December 10 – 16 2021
FEAR NOT Brave Investors
Where have we been and where are we going? Join our weekly market thread on Traders Community…
Fed, Apple and Inflation
The Week That Was – What Lies Ahead?
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
We started the week with our podcast How Quickly Markets Forget, S&P 500 In Striking Distance Of All Time Highs which quickly morphed into difference does a week make! You can thank Apple for much of it, AAPL bounced $23 from Friday’s nadir with back to back pumps from three upgrades with delta covering getting it to $180 all time highs Friday evening. On Friday all 11 S&P 500 sectors closed higher, the S&P 500 closed at a record high.
The other factor that pumped the market was the bear trap from the triggering of selling in oil and indices on a thin trading week with the Omicron fear pool. The nature of the move was well captured in The DIX Dark Index As a Proxy For Buying Activity Opportunities. In the violent sell off and reversal note two things on the 2 yr DIX.
- The sharp fall to the lower reaches of the GEX (orange/pink)
- The positive divergence of the DIX (blue) to the S&P 500 (green)
A key part of the KnovaWave trading system is crowd psychology and we incorporate the DIX in telling us where the dark pools are, short is long as we see with Sqzme. These indicators coupled with our Murrey Math, Ichimoku and Babson components help us pin point supports and opportunity. Fractal recognition of DIX and patterns with option gamma levels are a very powerful indicator and improve the probability and therefore lower risk of a trade or investment.
Given the power of this reversal (ABC for technicians) we saw the crowd fever take over to sharp highs in $AAPL and SPX in particularly. To underscore where we are at this is all following a well telegraphed red hot Consumer Price Index report. US November CPI came in at +6.8% y/y the highest since 1982, m/m CPI rose 0.8%. Energy costs showed the biggest gain (33.3% vs 30% in October), namely gasoline (58.1% vs 49.6%). Inflation also increased for shelter (3.8% vs 3.5%) and food (6.1% vs 5.3%, the highest since October of 2008). Real weekly earnings fell -0.2% vs -0.9% prior.
Now this gets really interesting as we get the Federal Reserve’s policy update Wednesday, all eyes will be the pace of the taper rate hikes and the tone of the Fed’s language. We get a deluge of Central Bankers this week, ECB, BoE and BoJ will also meeting to discuss monetary policy, Last few weeks we had New Zealand, Canada, Mexico, Brazil and Australia. We also get global December flash PMIs for an insight about the state of the global economy.
Traders on Friday after the CPI drop saw a more than 50% chance of a rate hike by May 2022, up from a roughly 30% chance a month ago, according to the CME Group’s FedWatch program.
Inflation is global, it’s not just stateside. Inflation in China rose to 2.3% in November 2021, the highest figure since August 2020 from 1.5% a month earlier. Notably food prices and a further rise in cost of non-food items both rose. The cost of food increased for the first time in six months. In Europe with energy prices vertical inflation is rising rapidly.
We hear all this talk about rates and tapering, but lets be very clear here it is a taper of a massive $120 billion in monthly bond purchases that have supported the recovery. In plain English there will be still huge amounts of bond purchases. Rates are at or near historically lows.
We need to all the risks to be wary off and received plenty of flak from it. It’s not rocket science valuations defy gravity, the S&P 500’s price-to-earnings ratio on a forward 12-month basis stands at 21.3, a 35% premium to its 20-year average, according to Refinitiv Datastream. The discount of risk continues. We always talk here about expect the unexpected and now that is front and center, gage the markets reaction, the market is always right and that’s why we focused on the crowd psychology aspect over the past few weeks.
We are in an openly hawkish phase. Recall the New York Fed president John Williams, who is a voting member continued with his hawkish tilt of late. He said we are seeing broader based increases in inflation. Fed Governor Bullard said US Core PCE Is “Quite High” and added that the Fed should take towards a more hawkish policy in the next couple of meetings. Then we had Fed Governor Christopher Waller say the rapid improving job market market and deteriorating inflation data have pushed him towards favoring a faster pace of tapering and more rapid removal of accommodation.
“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
Our weekly reminder for risk, timely given the V shape to ATH in just a week. 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
Highlights – USA
- S&P500 jumped 3.8% (up 25.5% y-t-d),
- Dow surged 4.0% (up 17.5%).
- Nasdaq100 surged 3.9% (up 26.7%).
