Join us in our weekly market thread.
Where have we been and where are we going? Join our weekly market thread on Traders Community…
FEAR NOT Brave Investors
Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.
Leverage, Record Highs and Doge
The Week That Was – What Lies Ahead?
The S&P continued to melt up while the small caps struggle was again the theme of the week. The large money center banks reported, with many posting record profits and revenues, mainly due to trading and investment bank fees from IPOs and SPACs. This, while a major part of the country is still unemployed and on food stamps. The disconnect between Wall Street and main street is for all to see and larger than ever since the pandemic.
Digital banking platform Coinbase went public on Wednesday trading under the symbol $COIN. The Nasdaq’s first major direct listing rose as high as $429.54 briefly giving it a market value over $100 billion. However it quickly lost a quarter of that before days end. That and the spectacular rise of Doge, which was created as a joke were what it seemed everyone was talking about. Each week the markets feel more and more like we are the racetrack.
Two weeks gone and the Archegos collapse still has Credit Suisse trying to offload stock. So many questions of why from all those involved, risk management, profit taking, bankers greed that even Gordon Gekko would be ashamed of. It is clear many are caught short as the S&P has effectively not allowed a pull back since the strong US Jobs report released Good Friday. Yet the Russell fails to bounce, possibly more funds caught out unloading.
Looking through the banking reports one that stood out was BlackRock’s assets under management rose to a record $9 trillion in the quarter, compared with $6.47 trillion a year earlier. Fixed income accounted for a bulk of the inflows, as expectations of policy tightening by the Federal Reserve triggered large moves in debt markets and pushed up U.S. Treasury yields. Amazing amounts of money under a select few controllers.
Still 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. Recall last week 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.
This week we had; US housing starts soar 19.4% in March to the highest since June 2006 helping US consumer sentiment higher with one year inflation expectations the highest since 2012.
Over in China first quarter GDP grew at the strongest pace on record at 18.3%. In Australia employment surges as participation hits all time high. Back in America energy prices pressure Consumer inflation rate to over 2 year high, The Bank of South Korea left rates unchanged citing exports leading the recovery
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 relevaton from the speed of technology adapting and disrupting to a new world with the lockdown is transformative. The shift has enabled and transformed the traditional 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 $63,000. 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&P500 gained 1.4% (up 11.4% y-t-d),
- Dow rose 1.2% (up 11.7%).
- S&P 400 Midcaps jumped 1.9% (up 18.0%),
- Small cap Russell 2000 rallied 0.9% (up 14.6%).
- Nasdaq100 advanced 1.4% (up 9.0%).
- Utilities surged 3.7% (up 7.0%).
- Banks slipped 0.2% (up 25.6%), Broker/Dealers gained 1.0% (up 22.5%).
- Transports were unchanged (up 19.3%).
- The Semiconductors declined 1.3% (up 16.4%).
- The Biotechs rallied 2.3% (down 3.3%).
- With bullion surging $33, the HUI gold index jumped 3.2% (down 2.5%).
Highlights – Europe Stocks
- U.K.’s FTSE equities index gained 1.5% (up 8.7% y-t-d).
- France’s CAC40 rose 1.9% (up 13.3%).
- The German DAX equities index gained 1.5% (up 12.7%).
- Spain’s IBEX 35 equities index increased 0.6% (up 6.7%).
- Italy’s FTSE MIB index rose 1.3% (up 11.3%).
Highlights – Asia Stocks
- Japan’s Nikkei Equities Index declined 0.3% (up 8.2% y-t-d).
- South Korea’s Kospi index gained 2.1% (up 11.3%).
- India’s Sensex equities index retreated 1.5% (up 2.3%).
- China’s Shanghai Exchange declined 0.7% (down 1.3%).
- Australia’s S&P/ASX 200 rose to 68 points or almost 1 per cent on the week. The broader All Ordinaries rose 8 points or 0.11% to a second-straight record close. Advances in Newcrest, Rio Tinto, BHP and CSL outweighed declines in Woodside, Fortescue and most of the banks.
