April 9-16, 2023

FEAR NOT Brave Investors

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

The Week That Was – What Lies Ahead?

Contents

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

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

Editorial

Last week began with a touch of geopolitical aggression from the friendly mob at OPEC+ doing their best to help out their Russian friends. OPEC+ announced a surprise cut of over 1 million barrel per day crude oil production cut on Sunday ahead of the scheduled JMMC Monday. This is in addition to the already announced 500kppd previously announced by Russia. The OPEC move coincided with China, Russia, Saudi Arabia and Brazil all saying they will deal together in Yuan.

The move came a week after China’s Xi and Putin slammed Vodka shots at the Kremlin, ok maybe they did, maybe they didn’t. Oil prices gapped up as did biofuel relatives such as sugar and relative. WTI back to $80, hardly earth shattering. The S&P energy sector rose 3.0% with companies like Exxon leading the charge, which brings us to the next part of the story.

The American response was Texas is looking to drill more and energy giant ExxonMobil, the largest U.S. oil company, has held preliminary informal talks with U.S. fracking giant Pioneer Natural Resources Co. about a possible acquisition. Pioneer is the largest oil producer in the Permian; Exxon, the sixth largest, according to analytics firm Novi Labs. Last week XOM also said they were abandoning certain projects in Brazil. If you think all these moves are unrelated, you are mistaken.

Keep in mind this came just weeks after the collapse of US regional Banks and the UBS takeover of Credit Suisse. Russia is at war, and teams have been picked, heck if slaughtering people isn’t enough, a grain and food war is stalling, let’s get back to oil as a weapon. On that note Russia is readying its fertilizer war again. At the same time China has been buying up gold hoping to avoid sanction tie ups. Gold futures settled $9.20 lower (-0.5%) to $2,026.40/oz, up about +2% on the week, helped by weekly losses in yields and the greenback.

We get a glimpse of what the Fed was thinking during those EOW swirling days with the FOMC minutes of that meeting. Measures of financial market stress have improved since that meeting as shown in charts 7–9 from Scotiabank below.

Well, 2008 redux didn’t happen in the last few weeks, so the Fed moves have worked for now, much to Xi and Putin’s chagrin.

We get the money center banks next week so we get an update on that front. In a shortened week ahead of Easter, stock market mostly declined or were steady. The Dow squeezed out a slim gain as money flowed into blue chip names. Growth concerns is the main overhang as bonds indicated, the 10-year note closed out Thursday at 2023 lows.

Many of the economic releases this week came in weaker than expectations. Some of the more influential data included the March ISM Manufacturing and Non-Manufacturing Indices, February JOLTS Job Openings sharp fall revived questions about the strength of the labor market, and therefore the broader economy. We also saw soft Factory Orders, March ADP Employment Change, and weekly jobless claims which saw big upward revisions to last week’s numbers. Job cuts rose 15% in March as US based employers slashed 89.7K job cuts in March of 2023 the Challenger, Gray & Christmas report showed.

Ahead of his bank’s earning next Friday JPMorgan Chase (JPM) CEO Jamie Dimon in his annual shareholder letter that the regional banking crisis is not over yet and will have repercussions for years to come. Then we got the US employment report and bond yields leapt higher after the March jobs report showed a cooling but still strong labor market.

The reaction to non-farm payrolls was that good news is good news. S&P 500 futures closed early for the Good Friday holiday up 9.5 points to 4141. The 10-year U.S. Treasury yield jumped to 3.379%, from 3.288% Thursday. The yield on the two-year note, highly sensitive to monetary policy expectations rose to 3.948% from 3.818%. Now it was thin and most of the trading world was out, but you got a picture of the soft side on trading books.

Cyclical sectors were the biggest losers and defensive-oriented sectors the biggest winners along with energy names. The industrials (-3.4%), consumer discretionary (-3.0%), and materials (-1.3%) sectors were sold off while the utilities (+3.1%) and health care (+3.1%) sectors rose. It gives you a clue what the fund managers are laying off.

