it simple support is Tenkan and Kijun as Chikou rebalances.
The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in.
Weekly SPX spat the break channel it had been tracing since the break of v of (III) or (V). Key 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 putcall 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 chickou 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.
Watching Semiconductors cleanly with Murrey Math levels and Tenkan – keys are previous high at +1/8 and Chikou rebalance patterning. Weekly +2/8 around 250 key number recognition factor also.
Amazon high was MM +3/8 and from there has built a large weekly flag which it closed under after breaking the Tenkan and Kijun, watch if Kijun closes through Tehkan for a bigger move.
US Stocks Watch
Earnings Week Ahead
First-quarter corporate earnings likely benefited from the firming economic backdrop. Over the last several months, analysts have raised their aggregate S&P 500 earnings per share (EPS) estimates by a record 6.0% according to Factset. With the US stock markets at record highs the downside to increasing profit expectations is the potential for some disappointments and that could cause adverse or stalled market to potentially. Last quarter the banks big banks kicked off 4th-quarter earnings reports on Jan 15, helped to set the tone for the broader U.S. stock market, as businesses coped with the eleventh month of the pandemic. Banks reaped the rewards of the initial public offerings and record corporate borrowings during the pandemic. Investors (and algos) will focus pn 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.
Last week we heard from Constellation Brands, Conagra Brands and Levi Strauss
This week we hear from:
- Monday starts us off with
- Tuesday with earnings from
- Wednesday Earnings Include
- Thursday Earnings Include
- Friday Earnings include
HD Supply (HDS) Aphria (APHA) TuanChe (TC) Simulations Plus (SLP) Oramed (ORMP) Biofrontera ADR (BFRA) Qualigen Therapeutics (QLGN)
Fastenal Co (FAST) OrganiGram (OGI) before market open
JPMorgan Chase (JPM), Goldman Sachs (GS), Wells Fargo (WFC), Bed Bath & Beyond (BBBY) Infosys, First Republic Bank
Bank of America (BAC), Charles Schwab (SCHW), Truist Financial Corp (TFC), The Progressive Corp (PGR), US Bancorp (USB), UnitedHealth Group (UNH), PepsiCo (PEP), Delta Air Lines (DAL), BlackRock (BLK), Rite Aid (RAD), Citigroup (C); Alcoa (AA) PPG Industries, Wipro, Taiwan Semiconductor, Truist Financial, SunTrust
Morgan Stanley (MS), Bank of New York Mellon (BK), PNC Financial Services Group (PNC), Kansas City Southern (KSU), Citizens Financial Group (CFG), State Street Corp (STT), Ally Financial (ALLY) before market open
IPO Week Ahead
Five IPOs are scheduled to raise $4.5 billion in the week ahead, joined by Coinbase’s widely anticipated direct listing.
- Digital banking platform Coinbase (COIN) will be the Nasdaq’s first major direct listing, with an estimated market value at listing of more than $50 billion. The company operates a platform that allows individuals and institutions to trade Bitcoin and over 45 other crypto assets. While the company saw explosive growth in the 4Q20, its revenue is directly tied to cryptocurrency transactions, which have fluctuated historically.
The largest IPO of the week, AppLovin (APP) plans to raise $2.0 billion at a $30.7 billion market cap. This company provides a platform that enables mobile app developers to market and monetize their apps. Fast growing and profitable on an EBITDA basis, AppLovin has driven over six billion mobile app installs for developers since 2012.
- Autonomous trucking startup TuSimple (TSP) plans to raise $1.3 billion at an $8.5 billion market cap. TuSimple is developing autonomous driving technology for semi-trucks in order to build the first Autonomous Freight Network (AFN). Highly unprofitable with explosive growth, TuSimple began generating revenue in 2019.
- Senior-focused healthcare platform agilon health (AGL) plans to raise $1.0 billion at a $9.0 billion market cap. This company provides a healthcare platform that is focused on senior care for primary care physicians. agilon has posted strong growth and was profitable on an EBITDA basis in 2020. Insiders and new investors have indicated an interest in purchasing up to 50% of the deal.
- Digital banking platform Alkami Technology (ALKT) plans to raise $141 million at a $2.2 billion market cap. Alkami provides a digital banking platform to community, regional, and superregional financial institutions. With double-digit growth over the past two years, Alkami is unprofitable, though it has steadily increased gross and EBITDA margins.