Highlights – Emerging Stocks
- EM equities were mostly higher
- Brazil’s Bovespa index jumped 2.7% (up 1.8%),
- Mexico’s Bolsa rose 2.2% (up 10.6%).
- South Korea’s Kospi index gained 2.1% (up 11.3%).
- India’s Sensex equities index retreated 1.5% (up 2.3%).
- China’s Shanghai Exchange declined 0.7% (down 1.3%).
- Turkey’s Borsa Istanbul National 100 index rallied 1.1% (down 4.6%).
- Russia’s MICEX equities index recovered 3.2% (up 9.4%).
IPO and SPAC mania is back in full force with last years Snowflake an indication of and video game maker Roblox going public the most recent big hit.
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.
This three-month period is the first to be compared to year earlier profits that were affected by the pandemic. Profit growth for the S&P 500 is a stunning 30.2% for the quarter so far, based on actual reports and estimates. That makes it the best three-month period since the third quarter of 2010, according to FactSet. Last quarter when 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 Q1 has kicked off with the big banks setting the tone pushing the S&P 500 to record highs.
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 HD Supply (HDS) Aphria (APHA) TuanChe (TC) Simulations Plus (SLP) Oramed (ORMP) Biofrontera ADR (BFRA) Qualigen Therapeutics (QLGN) 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)
This week we hear from:
- Monday starts us off with
- Tuesday with earnings from
- Wednesday Earnings Include
- Thursday Earnings Include
- Friday Earnings include
Coca-Cola, IBM, United Airlines, Zions Bancorp, FNB, Steel Dynamics
Johnson & Johnson, Travelers, Procter and Gamble, Netflix, Abbott Labs, CSX, Lockheed Martin, Intuitive Surgical, Tenet Healthcare, Philip Morris, Northern Trust, Fifth Third, KeyCorp, Comerica Biogen, Interactive Brokers, Kinder Morgan
Verizon, Chipotle, Whirlpool, Nasdaq, Baker Hughes, Anthem, Netgear, Spirit Airlines, Canadian Pacific Railway, Lam Research, Discover Financial, SLM, Halliburton, Knight-Swift Transportation
AT&T, Intel, D.R. Horton, American Airlines, Union Pacific, Alaska Air, Pentair, Tractor Supply, Celanese, Seagate Technology Biogen, Dow, Credit Suisse, SAP, Boston Beer, Mattel, Snap, Valero Energy, Freeport-McMoRan, Quest Diagnostics, Southwest Airlines
American Express, Honeywell, Daimler, Regions Financial, Schlumberger, Kimberly-Clark
IPO Week Ahead
Eight IPOs are scheduled to raise a total of $3.0 billion in the week ahead, led by software maker UiPath (PATH).
- The largest IPO of the week, UiPath (PATH) plans to raise $990 million at a $26.0 billion market cap. The company provides software that identifies automation opportunities across organizations. Fast growing and unprofitable, the company’s nearly 8,000 customers included 80% of the Fortune 10 and 63% of the Fortune Global 500 as of 1/31/21.
- Medical device management company Agiliti (AGTI) plans to raise $500 million at a $2.6 billion market cap. Agiliti provides a comprehensive suite of medical equipment management and service solutions to roughly 7,000 hospitals. The company’s business model relies on direct payment from hospital customers rather than payor reimbursement, and it has maintained profitability on an EBITDA basis.
- Synthetic biology company Zymergen (ZY) plans to raise $401 million at a market cap of $3.0 billion. The company is focused on the design, discovery, and development of biologically and chemically-based innovations for a broad range of industries. Zymergen has designed four potentially breakthrough products spanning electronic films and insect repellents, though it estimates a five-year and $50 million launch process.