The doomsayers may be right, but we are seeing constant surprises to that theory. For example, early signs that the US housing market slump is finding a base are emerging, pending home sales having risen for a third month and to a 6-month high. we will keep an eye on consumer sentiment and business activity. We are far from being out of the woods, remember the market is not the economy. Saying that we got quite the distorted job picture per our main job stories which wee reprise below. Are we simply taking some air out or is the beginning of the great meltdown?

What we continue to notice is how this market is still being treated by ‘experts’ as those in the past, hence the volatility and extreme in bulls/bears. Understanding crowd behavior is essential in these markets. The moves have caught analysts and strategists by surprise with the uber bear running amok in the past few weeks. Typical thinking is this from Morgan Stanley strategists; “Given the events of the past few weeks, we think … equity markets are at greater risk of pricing in much lower estimates”, noting that earnings estimates were 15-20% too high even “before the recent banking events.”

What non-traders are failing to grasp is this market with so many variables is not trading as they expect and they are constantly wrong. S&P 500 earnings for the first quarter are estimated to have fallen 5% from 2022, followed by an expected 3.9% drop in the second quarter, Refinitiv data shows. During recessions, however, earnings tumble at a 24% annual rate on average, according to Ned Davis Research. However how important is that in such a chaotic market? There is the answer structure your thinking around game theory or even chaos theory.

A reminder in these markets don’t get married to a view, leave biased partisan opinions at the door and find a leader. Right now, TSLA is giving us a good indicator of crowd behavior. Note the divergence and convergence with it and other instruments. Be proactive.

So how Screwed are We?

• The banking system is on much greater Credit risk than mortgage risks were offloaded during the 2008 mortgage finance Bubble. At $25.6 TN, Banking System Assets ended 2022 almost double the 2007 level.
• Financial Sector debt growth jumped to a 9.66% rate last year, the strongest since 2007’s 13.50% Z.1 data showed. Now we are looking at this given the quick demise of regional banks and the concerns of the commercial structure. Why? we simple note a jump in Financial Sector borrowings signals a surge in risk intermediation. Is this fateful late-cycle intermediation gong to haunt the financial sector and economy when the Bubble bursts.
• If it doesn’t burst well, we circle back to the popular view that Financial Sector debt included in analysis would be “double counting” borrowings already included elsewhere (i.e. mortgage and business). The swift end to backs, the shocking management out there and geopolitical cold war out there has us ready to expect the unexpected and aware of moves to mitigate by Central banks as we saw a few weeks ago.
• GSE Assets expanded an unprecedented $2.094 TN, or 29.4%, over the past three years to a record $9.224 TN. FHLB Assets surged $524 billion, or 72%, in 2022, with indications for Q1 growth upwards of (yes) $400 billion.
• FHLB plays a pivotal role, last year prolonging the lending boom and last month stabilizing bank liquidity.

The Credit cycle downturn is coming to the surface.

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

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

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

Ahead is CPI, Bank Earnings and Retail Sales

Eyes will be on top macroeconomic reports that will emphasize the health of the US and global economies. Eyes and ears will be on central bankers given the market turmoil and the hiking of rates.

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

The Fed minutes will be out and so will a handful of Fed speakers. Fed’s Williams speaks on Monday, Fed’s Goolsbee, Harker, and Kashkari talk on Tuesday. Wednesday Fed’s Barkin yaps away. The next FOMC meeting is on May 2^nd–3^rd.

Measuring U.S. Hotness

Key macroeconomic reports features’ the March CPI inflation report which is expected to show a slower monthly pace of 0.2%, down from 0.4%, while headline inflation reading is expected at 5.2% year on year, down from February’s 6.0%. The March Retail Sales report is expected to show another soft month of spending.

Earnings reports include Tilray Brands (TLRY) CarMax (KMX) Delta Air Lines (DAL) UnitedHealth Group (UNH), BlackRock (BLK), Wells Fargo (WFC), JPMorgan (JPM), PNC (PNC) and Citi (C).