- In its second IPO attempt, Karat Packaging (KRT) plans to raise $75 million at a $368 million market cap. Fast growing and profitable, this company manufactures and distributes disposable food packaging to many fast casual and fast food chains, such as Applebee’s, Chipotle, and In-N-Out.
IPO data via Renaissance Capital
Part B : Bond Markets
Highlights – Treasuries
- Investment-grade bond funds saw inflows of $4.079 billion, and junk bond funds posted positive flows of $3.809 billion (from Lipper).
Prior to the recent bond route 2 weeks ago “Investors are flooding the state and local government debt market with cash, driving the biggest weekly influx ever into mutual funds focused on the riskiest municipal securities. Buyers added $2.6 billion to municipal-bond mutual funds in the week ended Wednesday, the 10th straight inflow and the third biggest on record… High-yield funds collected $1.1 billion, outpacing the previous record of $796 million in 2017…” Bloomberg (Danielle Moran and Romy Varghese)
- Three-month Treasury bill rates ended the week at 0.0075%.
- Two-year government yields declined three bps to 0.16% (up 3bps y-t-d).
- Five-year T-note yields sank 11 bps to 0.86% (up 50bps).
- Ten-year Treasury yields fell six bps to 1.66% (up 74bps).
- Long bond yields dipped three bps to 2.33% (up 69bps).
- Benchmark Fannie Mae MBS yields fell 12 bps to 1.94% (up 60bps).
All good while markets hold up but take note that the loosest financial conditions in history have supported a record $1.4 trillion of corporate debt issuance. While easy credit availability has supported economic activity, funding new investment whilst keeping vulnerable companies afloat. THe combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.
Highlights – Mortgage Market
U.S. home prices have been fueled by the lowest mortgage rates in history and relocation demand have risen rose at the fastest pace on record, surpassing the peak from the last property boom in 2005. The median price of a single-family home climbed 14.9% to $315,000 in the fourth quarter, the biggest surge in data going back to 1990. The Northeast led the way with a 21% gain.”
- Freddie Mac 30-year fixed mortgage rates fell five bps to 3.13% (down 20bps y-o-y). Fifteen-year rates declined three bps to 2.42% (down 35bps). Five-year hybrid ARM rates jumped eight bps to 2.92% (down 48bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 11 bps to 3.18% (down 68bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week gained $14.9bn to $7.657 TN. Over the past 82 weeks, Fed Credit expanded $3.930 TN, or 105%. Fed Credit inflated $4.846 Trillion, or 172%, over the past 439 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week declined $2.6bn to $3.549 TN. “Custody holdings” were up $233bn, or 7.0%, y-o-y. Total money market fund assets declined $12.6bn to $4.485 TN. Total money funds rose $10bn y-o-y, or 0.2%. Total Commercial Paper surged $72.1bn to $1.172 TN. CP was up $73bn, or 6.7%, year-over-year.
We do know we have massive speculation pockets, viz a viz the Meme or GameStop, Weed stocks and cryptocurrency spectacles in just the matter of weeks. The Fed is today throwing additional fuel on historic speculative manias.
- The Fed QE infinity programme is a yield curve control policy with long government bond yields coming down. Bond supply and continued central bank resistance to more negative policy rates limits the move. Central banks have been cutting rates and adding liquidity to avoid systematic failure.
Highlights – European Bonds
- Greek 10-year yields gained four bps to 0.86% (up 24bps y-t-d).
- Ten-year Portuguese yields rose seven bps to 0.28% (up 25bps).
- Italian 10-year yields jumped 10 bps to 0.73% (up 18bps).
- Spain’s 10-year yields rose seven bps to 0.38% (up 33bps).
- German bund yields increased three bps to negative 0.30% (up 27bps).
- French yields gained four bps to negative 0.04% (up 29bps).
- The French to German 10-year bond spread widened one to 26 bps.
- U.K. 10-year gilt yields declined two bps to 0.77% (up 58bps).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields declined two bps to 0.11% (up 9bps y-t-d).
Part C: Commodities
- The Bloomberg Commodities Index added 0.2% (up 7.7% y-t-d). ‘WTI crude fell $2.13 to $59.32 (up 22%).