- Swimming pool company Latham Group (SWIM) plans to raise $400 million at a $2.4 billion market cap. Latham is the largest designer, manufacturer, and marketer of in-ground residential swimming pools in North America, Australia, and New Zealand. Profitable with strong growth, the company holds a #1 market position in North America in every product category in which it competes.
- Advertising analytics platform DoubleVerify Holdings (DV) plans to raise $340 million at a $4.3 billion market cap. DoubleVerify provides a suite of tools that enables advertisers to assess the effectiveness of the ads targeting and audience. The company is highly profitable with strong cash flow, but it faces significant competition with low barriers to entry.
- Cybersecurity training platform KnowBe4 (KNBE) plans to raise $201 million at a $3.1 billion market cap. The company seeks to train and educate employees to recognize cybersecurity attacks through its training program and tests. While the company has been able to operate near breakeven with positive cash flow, revenue growth has slowed, and it operates in a competitive space.
- Epilepsy medical device developer NeuroPace (NPCE) plans to raise $85 million at a $407 million market cap. Neuropace’s RNS System is the first and only commercially available neuromodulation system that monitors and responds directly to a patient’s electrical brain activity. While the RNS System represents a novel approach, the epilepsy market is competitive.
- Semiconductor manufacturer SkyWater Technologies (SKYT) plans to raise $75 million at a $519 million market cap. The company hopes to enable disruptive design concepts for integrated circuit boards and other micro- and nanotechnology through its Advanced Technology services. Additionally, SkyWater is coming public as global economies face a chip shortage.
IPO data via Renaissance Capital
Part B : Bond Markets
Highlights – Treasuries
- Investment-grade bond funds saw inflows of $6.434 billion, while junk bond funds posted outflows of $132 million (from Lipper).
In the US this month, spending of $972 billion was up from the year ago $356 billion, while receipts increased to $268 billion from $237 billion. Washington borrowed 70 cents of every dollar it spent last month. About 50% of the $3.41 TN first-half expenditures were debt-financed. Worse yet, our federal government is on track for back-to-back years of $3.0 TN plus annual deficits.
- Three-month Treasury bill rates ended the week at 0.01%. Two-year government yields added a basis point to 0.16% (up 4bps y-t-d). Five-year T-note yields declined three bps to 0.83% (up 47bps). Ten-year Treasury yields dropped eight bps to 1.58% (up 67bps). Long bond yields fell six bps to 2.27% (up 62bps). Benchmark Fannie Mae MBS yields sank eight bps to 1.86% (up 52bps).
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 dropped nine bps to 3.04% (down 27bps y-o-y).
- Fifteen-year rates fell seven bps to 2.35% (down 45bps).
- Five-year hybrid ARM rates sank 12 bps to 2.80% (down 54bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 12 bps to 3.06% (down 63bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week expanded $35.4bn to $7.692 TN.
- Over the past 83 weeks, Fed Credit expanded $3.930 TN, or 105%.
- Fed Credit inflated $4.881 Trillion, or 174%, over the past 440 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week increased $5.1bn to $3.554 TN.
- “Custody holdings” were up $236bn, or 7.1%, y-o-y.
- Total money market fund assets fell $30.1bn to $4.454 TN.
- Total money funds dropped $70bn y-o-y, or 1.5%.
- Total Commercial Paper jumped $35.2bn to an 11-year high $1.207 TN. CP was up $149bn, or 14.0%, 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 increased three bps to 0.90% (up 28bps y-t-d).
- Ten-year Portuguese yields surged 12 bps to 0.40% (up 37bps).
- Italian 10-year yields added two bps to 0.75% (up 20bps).
- Spain’s 10-year yields rose two bps to 0.39% (up 35bps).
- German bund yields gained four bps to negative 0.26% (up 31bps).
- French yields rose three bps to negative 0.01% (up 33bps).
- The French to German 10-year bond spread narrowed one to 25 bps.
- U.K. 10-year gilt yields slipped a basis point to 0.76% (up 57bps).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields declined two bps to 0.09% (up 7bps y-t-d).