Click here to see the Full Week Ahead List Below

Some things never change, when you think Greed is Good

Where is the fear?

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

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

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

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

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

China; Behind the Iron Curtain

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

• “China’s provincial governments are facing unprecedented debt burdens following a collapse in land sales, a slowing economy and increased spending on Covid testing and lockdowns over the years. Investors are becoming increasingly worried about the massive debt pile, which Goldman Sachs… estimated this week has reached $23 trillion — or 126% of GDP — if off-budget borrowing by local governments are included. Curbing local debt risks was also highlighted by President Xi Jinping as a key challenge officials must tackle this year.” April 5 – Bloomberg
• “China’s local traders are borrowing a record amount of short-term cash, in a sign they are leveraging up returns in a stable bond market. Turnover in so-called pledged repurchase trades surged past 8 trillion yuan ($1.2 trillion) to an all-time high Thursday… The figures are used as a gauge of leveraged activity in bonds, even if the transactions also include the day-to-day financing needs of firms in the market.” April 7 – Bloomberg

The Market Tripod of Destruction.

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

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

Inflation Matters

• US Core PCE Inflation Comes in Lighter Than Expected in February
• US Producer Price Inflation Fell in February as Economy Faces Headwinds
• Modest Pullback in US Consumer Inflation in February as Core Services Prices Climb
• FAO World Food Price Index Fell in February for Eleventh Consecutive Month

Inflation with Henry Kaufman

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

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

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

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

Independence – Never Take It for Granted Traders

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

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

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

Volatility

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

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

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

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

– MoneyNeverSleeps

Cboe Daily Market Statistics

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

Part A – Stock Markets

Weekly Highlights – USA

Indices

• S&P500 was little changed (up 6.9% y-t-d),
• Dow increased 0.6% (up 1.0%).
• S&P 400 Midcaps slumped 2.6% (up 0.7%),
• Small cap Russell 2000 fell 2.7% (down 0.4%).
• Nasdaq100 declined 0.9% (up 19.4%).

Sectors

• Utilities jumped 3.2% (down 1.5%).
• Banks fell 2.0% (down 20.3%),
• Broker/Dealers sank 4.9% (down 2.3%).
• Transports lost 3.3% (up 4.3%).
• Semiconductors sank 4.9% (up 21.3%).
• Biotechs gained 1.6% (up 2.1%).
• With bullion jumping another $39, the HUI gold equities index surged 6.1% (up 18.3%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index rose 1.4% (up 3.9% y-t-d).
• France’s CAC40 was unchanged (up 13.1%).
• German DAX equities index slipped 0.2% (up 12.0%).
• Spain’s IBEX 35 equities index increased 0.9% (up 13.2%).
• Italy’s FTSE MIB index added 0.4% (up 14.8%).

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

 Highlights – Asia Stocks

• Japan’s Nikkei Equities Index fell 1.9% (up 5.5% y-t-d).
• South Korea’s Kospi index increased 0.5% (up 11.4%).
• India’s Sensex equities index gained 1.4% (down 1.7%).
• China’s Shanghai Exchange Index rose 1.7% (up 7.7%). 

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: -0.3% Thursday to7219 (+0.6% for the week)
• Major banks under pressure, NAB hit the most, down 0.6% to $27.88. ANZ fell 0.5% to $23.19, Westpac 0.1% to $21.76 and CBA 0.1% to $99.01.
• Thurs Lithium miners fell with Lake Resources plunging 4.2% to 45.5¢, Allkem down 3.5 % and Pilbara Minerals down 3.2 %. Miner BHP shed 0.4 % to $45.05, Rio Tinto 0.3% to $116.31. Fortescue Metals slipped 0.1%t to $21.57

Highlights – Emerging Markets Stocks 

EM equities mixed

• Brazil’s Bovespa index declined 1.0% (down 8.1%),
• Mexico’s Bolsa index dipped 0.8% (up 10.4%)
• Turkey’s Borsa Istanbul National 100 index rose 2.3% (down 10.6%).
• Russia’s MICEX equities index jumped 2.4% (up 16.4%).