- Gasoline dropped 3.0% (up 39%),
- Natural Gas sank 4.3% (down 1%).
- Copper rallied 1.2% (up 15%).
- Wheat surged 4.5% (unchanged).
- Corn rose 3.1% (up 19%).
- Bitcoin declined $540, or 0.9%, this week to $58,334 (up 101%).
- Risk markets continue to respond to a Conronvirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
- U.S. producers production still under pre Laura levels.
- Higher crude prices prompt some U.S. producers start drilling again with rigs up for the ninth week in a row.
BDI Freight Index
Copper has been a leader in the risk on movement, The weekly channel since the low has maintained the speed of the move with support at the tenkan and tested the median line this week
US Crude Oil (WTI)
WTI spiked higher over $68 Last week to complete a 5 wave structure and test min targets after broke the topside of the channel it had been in since September, In any break, the key is crowd behavior to help tell the story which in energy is often around often geopolitics. We watch ABC corrections and from here we get the energy from the break being balanced. This week that was powered by the Tenkan Spit of a spit. Support is the Tenkan, old channel & prev high confluence. Watch Kijun & 50 dma.. Resistance MM and previous lows.
WTI continued higher after it rebalanced chikou indicative of extreme crowd behavior reverseing at 7/8 after the series of fractals at last Dec wave 1 turn after we had completed 5 waves as marked, from here we watched 3 & 5 waves develop. Price popped after the spit of the 50wma (green) which is now key for support as Tenkan touched Kijun in a kiss of life. Given that we had tremendous energy which bore out in the hghs last seen 2019.
These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications.” Support is previous channels, tenkan and Kijun. Above we have Murrey Math time and price
US Natural Gas (Henry Hub)
US Natural Gas has played out both the corrective and consolidation phases since it completed its B or IV ( Bull Case) last year since then a series of 3 waves. Bear is this 3 wave is a C of B, bull a developing 5 and we closed under the daily cloud which needs to be recaptured for the natags bulls. Tenkan failed after the arctic blast with more failure after Kijun crossed Tenkan. Support is previous breaks. Resistance is 8/8 and recent highs.
Natty has moved in a series of 3’s since spat the 50 wma to get over weekly Kijun and Tenkan BUT this week all gave way other than the weekly Kijun in it’s larger developing pennant. Support is the cloud and 50wma. A series of fractals, as you would expect in a seasonal commodity with weather a prime mover. Resistance is recent highs and Fib/Murrey confluence.
Key Energy Reports
- Into The Vortex – EIA Reports Draw of -98 Bcf in Natural Gas Inventories
- Around The Barrel – Massive Crude Oil Build of 21 Million Barrels and Gasoline Draw of 13.6 Million Barrels on Texas Storm
- OPEC Monthly Oil Market Report February 2021
- BHP Writes Down Australian Thermal Coal Mine $1.6 Billion
- Environmental Services Charah Solutions To Recycle 8.1 Million Tons of Coal Ash For Dominion
- Spot Gold rallied 0.9% to $1,744 (down 8.2%).
- Silver gained 1.0% to $25.266 (down 4.3%).
Gold exudes weakness or bulls disappointment after its manic rise to +5/8 weekly and rebalance of the Kikou in 5 waves then tested and failed the Tenkan, kijun and 50 wma. We found support at the wave 1 confluence of the higher degeree 5, To be bullish we would need to recapture the cloud (or the flag 🙂 In sight of the intraday high of $1765.43 is a key harmonic pivot. We appear to have overcome the negative divergence between the weekly chikou, Silver spread and the recent highs BUT NOT yet Tenkan & Kijun fails. From there does the 5 play out? Watch Fibs and chikou.
Silver is back at the cloud, key 38% and 50wma providing support after the correction following the squeeze which forced Gold/Silver which buoyed silver in the PM space, eventually we reversed with a double top Knowing that recall Silver did a fractal of the sharp C up to breakdown level above the cloud fed by divergence from gold reverting. The weekly Tenkan crossing the Kijun would signal more downside. Note the MM
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.”
- For the week,the U.S. dollar index declined 0.9% to 92.163 (up 2.5% y-t-d).