Part C: Commodities
- The Bloomberg Commodities Index jumped 3.0% (up 10.9% y-t-d).
- WTI crude rallied $3.81 to $63.13 (up 30%).
- Gasoline surged 4.0% (up 45%),
- Natural Gas jumped 6.1% (up 6%).
- Copper advanced 3.2% (up 18%).
- Wheat rose 2.5% (up 2%).
- Corn slipped 0.6% (up 19%).
- Bitcoin jumped $3,672, or 6.3%, this week to $62,005 (up 113%).
- 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.
Global oilstockpiles are continuing to decline and that should also support the bullish case for oil prices. The dollar outlook has shifted quickly and if further weakness continues, the super commodity cycle could provide an additional level of underlying support for crude prices. 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 roses 1.9% to $1,777 (down 6.4%). Silver jumped 2.8% to $25.97 (down 1.6%).
April 11 – Bloomberg (Shruti Srivastava and Swansy Afonso): “Gold imports by India surged in March to the highest monthly total in nearly two years as a slump in prices stoked demand for jewelry during the ongoing wedding season. Overseas purchases increased more than sevenfold to 98.6 tons last month from 13 tons a year earlier… That would be the highest since May 2019.”
Gold bulls got a strong trading week as weaker bond yields are keeping the dollar vulnerable to further losses. Gold’s primary driver is real yields and now that the 10-year real yield is back at the March lows in an extended consolidation that could see further downward pressure for Treasury yields. Gold is benifitting from China giving banks permission to import bullion. Gold has massive support at the $1750 level and tentative resistance at the $1800 region, followed by the $1858 level.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 the U.S. dollar index declined 0.7% to 91.556 (up 1.8% y-t-d).
- Majors for the week on the upside, the Australian dollar 1.5%, the British pound 0.9%, the Japanese yen 0.8%, the euro 0.7%, the Swiss franc 0.5%, and the Canadian dollar 0.2%.
- Minors for the week on the upside, the South African rand increased 2.1%, the Brazilian real 1.7%, the New Zealand dollar 1.6%, the Norwegian krone 1.5%, the Swedish krona 1.2%, the Mexican peso 1.2%, the Singapore dollar 0.6%, the South Korean won 0.4% . The Chinese renminbi increased 0.49% versus the dollar this week (up 0.1% 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 has been strengthening after RBNZ policy mostly went as expected with no changes with interest rates or its large-scale asset purchases. NZD has 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
The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.
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
USDJPY has declined for two consecutive weeks following the recent weakness with Treasury yields. BOJ could start to decrease purchases and that should thwart some yen strength. The 108.00 level should remain massive support for dollar-yen as long as Treasury yields start to stabilize. 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. The Turkish Central Bank removed its tightening bias and scrapped the end-2021 inflation target in a dovish move. The Turkish lira has plunged about 11% since Naci Agbal was fired as the central bank governor in March.
Bitcoin 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. Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking after news hit that Turkey and then India are banning crypto payments. 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
Fed Warnings on Possible Medium To Long Term Risks
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 many record results for Q1. Mainly from trading and fees from IPO’s and SPAC’s. Rising interest rates also help the bottom line.
- Goldman Sachs Trading and SPACs Investment Banking Fees Pull in Record Revenue
- Wells Fargo Beat Earnings With $1.05 Billion Reserve Release
- JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
- Blackrock Earnings Soar As Assets Under Management Rose to Record $9 Trillion
- PNC Bank Earnings Beat Ahead of Completing BBVA USA Bancshares Acquisition
- Citigroup Beats Earnings on Reserve Release, Exiting Most Consumer Banking in Asia, Europe, and Middle East
- Bank of America Earnings Rise With Net Interest Yield and Release of Loan loss Reserves
- Morgan Stanley Dealmaking and Trading Drive Record Profits
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.