- S&P 400 Midcaps jumped 2.9% (up 20.5%)
- Small cap Russell 2000 rose 2.4% (up 12.0%).
- Utilities rose 2.5% (up 10.3%).
- Transports advanced 2.7% (up 31.2%).
- Banks gained 2.2% (up 36.2%)
- Broker/Dealers added 1.9% (up 26.6%).
- Semiconductors rose 2.9% (up 40.0%).
- Biotechs increased 0.6% (down 8.4%).
- With bullion little changed, the HUI gold index fell 1.6% (down 19.2%).
Highlights – Europe Stocks
- U.K.’s FTSE rallied 2.4% (up 12.9% y-t-d)
- France’s CAC40 rallied 3.3% (up 25.9%).
- German DAX equities index rose 3.0% (up 13.9%).
- Spain’s IBEX 35 equities index increased 1.4% (up 3.5%).
- Italy’s FTSE MIB index rallied 3.0% (up 20.2%).
Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September 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 gained 1.5% (up 3.6% y-t-d)
- South Korea’s Kospi index increased 1.4% (up 4.8%).
- India’s Sensex equities index gained 1.9% (up 23.1%).
- China’s Shanghai Exchange rallied 1.6% (up 5.6%).
Highlights – Australian Stocks
- Australia’s S&P/ASX200 +1.6% for the week with all sectors green. First weekly gain in five weeks. The index is up 10% for the year.
- $22 billion merger of Santos and Oil Search completed on Friday
- Iron ore -2.6% to $US108.53 a tonne Friday
Highlights – Emerging Markets Stocks
- EM equities hit rallied
- Brazil’s Bovespa index advanced 2.6% (down 9.5% YTD)
- Mexico’s Bolsa gained 1.2% (up 16.2%).
- Turkey’s Borsa Istanbul National 100 index surged 6.5% (up 37.8%).
- Russia’s MICEX equities index sank 3.9% (up 14.3%).
IPO and SPAC mania remains in full force.
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
This week’s top % gainers
- Healthcare: TBPH (9.95 +28.06%), LHCG (133.37 +19.71%), MESO (6.21 +19.19%), ACAD (22.3 +18.7%)
- Industrials: GOL (6.88 +28.61%)
- Consumer Discretionary: TACO (12.51 +66.07%), LOVE (81.15 +31.4%), EDU (2.28 +21.66%)
- Information Technology: PLAB (17.18 +24.85%), PI (84.74 +20.17%), SIMO (90 +19.94%), CIEN (73.17 +19.77%), EPAY (51.67 +18.17%)
- Financials: JT (1.07 +40.77%), TRUP (141.69 +26.99%)
- Energy: LPI (68.12 +22.91%), SWN (5.46 +19.47%), PTEN (8.91 +19.12%), CPG (5.26 +18.89%)
This week’s top % losers
- Healthcare: RETA (28.94 -63.22%), RDUS (7.18 -51.91%), HQY (41.2 -24.13%), AXDX (4.14 -16.7%), MRNA (257.07 -16.19%), ENTA (69.61 -15.8%), AGIO (29.91 -12.59%)
- Materials: HMY (3.69 -12.68%), GFI (9.82 -10.77%)
- Industrials: AVAV (63.17 -18.75%), PATK (73.61 -11.8%), JOBS (49.54 -11.54%)
- Consumer Discretionary: SFIX (19.18 -17.22%), CONN (18.71 -14.17%), GME (148.74 -13.72%), LE (18.45 -11.89%), FLWS (23.47 -11.69%)
- Information Technology: EVBG (62.82 -43.47%), POWI (87.32 -10.62%)
Technical Analysis of key markets via KnovaWave
Daily: We saw a violent ABC for the 5 waves up for SPX continue right into bottom of the median line to give us an (a) or C of a 4. with impulse after completing 5. Reversed hard with energy fueled from the power impulse down from near +1/8 ATH. On the way up (just like down) It accelerated after it broke the Tenkan through the rejected Kijun and then the Kijun to close back over the median and 8/8. Bulls this was a (ii) of a 5. Bears this is a a-b of a C off a completive V of degree. We watch if this low was a (iii), (a) or C. Will determine if sharp ABC completed off all time highs around +1/8. We have to respect the number of alternatives of degree of 5. With such trends keep it simple support is Tenkan and Kijun and watch for ABC. No fear is the driving element.