- Majors for the week For the week on the upside, the Swiss franc 2.0%, the euro 1.2%, the Japanese yen 0.9%, the Canadian dollar 0.4%, and the Australian dollar 0.2%. For the week on the downside, the British pound declined 0.9%.
- Minors for the week on the upside, the Swedish krona increased 2.2%, the Mexican peso 0.7%, the South Korean won 0.6%, the Brazilian real 0.4%, the Norwegian krone 0.4%, the South African rand 0.4%, the Singapore dollar 0.3%. and the Chinese renminbi increased 0.22% versus the dollar this week (down 0.39% y-t-d).
Australian Dollar – AUDUSD
Aussie dollar completed a 5 at the pysch 80 level and it back doing a break retest of 8/8 and the weekly tenkan. as one would expect after it completed 5 waves in emotive fashion. It has closed over the 50 Wma in 5 waves but between the Tenkan and Kijun like many commodities.The AUDUSD old three year high of 0.7820 from January 6. is a key option energy point playing out.
New Zealand Dollar – NZDUSD
The Kiwi mirrored the AUD in its wave (iii) spit and has since closed over the panic breakdown (0%) correcting all of the panic muster wave and running to the 38% Fib & 6/8 confluence. Support the Kijun and Resistance Tenkan, which is pivotal. Resistance 6/8 spits.
Canadian Dollar – USDCAD
The Loonie hit in 3 year high this week as it continues to benefit from dollar weakness and commodity currency strength led by the AUSD and NZD after spitting the 261% Fib & Weekly 8/8 after 5 waves lower (USD higher) We closed ender the old 38.8% confluence. Use Fibs for support and resisitance until Tenkan and Kijun catch up
Euro – EURUSD
The Euro continues to correct in flags after broke the channel last May. after ABC (IV) then retested the tenkan to spit the +1/8 in 5 waves from there we closed the week back testing the tenkan (orange) and now Kijun (pink). A question of degree on recent high – 1 complete or 1 of 3?, Watch 3 waves to see development for continuation. Resistance is Fibs as marked. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.
British Pound – USDGBP
EuroPound – EURGBP
Back testing top of outer band and tenkan of Brexit. Johnson price reaction.after its classic ABC out of failure following the X wave. Tenkan will give us a clue if normalcy is returning to the channel trade.
Japanese Yen – USDJPY
Japanese Yen still stuck in channel trade, a series of failures and sharp bounces after X led 3 wave panic. Any change will come from the weekly Kijun Tenkan kiss. Use your #USDJPY Murrey 6/8 0/8 grid for now. #EURJPY #AUDJPY will determine risk on/off
Mexican Peso USDMXN
The Peso corrected the collapse to +1/8 against the USD right back to the 100% Fib We have seen violent moves with outisde uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.
Turkish Lire USDTRY
The Turkish Lire had corrected back to the weekly cloud to bounce to the Kijun, correcting back through Tenkan after the 200bp hike by the Turkish Central Bank. The USD/TRY had fallen to around 7,80 to bounce to 8/8. The move is a question of degree. Keep an eye on geopolitical risk factors.
Bitcoin has exploded after it spent a year consolidating under the 61.8% spit. Each tenkan and kijun tap has seen an explosive kiss of life to over 423% of that consolidation. Use Murrey Math levels for higher corrections and target as algos control the herd here, support is the cloud and sharp ABC, 1-2 moves.
On the Risk Radar
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
Bloomberg (Michael Sasso and Leslie Patton): “A resurgent job market is creating more opportunities at a faster clip than many economists and employers expected. What’s more, too few people are applying for positions that are reopening, and that’s setting up a battle for talent. Restaurants and hotels are raising wages, offering bonuses for worker referrals or luring people from other states to cope with the shortage…. Nonfarm payrolls rose by 916,000 last month, blowing away economists’ median estimate of a 660,000-job gain. Meanwhile, a measure of service-industry activity released this week saw the fastest growth on record in March…”
Over 14.5 million are collecting traditional jobless benefits, up from 1.7 million a year ago, with no end in sight. on Thursday, the Labor Department reported under 800,000 Americans applied for unemployment benefits for the second time since the crisis. With the Covid shutdown we lost over 22 million jobs in March and April. Still a huge shortfall in jobs, and the big question is will they come back?