Technical Analysis

S&P 500

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

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

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

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

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

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

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

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

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

NASDAQ 100

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

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

Dow Jones

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

Russell 2000

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

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with retest & break of the triple top patterning in a pennant. From there been a fractal on each exhaustion. The Philadelphia Semiconductor (SOX) Index returned 27.6% for Q1 2023. Pull from Chip players’ Nvidia surged 90% and AMD 51%.

NVidia $NVDA

NVidia surged 90% in Q! 2023. The Philadelphia Semiconductor (SOX) Index returned 27.6% for the quarter, with the Nasdaq Computer Index up 25.7% and the NYSE Arca Technology Index gaining 26.1%. The Nasdaq100 (NDX) jumped 20.5%. NVDA took off after the breakup retest from May 2021. NVidia is a clear leader of SOX & SMH look for cues there and ABC failures for changes. NVDA never looked back after the Key Break (mauve) and Tenkan to a flat cloud and holding support the recent low at the 61.8% extension.

Apple $AAPL

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

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

ARKK ETF

The ARK Innovation ETF (ARKK) finally found some support at -1/8, 78% off highs and the 423.6% extension! The ARK Innovation ETF returned 29% for Q1 2023. The fund is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, it has not been a pretty slide. For the quarter, Nasdaq Computer Index up 25.7% and the NYSE Arca Technology Index gaining 26.1%. The Nasdaq100 (NDX) jumped 20.5%.

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

ExxonMobil XOM

Part B: Bond Markets

Bond Watch

Treasuries

U.S. Treasuries yields continue to respond to risk on/off pressures intraday in the short tenors and further out the curve to recessionary risks. This was highlighted Friday in a thin market by the two-year note, which is highly sensitive to monetary policy expectations. With stocks closed and bonds open for a shortened session for Good Friday moves were exaggerated, The U.S. March jobs report showed a cooling but still strong labor market. The 10-year U.S. Treasury yield jumped to 3.379%, from 3.288% the prior day. The yield on the two-year note rose to 3.948% from 3.818%. Both yields have plunged in recent weeks as bond prices have climbed.

Treasury Yield Watch

• Three-month Treasury bill rates ended the week at 4.635%.
• Two-year government yields declined four bps this week to 3.98% (down 45bps y-t-d).
• Five-year T-note yields dropped eight bps to 3.50% (down 51bps).
• Ten-year Treasury yields fell eight bps to 3.39% (down 49bps).
• Long bond yields declined four bps to 3.61% (down 35bps).
• Benchmark Fannie Mae MBS yields rose three bps to 5.08% (down 31bps).

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

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates gained three bps to 6.27% (up 155bps y-o-y).
• Fifteen-year rates declined two bps to 5.53% (up 162bps).
• Five-year hybrid ARM rates slipped a basis point to 5.55% (up 199bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates bps down 19 bps to 6.75% (up 192bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index increased 0.7% (down 5.8% y-t-d).
• Spot Gold rose 2.0% to $2,008 (up 10.1%).
• Silver jumped 3.6% to $24.98 (up 4.3%).
• WTI crude surged $5.03, or 6.6%, to $80.70 (up 1%).
• Gasoline rose 4.2% (up 14%),
• Natural Gas dropped 9.3% to $2.01 (down 55%).
• Copper declined 1.9% (up 5%).
• Wheat fell 2.4% (down 15%),
• Corn dropped 2.6% (down 5%).
• Bitcoin lost $690, or 2.4%, this week to $27,900 (up 68%).