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: The weekly shows us the reenergized SPX tripped in 3 to test recent break up at Tenkan from there we had had a powerful rally to ATH. Again notice what happened “Each new high has evolved after testing Tenkan key support which is the next line after Friday’s dump & minor bounce.” We watch for a spit of a spit Extensions are difficult to time, keep it simple.
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 move to 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. From there we sold off right to Tenkan (as did SPX) and bounced hard Support Tenkan to Kijun. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.
The small cap Russell RUT has been developing a large flag which it did a false break to fuel the selling from there we replicated to the down (Adam’s theory). Unlike SPX and NDX we could not get through Tenkan and Kijun which rejected the bounce. This is the index showing more of the fast money crowd and is trading like it. Closed right at the top of the cloud and at the channel. the flag. Needs to get traction in here for bulls. Support +1/8 through 7/8 (cloud base)
Semiconductors SMH clean with reaction from above reverted with the retest & break of the triple top patterning in a pennant. Pull from Chip Shortage players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX saw Semiconductors rise 2.9% (up 40.0% YTD)
Following the announcement of NVDA 4/1 split some levels off the energy break NVidia hasn’t looked back with many gaps below. We saw another power move off the $200 retest (old $800) & earnings off $300 which are retesting. It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.
Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level. These levels will be key energy levels. Support from previous highs, resistance now Fibs and Murrey Math levels. Remember the impact $AAPL has, at least short term on all the major indices.
Amazon double top that filled the gap in 3 waves held at the 50wma but little impulse – compare to $AAPL for example.. From from there failing near the previous high. Watch action around support is 200wma and previous breaks. Resistance previous flag.
The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Support previous lows, needs to clear 130 to build C or iii for bulls. We saw ATH in NASDAQ & SPX yet this couldn’t raise a bid – very telling negative divergence. $ARKK circa 80 & 90 reversals and 200ma.
US Stocks Watch
This three-month period is the second to be compared to year earlier profits that were affected by the pandemic. According to Refinitiv, earnings for the second quarter are looking to be up 78.1%. 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 markets potentially.
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.
MongoDB, Coupa Software , SentinelOne, Toll Brothers, Stitch Fix, UiPath, Campbell Soup, RH, GameStop, Broadcom, Costco, Hormel, Lululemon, Chewy
Monday starts us off with
- Earnings: Regeneron investor day
- Earnings: Campbell Soup investor day
- Earnings: Lennar earnings and Eli Lilly analyst meeting
- Earnings: Accenture, Adobe, Jabil and FedEx
Friday Earnings include
- Earnings: Darden Restaurants
These are the highlighted earnings for the US this week. Please check daily schedules for more reports.
“U.S. companies are rushing to cash in on soaring stock prices. It isn’t just the white-hot market for initial public offerings. Companies are returning to the public markets to issue shares and raise cash from investors at the same time that existing shareholders are tapping the public market to unload their stockholdings at a record clip. Companies including Zoom Video Communications Inc. and Norwegian Cruise Line Holdings Ltd. have sold billions of dollars of shares this year… There have been 556 follow-on offerings, or stock sales by companies or existing shareholders, among U.S. companies this year, the most since 1996, according to Dealogic… They have raised a total of $133 billion. Behind the boom in share issuance? An ascendant stock market.” August 25 – Wall Street Journal (Gunjan Banerji):
US IPO Week Ahead:
Part B : Bond Markets
Highlights – Treasuries
Investment-grade bond funds saw outflows of $1.355 billion, while junk bond funds posted inflows of $1.259 billion (from Lipper).
- Three-month Treasury bill rates ended the week at 0.0475%.
- Two-year government yields gained seven bps to 0.66% (up 53bps y-t-d).
- Five-year T-note yields rose 12 bps to 1.25% (up 89bps).
- Ten-year Treasury yields jumped 14 bps to 1.49% (up 57bps).
- Long bond yields surged 21 bps to 1.88% (up 23bps).
- Benchmark Fannie Mae MBS yields gained eight bps to 2.07% (up 73bps).
All good while markets hold up but take note that the loosest financial conditions in history have supported record 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
Unprecedented cash payments by the U.S. government to households, changing consumer preferences and lowest mortgage rates in history have fueled a pandemic boom in housing, the fastest pace of increase on record in data from 1988 and prices surpassing the peak from the last property boom in 2005. The S&P CoreLogic Case-Shiller U.S. National Home Price Index has mark the fastest pace of increase on record in data from 1988 in 2.