Biden will deliver his second major sales pitch in a week for the ‘American jobs plan’ with a White House speech Wednesday, as he and his team reach out to governors, mayors and the broader public through phone calls, briefings and local TV appearances to make their case. In addition to emphasizing the need for urgency, with the pandemic exposing weaknesses that left millions of families struggling, Biden in his… remarks will argue that infrastructure needs go far beyond just roads and bridges…
“U.S. Treasury Secretary Janet Yellen… fleshed out the details of a corporate tax hike plan linked to President Joe Biden’s infrastructure investment proposal, aiming to raise $2.5 trillion in new revenues over 15 years by deterring tax avoidance. Yellen’s plan relies on negotiating a 21% global minimum corporate tax rate with major economies and a separate 15% minimum tax on ‘booked’ income aimed at the largest U.S. corporations. Dozens of big U.S. companies use complex tax strategies to reduce their federal tax liabilities to zero. Yellen said that promises of increased U.S. investment by corporations under the 2017 Republican tax cuts failed to materialize.”
The virus and psychological affect on domestic and trade relationships have impacted growth strategies with unexpected consequences In a fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.
- Geopolitical tensions with China and India are on the rise as China increases military hardware near the China and India’s Himalaya border, a potential negative shock not priced by markets.
- Italian Prime Minister Mario Draghi is bringing forward plans for as much as 40 billion euros ($48bn) in new borrowing as the cost of keeping the economy afloat drains the state’s coffers and street protests heap pressure on the government… The government has spent over 130 billion euros so far to support the economy which has pushed public debt to 155.6% of gross domestic product.” April 4 – Reuters (Sarah White):
- “France’s public deficit is expected to reach 9% of gross domestic product (GDP) in 2021, French Finance Minister Bruno Le Maire said…, up from a previous forecast of 8.5% as the country enters its third national coronavirus lockdown. The change follows a downward revision of France’s growth forecast from 6% to 5% for this year… Le Maire… said France’s public debt was set to reach 118% of GDP this year, up from its latest forecast of 115%.”
- China tightened its grip on Hong kong and threats with Taiwan continue. Secretary of State Mike Pompeo lifted communication restrictions between American and Taiwanese officials on Saturday. Pompeo said the restrictions had been imposed decades ago “in an attempt to appease the Communist regime in Beijing.”
- Russia is showing the affects of low energy prices, filtering into the socio economic dynamic
- A Brexit deal was concluded on Christmas Eve and moving rapidly through the approval process from both sides for the official start of the UK outside of Europe on Jan. 1st.
- For emerging markets the lower US dollar is helping the Fragile 5. Argentina and Turkey are still red letter risks with Covid however.
- Over $4 trillion of EM debt matures by the end of 2020, of which around a third is denominated in foreign currency, according to the Institute of International Finance. Nevertheless Banks are telling investors to buy, buy, buy, who is selling you should ask?
If you wanted to play in the big room at Vegas, you are living it. Understand risk and the madness of crowds for your own sanity and wealth.
Continued volatility with the engulfing uncertainty of the Coronavirus and in commodity markets, particularly in oil and other commodities, not to mention unrest in Iran, Libya and Iraq.
- Trade wars persist between Australia and China. The largest exporter of commodities and the worlds largest importer of commodities. China is experiencing record cold weather and it’s beligerance is hurting shooting itself in the foot. Regional partners such as Japan and India have supported Australia’s standing up to Chinese bullying.
- In addition to rising tensions with China, the United States Trade Representative said last month said that the USTR is considering a new round of tariffs on $3.1 billion in European exports from France, Germany, Spain and the U.K..We are awaiting Biden’s offical resposne.
- Chairamn Chi and President Biden had a phone hook last month week with the US saying they will review all policies but tariffs to stand in the meantime. China continued it’s theats on the matter.
Fat Tail Virus Risk
- “The highly contagious variant first identified in the U.K. is now the most common Covid strain circulating in the U.S., the head of the Centers for Disease Control and Prevention said… ‘The variant, known as B.1.1.7, is ‘now the most common lineage circulating in the United States.’ CDC Director Dr. Rachelle Walensky said… ‘Testing remains an important strategy to rapidly identify and isolate infectious individuals, including those with variants of concern,’ Walensky said.”