Key Long Term Commodity Charts

Copper

Gold

Energy

WTI Oil

Natural Gas

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

BDI Freight Index

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

Charts and commentary via KnovaWave on:

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

Part D: Forex Markets

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

Highlights

• For the week, the U.S. Dollar Index declined 0.4% to 102.09 (down 1.4% y-t-d). 2022 gains were 8.2%%
• For the week on the upside, the Swiss franc increased 1.1%, the British pound 0.7%, the euro 0.6%, the Japanese yen 0.5%, the Brazilian real 0.1%, the Singapore dollar 0.1%. The Chinese (onshore) renminbi increased 0.08% versus the dollar (up 0.45%).
• On the downside, the South African rand declined 2.2%, the South Korean won 1.1%, the Swedish krona 0.6%, the Mexican peso 0.5%, the Norwegian krone 0.3%, the Australian dollar 0.2%, and the New Zealand dollar 0.2%.

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

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

Cryptocurrencies

Bitcoin

Bitcoin continues to be plaything of levered speculators, this week we saw the markets turn against those short. An incredibly intense squeeze engulfed the Treasury market which flowed through to crypto. Intense squeeze dynamics also spurred a huge rally in crypto, with bitcoin surging a crazy 34%.

Where did this come from? Forced coverage from yield curve punts blowing up. Yen shorts and levered “carry trades” were at risk. JGB and European yields sank. Corporate spreads were blowing out, inflicting losses on levered corporate bond portfolios. Energy prices tanked. The favored (so called safe) financial stocks were collapsing, while the heavily shorted technology stocks rallied. For the week, the KBW Bank Index sank 14.6%, while the Nasdaq100 (NDX) jumped 5.8%.

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

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

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

Ethereum

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

So that went quick….. its all about the crisis that just kept holding off until it didn’t

“Just hours after Wall Street opened for trading on Friday morning, US regulators had seized control of Silicon Valley Bank, which had imploded under the strain of depositors pulling out their money en masse. What at first seemed like the failure of a one-of-its-kind lender with deep ties to the technology industry quickly appeared as though it might spiral out of control. Within 48 hours, regulators were preparing a package of emergency measures to quell panic among depositors and prevent contagion in the rest of the banking system. For some working on the effort, it evoked memories of the response to the coronavirus pandemic in 2020 and the great financial crisis of 2008. By Sunday evening, the US government announced it would guarantee all deposits held at SVB and crypto lender Signature Bank, which was also shut down by regulators at the weekend. The Federal Reserve, meanwhile, launched a lending facility that would be available to lots of other banks in order to ensure depositors’ demands could be met.”

March 13 – Financial Times (Colby Smith, James Politi, Ortenca Aliaj and James Fontanella-Khan)

“The Federal Reserve on Sunday unveiled a new program to ensure banks can meet the needs of all their depositors amid escalating chances of bank runs following the abrupt collapse of two major banks in the space of 72 hours. The Bank Term Funding Program (BTFP) will offer loans with maturities of up to a year to banks, savings associations, credit unions and other eligible depository institutions. Here are some key elements of the Fed’s program: A key element of the program is acceptable loan collateral – including U.S. Treasuries and mortgage-backed securities among others – will be valued at ‘par’… Loans of up to a year in length will be available under the new facility… Interest rates will be the one-year overnight index swap (OIS) rate plus 10 bps and will be fixed for the term of the advance on the day the advance is made… The loan commitments made by the Fed’s 12 regional banks will be backstopped with $25 billion from the U.S. Treasury’s Exchange Stabilization Fund.”

March 13 – Reuters (Dan Burns)

“The biggest banks in the U.S. swooped in to rescue First Republic Bank with a flood of cash totaling $30 billion, in an effort to stop a spreading panic following a pair of recent bank failures. JPMorgan…, Citigroup Inc., Bank of America Corp. and Wells Fargo are each making a $5 billion uninsured deposit into First Republic, the banks said… Morgan Stanley and Goldman Sachs… are kicking in $2.5 billion apiece, while five other banks are contributing $1 billion each. The bank’s executives came together in recent days to formulate the plan, discussing it with Treasury Secretary Janet Yellen and other officials and regulators in Washington, D.C…”