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 the Bank of Canada decision on Wednesday and the European Central Bank rate decision on Thursday. A light data week with Global PMI manufacturing and services data on Friday. In the US we will also watch New home sales Friday. Another weekly key is the jobless figures after Thursday’s report of 576,000 new claims, the lowest level since the early days of the pandemic.
Central Banker and Geopolitics Watch speeches, reports and rate moves.
Monday: April 19 2021
- U.K. Fintech Week starts with a keynote speech by Chancellor of the Exchequer Sunak.
- Riksbank Deputy Governor Breman gives speaks on the economic risks of climate change.
- Tentative EUR German Buba Monthly Report
- Canadian Prime Minister Trudeau’s government releases its first budget in two years.
- 21:30 AUD RBA April policy meeting minutes
- 21:30 CNY PBoC Loan Prime Rate
Tuesday April 20, 2021
- None Seen
Wednesday April 21, 2021
- Tentative Russian President Putin delivers his annual address to the nation.
- 04:05 Deputy Governor Ramsden gives Wednesday’s keynote speech at U.K. Fintech Week.
- 06:30 BoE Gov Bailey Speaks on “Diversity and Market Intelligence”
- 10:00 CAD BoC Monetary Policy Report
- 10:00 CAD BoC Rate Statement
- 10:00 CAD BoC Interest Rate Decision
- 11:00 CAD BOC Gov Macklem Press Conference
Thursday April 22, 2021
- 07:45 a.m. European Central Bank rate decisions
- 07:45 a.m. ECB Monetary Policy Statement
- 08:30 a.m ECB Press Conference with President Christine Lagarde
- Tentative President Biden Invites 40 World Leaders to Leaders Summit on Climate
Friday April 23, 2021
- Sovereign Rating Updates – Finland (Fitch) – Netherlands (Fitch) – EFSF (S&P) – Greece (S&P) – Italy (S&P) – U.K. (S&P) – Finland (DBRS)
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 18, 2021
- 19:01 GBP Rightmove House Price Index (MoM)
- 19:50 JPY Exports (YoY) (Mar)
- 19:50 JPY Imports (YoY) (Mar)
- 19:50 JPY Trade Balance (Mar)
- Tentative AUD HIA New Home Sales (MoM)
Monday, April 19, 2021
- 00:30 JPY Capacity Utilization (MoM) (Feb)
- 00:30 JPY Industrial Production (MoM) (Feb)
- 05:00 EUR Construction Output (MoM) (Feb)
- 05:00 EUR Current Account (Feb)
- 05:00 EUR Current Account n.s.a. (Feb) T
- entative EUR German Buba Monthly Report
- 08:15 CAD Housing Starts (Mar)
- 21:30 AUD RBA Meeting Minutes
- 21:30 CNY PBoC Loan Prime Rate
- 23:00 NZD RBNZ Offshore Holdings (Mar)
Tuesday, April 20, 2021
- 02:00 GBP Average Earnings (Feb)
- 02:00 GBP Claimant Count Change (Mar)
- 02:00 GBP Employment Change 3M/3M (MoM) (Feb)
- 02:00 GBP Unemployment Rate (Feb)
- 02:00 EUR German PPI (MoM) (Mar)
- 08:55 USD Redbook (MoM)
- Tentitive Apple’s Spring Loaded Event (new iPad Pro line, AirTags, and a new iMac are expected
- 11:30 NZD GlobalDairyTrade Price Index
- 12:00 USD 52-Week Bill Auction
- 16:30 USD API Weekly Crude Oil Stock
- 17:00 KRW PPI (MoM)
- 18:45 NZD CPI (QoQ)
- 20:30 AUD MI Leading Index (MoM)
- 21:30 AUD Retail Sales (MoM)