- Reuters (Neha Arora and Francis Mascarenhas): “India reported another record number of new COVID-19 infections on Friday and daily deaths hit their highest in more than five months, as it battles a second wave of infections and states complain of a persistent vaccine shortage. Evoking memories of the last national lockdown when tens of thousands of people walked on foot back to their homes, hundreds of migrants in badly affected Mumbai packed into trains as bars, malls and restaurants have again been forced to down shutters.”
- Fauci believes 70%-85% of the population must be vaccinated to reach herd immunity.
The major money cents banks released earnings with mixed results for Q4:
- JPMorgan Earnings Surge On Bond and Equity Trading Revenues
- PNC Bank Earnings Improve As It Hits Record Capital and Liquidity
- Wells Fargo Disappoint Again As Revenue Misses While Other Banks Rise
- Citigroup Beats Earnings Forecasts and Frees Up Credit Loan Provisions Along With JPMorgan
- Bank of America Revenue Falls With Rates, Announces $2.9 billion Share Buyback
- Goldman Sachs Trading Accounted for 47% of Revenue in 2020, The Best In A Decade
- Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don’t exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.
- Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.
- Last year Morgan Stanley continues in its aim to become the leading wealth and investment services firm with another aggressive aquisition. $MS announced an intention to buy Eaton Vance $EV for $7 billion. This follows the bank completing its $13 bln acquisition of E*TRADE $ETFC.
- In times of recession and credit tightening Banks risk becomes problematic, though since 2008 the World’s Central Banks have been quick to loosen the strings. Add massive purchase of failing assets.
- Banks are benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 to a record $60.113 trillion. Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008.
“Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch”
The Week Ahead – Have a Trading Plan
The key focus in the week ahead will be inflation and consumer paricipation reports. We start off with the Monthly budget statement on Monday. On Tuesday we get the March US Consumer Price Index (CPI) and Real average weekly earnings. Wednesday we see MBA Mortgage Applications; Import price index, Export price index and the Federal Reserve releases Beige Book. Thursday we see jobless claims, Retail sales, Philadelphia fed Business Outlook, Industrial production and Capacity Utilization, NAHB Housing Market Index, and TIC report. Friday we finish the week with Housing Starts; Building permits and University of Michigan Consumer Sentiment survey
Powell is expected to continue to emphasize that the Fed will keep rates low for a long time and maintain its easy policies to help the economy.
Central Banker Watch speeches, reports and rate moves.
Monday: April 12 2021
- 1:00 p.m. Boston Fed President Eric Rosengren at Newton-Needham Regional Chamber webinar
- 2:00 p.m. Federal budget
Tuesday April 13, 2021
- 10:00 p.m. RBNZ Rate Decision & Statement
Wednesday April 14, 2021
- 07:45 a.m. ECB’s Panetta Speaks
- 9:15 a.m. Dallas Fed President Rob Kaplan at Woodlands Chamber webinar
- 10:00 a.m.ECB President Lagarde Speaks
- 12:00 p.m. Fed Chairman Jerome Powell at Economic Club of Washington webinar
- 2:00 p.m. Beige book
- 2:30 p.m. New York Fed President John Williams at Rutgers Finance Society webinar
- 3:45 p.m. Fed Vice Chairman Richard Clarida at Shadow Open Market Committee Meeting
- 4:00 p.m. Atlanta Fed President Raphael Bostic at Georgia Tech school of Architecture webinar
- 6:05 p.m. FOMC Member Kaplan Speaks
- 9:00 p.m South Korea CB Interest Rate Decision (Apr)
- 11:00 p.m BoJ Governor Kuroda Speaks
Thursday April 15, 2021
- 11:30 a.m. Atlanta Fed President Raphael Bostic interview with the Atlantic webinar
- 2:00 p.m. San Francisco President Mary Daly at Money Marketeers webinar
- 4:00 p.m.Cleveland Fed President Loretta Mester at Swarthmore College webinar
Friday April 16, 2021
- 05:00 a.m. BoE MPC Member Cunliffe Speak
Improvements in some economic indicators, such as home sales, manufacturing activity and in employment data have bolstered investor confidence and helped extend the rally in stocks. Support in markets comes from the Fed’s balance sheet which has ballooned to $7.2 trillion, and the central bank committed to monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities.