March 16 – Wall Street Journal (David Benoit, Dana Cimilluca, Ben Eisen, Rachel Louise Ensign and AnnaMaria Andriotis):

“Credit Suisse shares rebounded sharply on Thursday after the lender revealed plans to borrow up to SFr50bn ($54bn) from the Swiss central bank and buy back about SFr3bn of its debt in an attempt to boost liquidity and calm investors. The Swiss National Bank had said on Wednesday it was willing to provide a liquidity backstop following a plunge of as much as 30% in the troubled lender’s stock… In a statement on Thursday, Credit Suisse said it had taken the decision ‘to pre-emptively strengthen its liquidity’ by borrowing the funds from the Swiss central bank under a loan facility and short-term liquidity facility.”

March 16 – Financial Times (Joshua Frankli, Owen Walker and Laura Noonan)

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

Major US Banks Deliver Mixed Results in Q1, 2023

America’s big money center banks kick of first quarter earnings next week. There will be extra attention on them with the recent banking turmoil. Guidance will be keenly watched for from the money center banks. Concerns are rising over the banking sector’s exposure to commercial real estate. JPMorgan Chase (JPM), Citigroup (C), PNC Financial Services Group, Inc. (PNC) and Wells Fargo (WFC) reporting Q1 results on Friday. We got a preview from JPMorgan CEO Dimon saying that banking system is strong and sound despite the banking crisis raising the odds of a recession, and that the crisis is not over yet.

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

The Week Ahead – Have a Trading Plan

What Macro and Micro Risks and Opportunities Lie Ahead this week

Global Watch

Next Week’s Risk Dashboard via Scotiabank

• US nonfarm global aftermath
• US CPI is the next focus for Fed watchers
• US bank earnings to inform sector risks
• FOMC minutes to debate tightening effects
• The BoC will probably lean against cut pricing
• Will the BoK follow through on its prior threat?
• Peru’s central bank is expected to hold
• US retail sales probably softened
• PBoC constrained despite low Chinese inflation
• Australian jobs to offer post-mortem on RBA’s pause

Central bank Watch

In the week ahead we have key monetary policy meetings from Bank of Canada, Peru’s central bank and the Bank of Korea. Attention will also be on FOMC minutes that could materially inform next steps for the Federal Reserve.

Eyes and ears will be on central bankers. We have the backdrop of a more hawkish Fed Chair in the face of escalating systemic risk. How will this affect Fed policy given the massive treasury positions out there and the risk of uninsured funds? In this environment we get pivots daily. How much damage is the Federal Reserve willing to do in the guise of controlling inflation?

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

Monday, April 10, 2023

• 21:00 Bank of Korea Interest Rate Decision

Wednesday, April 12, 2023

• 10:00 BoC Monetary Policy Report & Interest Rate Decision

Thursday, April 13, 2023

• 19:00 Peru Interest Rate Decision

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

Economic Data Watch

US Data Focus

• Monday: February Wholesale Inventories (consensus 0.2%; prior -0.4%) at 10:00 ET
• Tuesday: March NFIB Small Business Optimism Index (prior 90.9) at 7:00 ET and $40 bln 3-yr Treasury note auction results at 13:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior -4.1%) at 7:00 ET; March CPI (consensus 0.3%; prior 0.4%) and Core CPI (consensus 0.4%; prior 0.5%) at 8:30 ET; weekly crude oil inventories (prior -3.74 mln) at 10:30 ET; $32 bln 10-yr Treasury note reopening results at 13:00 ET; and March Treasury Budget (consensus -$253.00 bln; prior -$262.40 bln) at 14:00 ET
• Thursday: March PPI (consensus 0.1%; prior -0.1%), Core PPI (consensus 0.2%; prior 0.0%), weekly Initial Claims (consensus 236,000; prior 228,000), and Continuing Claims (prior 1.823 mln) at 8:30 ET; weekly natural gas inventories (prior -23 bcf) at 10:30 ET; and $18 bln 30-yr Treasury bond reopening results at 13:00 ET
• Friday: March Retail Sales (consensus -0.4%; prior -0.4%), Retail Sales ex-auto (consensus -0.4%; prior -0.1%), March Import Prices (prior -0.1%), Import Prices ex-oil (prior 0.4%), Export Prices (prior 0.2%), and Export Prices ex-agriculture (prior 0.1%) at 8:30 ET; March Industrial Production (consensus 0.2%; prior 0.0%) and Capacity Utilization (consensus 79.0%; prior 78.0%) at 9:15 ET; and February Business Inventories (consensus 0.3%; prior -0.1%) and preliminary April University of Michigan Consumer Sentiment survey (consensus 62.7; prior 62.0) at 10:00 ET