- Freddie Mac 30-year fixed mortgage rates slipped a basis point to 3.10% (up 39bps y-o-y).
- Fifteen-year rates declined one basis point bps to 2.38% (up 12bps).
- Five-year hybrid ARM rates fell four bps to 2.45% (down 34bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up three bps to 3.25% (up 34bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week expanded $11.3bn to $8.622 TN. Over the past 117 weeks, Fed Credit expanded $4.895 TN, or 131%. Fed Credit inflated $5.811 Trillion, or 207%, over the past 474 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week fell $12.8bn to a one-year low $3.446 TN.
- “Custody holdings” were down $38bn, or 1.1%, y-o-y.
- Total money market fund assets rose $14.7bn to $4.636 TN. Total money funds increased $293bn y-o-y, or 6.7%.
- Total Commercial Paper declined $5.4bn to $1.089 TN. CP was up $99bn, or 10.0%, 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 surged 16 bps to 1.36% (up 74bps y-t-d).
- Ten-year Portuguese yields gained three bps to 0.31% (up 28bps).
- Italian 10-year yields rose five bps to 0.96% (up 42bps).
- Spain’s 10-year yields added a basis point to 0.36% (up 31bps).
- German bund yields gained four bps to negative 0.35% (up 22bps).
- French yields increased three bps to zero (up 34bps).
- The French to German 10-year bond spread narrowed one to 35 bps.
- U.K. 10-year gilt yields slipped a basis point to 0.74% (up 54bps).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields were little changed at 0.06% (up 4bps y-t-d).
Part C: Commodities
- The Bloomberg Commodities Index recovered 1.2% (up 24.1% y-t-d).
- Spot Gold was unchanged at $1,783 (down 6.1%).
- Silver fell 1.5% to $22.20 (down 15.9%).
- WTI crude rallied $5.41 to $71.67 (up 48%).
- Gasoline surged 9.4% (up 52%),
- Natural Gas fell another 5.0% (up 55%).
- Copper increased 0.5% (up 22%).
- Wheat dropped 2.3% (up 23%),
- Corn gained 1.0% (up 22%).
- Bitcoin sank $4,908, or 9.4%, this week to $47,497 (up 63%).
Risk markets continue to respond to a Coronavirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
BDI Freight Index
- The Baltic Exchange Dry Indexfell 2.1% to 3,272 on Friday, a second consecutive day of declines, amid weakness in both larger capesize and panamax vessel segments.
- The Baltic Dry Index gained 14.6% this week, 3.2%, its fourth weekly gain in five again attributed to factors such as rebounding Australia and Indonesia coal flows, as well as tighter capacity supply.
- The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, fell 3.3% to 4,827.
- The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, fell 2.5% to a one week-low of 3,068.
- The supramax index, for smaller vessel segments added 10 points to 2,551, a fresh high its highest level in over a month.
Copper rebounded sharply off the 50wma pulled up by the flattening Tenkan and Kijun to close right at the channel break – a key juncture. #HG shrugged off demand concerns from resurgence in Covid-19 supply disruptions. The power spits of +8/8 and +2/8 were rebalanced by the Tenkan breaking the Kijun with 50wma and cloud below. Copper had been a leader in the risk on movement for commodities.
Soybeans finally found bids after hitting weekly lows well under weekly cloud and well under 50wma to close right at the weekly Tenkan. – Watch for impulse
US Crude Oil (WTI)
4 Hour: WTI oil stayed below the 240 cloud after testing the 50 ma (green). This is a market that is reflective of fear and greed, note the reaction when Kijun and Tenkan cross or touch and Murrey Math confluence. Sell off capitulated to -4/8
Daily: On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs. The completion in 5 waves saw heavy selling with eventual confluence kiss of death with 50dma at the top of the cloud. From there down in 3 waves, completing a C or iii? Support wasn’t found until 0-8. Resistance the Tenkan
The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50dma Tenkan spit of a spit – hence the fractal energies reverberations. Support is previous lows, Murrey Math levels and Fib cluster. Support is the 50dma, Kijun, Tenkan and previous high confluence.