Economic Events in the Week Ahead:
Sunday, April 11, 2021
- 19:00 USD Fed Chair Powell 60 Minutes Interview
- 19:50 JPY Bank Lending (YoY) (Mar)
- 19:50 JPY PPI (MoM) (Mar)
- 19:50 JPY PPI (YoY) (Mar)
Monday, April 12, 2021
- 02:00 EUR German WPI
- 02:00 JPY Machine Tool Orders (YoY)
- 05:00 EUR Retail Sales (YoY)
- Tentative CNY M2 Money Stock (YoY)
- Tentative CNY New Loans
- Tentative CNY Outstanding Loan Growth (YoY)
- Tentative CNY Chinese Total Social Financing
- 10:30 CAD BoC Business Outlook Survey
- 11:00 USD IMF Meetings
- 11:30 USD 3-Month Bill Auction
- 11:30 USD 6-Month Bill Auction
- 13:00 USD 10-Year Note Auction
- 13:00 USD 3-Year Note Auction
- 14:00 USD Federal Budget Balance (Mar)
- 18:00 NZD NZIER Business Confidence (Q1)
- 18:00 NZD NZIER QSBO Capacity Utilization (Q1)
- 19:01 GBP BRC Retail Sales Monitor (YoY) (Mar)
- 19:50 JPY M3 Money Supply (Mar)
- 20:00 AUD HIA New Home Sales (MoM)
- 21:30 AUD NAB Business Survey (Mar)
- 21:30 AUD NAB Business Confidence (Mar)
- 23:00 CNY Trade Balance (USD) (Mar) 52.55B
Tuesday, April 13, 2021
- 02:00 GBP GDP 02:00 GBP Index of Services
- 02:00 EUR German WPI (MoM) (Mar)
- 04:00 EUR Italian Industrial Production (MoM) (Feb)
- 04:30 GBP Construction Output (MoM) (Feb)
- 04:30 GBP Industrial Production (MoM)
- 04:30 GBP Manufacturing Production
- 04:30 GBP Trade Balance (Feb)
- 05:00 EUR German ZEW Current Conditions (Apr)
- 05:00 EUR German ZEW Economic Sentiment (Apr)
- 05:00 EUR ZEW Economic Sentiment (Apr)
- 05:30 ZAR Gold Production (YoY) (Feb)
- 05:30 ZAR Mining Production (Feb)
- 06:00 USD NFIB Small Business Optimism (Mar)
- 07:00 USD OPEC Monthly Report
- 08:30 USD CPI (Mar)
- 08:30 USD Real Earnings (MoM) (Mar)
- 08:55 USD Redbook
- 09:00 GBP NIESR Monthly GDP Tracker
- 11:00 USD Cleveland CPI (MoM) (Mar)
- 13:00 USD 30-Year Bond Auction
- 16:30 USD API Weekly Crude Oil Stock
- 17:00 KRW Export Price Index (YoY) (Mar)
- 17:00 KRW Import Price Index (YoY) (Mar)
- 18:45 NZD Electronic Card Retail Sales (Mar)
- 19:00 KRW Unemployment Rate (Mar)
- 19:50 JPY Core Machinery Orders (MoM) (Feb)
- 20:00 SGD GDP (QoQ) (Q1)
- 20:30 AUD Westpac Consumer Sentiment (Apr)
- 22:00 NZD RBNZ Interest Rate Decision
- 22:00 NZD RBNZ Rate Statement
Wednesday April 14, 2021
- All Day Holiday India – Market Holiday
- 03:00 EUR Spanish CPI
- 03:00 EUR Spanish HICP Tentative CNY FDI
- 04:30 GBP Labour Productivity (Q4)
- 05:00 EUR Industrial Production
- 07:00 USD MBA 30-Year Mortgage Rate
- 07:00 USD MBA Mortgage Applications (WoW)
- 07:00 USD MBA Purchase Index
- 07:00 USD Mortgage Market Index
- 07:00 USD Mortgage Refinance Index
- 08:30 USD Export Price Index (MoM) (Mar)
- 08:30 USD Import Price Index (MoM) (Mar)
- 10:30 USD Crude Oil Inventories
- 14:00 USD Beige Book
- 18:45 NZD FPI (MoM) (Mar)
- 19:50 JPY Foreign Bonds Buying
- 19:50 JPY Foreign Investments in Japanese Stocks