Global Data Focus

G-20 finance ministers and central bank governors meeting in Washington

• OPEC: OPEC monthly oil market report is set for release
• Canada: Canada rate decision, Canada Fin Min Freeland, Canada existing home sales
• Brazil:
• Mexico: International reserves, industrial production
• Europe: Eurozone retail sales, ECB accounts, Eurozone industrial production, Germany CPI, France’s Constitutional Council will review President Macron’s controversial pension reform.
• UK: BoE Governor Andrew Bailey in Washington. GDP BoE Chief Economist Huw Pill, with Silvana Tenreyro.
• China: PPI, CPI Money supply, credit inflation, trade data and home prices
• Japan: PPI, Core machine orders BOJ’s Shimizu speaks about Japan’s economy and labor market.
• India: March inflation report is expected to drop from 6.44% to 5.76%, back in the 2-6% RBI target range. March trade data.
• South Korea:
• Australia: March employment report. Westpac consumer confidence and NAB business confidence will be released.
• New Zealand: New Zealand home sales Card spending data, manufacturing PMI, and Net migration.

US Stocks Watch Earnings and Event Watch

Earnings Highlights This Week:

• Monday includes Tilray Brands (TLRY), PriceSmart (PSMT) and Greenbrier Companies (GBX)
• Tuesday includes CarMax (KMX), ING Groep (ING), and Albertsons Companies (ACI).
• Wednesday includes Rent the Runway (RENT) and Sportsman’s Warehouse Holdings (SPWH).
• Thursday includes Delta Air Lines (DAL), Progressive Corp. (PGR), and Fastenal (FAST).
• Friday includes UnitedHealth Group (UNH), BlackRock (BLK), Wells Fargo (WFC), JPMorgan (JPM), PNC (PNC) and Citi (C).

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

Events

Notable conferences running during the week include:

Monday

• Semiconductor manufacturer Taiwan Semiconductor Company (TSM) March sales data
• Easter Monday with many countries on holiday

Tuesday

• Moderna (MRNA) will host its fourth annual Vaccines Day
• The 2023 Gold Forum Europe in Zurich, Switzerland Tuesday and Wednesday.
• Science Applications International Corporation (SAIC) will host an investor day.
• The US Energy Information Administration will publish its short-term energy outlook

Wednesday

• UK deadline for parties’ response in the proposed acquisition of Activision Blizzard (ATVI) by Microsoft (MSFT) scheduled.
• PNM Resources (PNM) and Avangrid (AGR) will seek resolution to a motion to dismiss a merger appeal filed by New Mexico state regulators. The two companies still intend to merge by the close of 2023.
• ConocoPhillips (COP) will host an Analyst & Investor Meeting

Thursday

• OPEC monthly oil market report is set for release.

Friday

• The American Association for Cancer Research will host its annual meeting. Event sponsors include Eli Lilly (LLY), Moderna (MRNA), Merck (MRK), AbbVie (ABBV), Amgen (AMGN), AstraZeneca (AZN), and Bristol-Myers Squibb (BMY).
• IEA publishes monthly oil market report

IPO Wrap

US IPO Week Ahead:

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

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