Wednesday April 21, 2021
- All Day Holiday Brazil – Tiradentes Day
- All Day Holiday India – Ram Navami
- 02:00 GBP CPI (MoM)
- 02:00 GBP PPI Input (MoM)
- 02:00 GBP PPI Output (MoM)
- 02:00 GBP RPI (MoM) (Mar)
- 04:05 GBP MPC Member Ramsden Speaks
- 04:30 GBP House Price Index (YoY)
- 06:30 GBP BoE Gov Bailey Speaks
- 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 CAD CPI (MoM) (Mar)
- 10:00 CAD BoC Monetary Policy Report
- 10:00 CAD BoC Rate Statement
- 10:00 CAD BoC Interest Rate Decision
- 10:30 USD EIA Crude Oil Inventories
- 11:00 CAD BOC Press Conference
- 13:00 USD 20-Year Bond Auction
- 19:50 JPY Foreign Bonds Buying
- 19:50 JPY Foreign Investments in Japanese Stocks
- 21:30 AUD NAB Quarterly Business Confidence
Thursday, April 21, 2021
- 02:00 CHF Trade Balance (Mar)
- 02:45 EUR French Business Survey (Apr)
- 04:00 EUR Italian Industrial Sales (MoM) (Feb)
- 06:00 GBP CBI Industrial Trends Orders (Apr)
- 07:45 EUR Deposit Facility Rate (Apr)
- 07:45 EUR ECB Marginal Lending Facility
- 07:45 EUR ECB Monetary Policy Statement
- 07:45 EUR ECB Interest Rate Decision (Apr)
- 08:30 USD Chicago Fed National Activity (Mar)
- 08:30 USD Continuing Jobless Claims
- 08:30 USD Initial Jobless Claims
- 08:30 USD Jobless Claims 4-Week Avg.
- 08:30 CAD New Housing Price Index (MoM) (Mar)
- 08:30 EUR ECB Press Conference
- 10:00 USD Existing Home Sales (MoM) (Mar)
- 10:00 USD US Leading Index (MoM) (Mar) 1
- 0:00 EUR Consumer Confidence (Apr)
- 10:30 USD Natural Gas Storage
- 11:00 USD KC Fed Composite Index (Apr)
- 11:00 USD KC Fed Manufacturing Index (Apr)
- 11:30 USD 4-Week Bill Auction
- 11:30 USD 8-Week Bill Auction
- 13:00 USD 5-Year TIPS Auction
- 19:00 AUD Manufacturing PMI
- 19:00 AUD Services PMI
- 19:01 GBP GfK Consumer Confidence (Apr)
- 19:30 JPY CPI, n.s.a (MoM) (Mar)
- 20:30 JPY Manufacturing PMI (Apr)
- 20:30 JPY Services PMI
- 20:30 SGD URA Property Index (QoQ)
- 21:00 NZD Credit Card Spending (YoY)
Friday, April 22, 2021
- 01:00 SGD CPI (YoY) (Mar)
- 02:00 GBP Public Sector Net Borrowing (Mar)
- 02:00 GBP Retail Sales (MoM) (Mar)
- 03:15 EUR French Manufacturing PMI (Apr)
- 03:15 EUR French Markit Composite PMI (Apr)
- 03:15 EUR French Services PMI (Apr)
- 03:30 EUR German Composite PMI (Apr)
- 03:30 EUR German Manufacturing PMI (Apr)
- 03:30 EUR German Services PMI (Apr)
- 04:00 EUR Manufacturing PMI (Apr)
- 04:00 EUR Markit Composite PMI (Apr)
- 04:00 EUR Services PMI (Apr)
- 04:30 GBP Composite PMI
- 04:30 GBP Manufacturing PMI
- 04:30 GBP Services PMI
- 09:45 USD Manufacturing PMI (Apr)
- 09:45 USD Markit Composite PMI (Apr)
- 09:45 USD Services PMI (Apr)
- 10:00 USD New Home Sales (MoM) (Mar)
- 13:00 USD U.S. Baker Hughes Oil Rig Count
- 15:30 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.
-comment section below data-
Subscribe and Follow
Find us at www.traderscommunity.com
- Follow our contributors on Twitter @traderscom @thepitboss16 @knovawave @ClemsnideClem
Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.