- 19:55 KRW Trade Balance (Mar)
- 21:00 KRW Interest Rate Decision (Apr)
- 21:00 AUD MI Inflation Expectations
- 21:30 AUD Employment Change (Mar)
- 21:30 AUD Full Employment Change (Mar)
- 21:30 AUD Participation Rate (Mar)
- 21:30 AUD Unemployment Rate (Mar)
Thursday, April 15, 2021
- 02:00 EUR German CPI (MoM) (Mar)
- 02:00 EUR German HICP (MoM) (Mar)
- 02:45 EUR French CPI (MoM) (Mar)
- 02:45 EUR French HICP (MoM) (Mar)
- 04:00 EUR Italian CPI (MoM) (Mar)
- 04:00 EUR Italian HICP (MoM) (Mar)
- 04:00 EUR Spanish Trade Balance
- 04:30 GBP BOE Credit Conditions Survey
- 06:00 EUR Reserve Assets Total (Mar)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 USD NY Empire State Manufacturing Index (Apr)
- 08:30 USD Philadelphia Fed Manufacturing Index (Apr)
- 08:30 USD Philly Fed Prices Paid (Apr)
- 08:30 USD Retail Sales (MoM) (Mar)
- 08:30 CAD ADP Nonfarm Employment Change
- 08:30 CAD Manufacturing Sales (MoM) (Feb)
- 09:15 USD Capacity Utilization Rate (Mar)
- 09:15 USD Industrial Production (MoM) (Mar)
- 09:15 USD Manufacturing Production (MoM) (Mar)
- 10:00 USD Business Inventories (MoM) (Feb)
- 10:00 USD NAHB Housing Market Index (Apr)
- 10:00 USD Retail Inventories Ex Auto (Feb)
- 10:30 USD Natural Gas Storage
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 16:00 USD US Foreign Buying, T-bonds (Feb)
- 16:00 USD Overall Net Capital Flow (Feb)
- 16:00 USD TIC Net Long-Term Transactions (Feb)
- 16:00 USD TIC Net Long-Term Transactions including Swaps (Feb)
- 18:30 NZD Business NZ PMI (Mar)
- 19:00 JPY Reuters Tankan Index (Apr)
- 20:30 SGD Trade Balance
- 21:30 CNY House Prices (YoY) (Mar)
- 22:00 CNY Fixed Asset Investment (YoY) (Mar)
- 22:00 CNY GDP (YoY) (QoQ) (Q1) YTD (YoY) (Q1)
- 22:00 CNY Industrial Production (YoY) (Mar) YTD (YoY)
- 22:00 CNY Retail Sales (YoY) (Mar) YTD (YoY) (Mar)
- 22:00 CNY Chinese Unemployment Rate
- 22:00 CNY NBS Press Conference
Friday, April 16, 2021
- 02:00 GBP Car Registration (YoY) (Mar)
- 02:00 EUR Italian Car Registration (MoM) (Mar)
- 02:00 EUR German Car Registration (MoM) (Mar)
- 02:00 EUR French Car Registration (MoM) (Mar)
- 02:30 CHF PPI (YoY) (Mar)
- 04:00 EUR Italian Trade Balance (Feb)
- 05:00 GBP BoE MPC Member Cunliffe Speaks
- 05:00 EUR CPI (MoM) (Mar)
- 05:00 EUR Trade Balance (Feb)
- Tentative EUR Eurogroup Meetings
- 08:15 CAD Housing Starts (Mar)
- 08:30 USD Building Permits (MoM) (Mar)
- 08:30 USD Housing Starts (Mar)
- 08:30 CAD Foreign Securities Purchases (Feb)
- 08:30 CAD Foreign Securities Purchases by Canadians (Feb)
- 08:30 CAD Wholesale Sales (MoM) (Feb)
- 10:00 USD Michigan Consumer Sentiment (Apr)
- 10:00 USD Michigan Inflation Expectations (Apr)
- 13:00 USD U.S. Baker Hughes Oil Rig Count
- 16:30 USD CFTC speculative net positions
Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats.
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