Weekly: WTI crude Oil futures continued with it’s measured move then reversed from 7-year highs. Long term 61.8% target fueled by ABC bull flag after rebalanced Chikou sated the 5 waves. Weekly Tenkan & Kijun closed touching to give next impulse clue after closing at 50wma. It must regain energy to complete correction
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)
4 Hour:: The 240 shows the waves are clear in the Murrey Math grid. Note impulses off Kijun/Tenkan crosses Recall natural gas spitting to +8/8 than +1/8 240 before retreating in 3 waves to spit violently the 50 4hr ma stayed above the cloud until the completive 5. That means a saturated bull pen and we are still in a developing 3 or C down. Continue to watch Kijun reactions and Murrey Math confluence.
Daily: US Natural Gas completed 3 waves correcting the daily 8/8 spit after a classic euphoria wave 5. However it was rejected hard at the Kijun and cloud top at 6/8. Meaning that 3 was either an a of a C or a iii – impulse in a nutshell. The adjunct failure of the 50dma and Tenkan open up a retest of 3.80-3.60.
Notice the fractals of the move after completing the C of 4 bullish scenario played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. For the bulls all this needs to hold for the highs to be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.
Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term.
Weekly: The classic double top playing out after a spit of the weekly Kijun was sent back off Tenkan only to reverse all the way to the 50wma. Natural gas continued to retrace with impulse after reaching it’s major target, the double top potential from 2014 which equated nicely to over 8/8 Weekly and showed true impulse off that to rebalance Chikou. It’s now a question of degree, 3 or 5? Impulse just shy of the 8/8 and Tenkan confluence.
Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan. This was energized with a series of fractals between old 38 and 50% channel, as you would expect in a seasonal commodity with weather a prime mover. Resistance is Fib/Murrey confluence, support Tenkan, Kijun – as always count your ABC’s
Key Energy Reports
- Around The Barrel – US Crude Oil Builds +6088Kbbl But WTI Cushing Around 2018 Lows
- Into The Vortex – EIA Reports Build of 81 Bcf in Natural Gas Inventories
- EIA Forecasts U.S. Natural Gas Inventories To Enter Winter Heating Season Below Average
- U.S. Natural Gas Consumption Down With Switch to Coal Due To Higher Gas Prices
- Desperate China Orders Inner Mongolia Coal Mines To Boost Production by 55%
- Natural Gas Flowing on Nord Stream 2 From Russia to Germany
- Natural Gas Volatilty a Lesson in The Reversal of Fortunes
- Record High Chinese Coal Futures Prices After Biggest Coal Producing Region Floods
- East China Manufacturing Hub Zhejiang Orders Production Suspensions to Meet Energy Targets
- ConocoPhillips Buys Shell’s Delaware Basin Assets for $9.5 bln in Cash.
- Europe Energy Crisis Years in the Making With Reactionary Environmental policy
- Oil Supply is Tighter Than Industry Estimates Morgan Stanley Says
- Spot Gold was unchanged at $1,783 (down 6.1%).
- Silver fell 1.5% to $22.20 (down 15.9%).
Gold continued to rally after it broke back over base of weekly cloud closing above the Tenkan, Kijun and 50wma after wave (ii) alt gains favor to top of cloud, can it sustain it?. Still rebalancing after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.
Silver, like Gold bounced off the cloud base. Back over 50wma after spitting Tenkan providing support after reversed. Closing at weekly Kijun which is now resistance. Major support is the 50wma
Part D: Forex Markets
John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
- For the week the U.S. Dollar Index little changed at 96.05 (up 6.8% y-t-d)
- Majors for the week on the upside, the Australian dollar 2.4%, the Canadian dollar 1.0%, and the British pound 0.3%. For the week on the downside, the Japanese yen declined 0.6%, the Swiss franc 0.5%
- Minors for the week For the week on the upside,the Norwegian krone increased 2.6%, the Mexican peso 1.9%, the Swedish krona 1.0%, the Brazilian real 0.8%, the New Zealand dollar 0.7%, the South African rand 0.7%, the Singapore dollar 0.7%. The Chinese renminbi increased 0.1% versus the dollar (up 2.47% y-t-d). For the week on the downside, and the South Korean won 0.1%.
Australian Dollar – AUDUSD
The Aussie dollar is still correcting since completing a 5 at the pysch 80 level to fall under the weekly cloud in emotive fashion. The Australian dollar fell to test of the August lows of 0.7106 with Omicron fears. Should that double bottom go support ia the Murrey Math Levels. Resistance the Cloud, Tenkan and Kijun like many commodities.
New Zealand Dollar – NZDUSD
The Kiwi mirrored the AUD in its wave (iii) spit and has corrected at the cloud much of the FOMO muster wave and retested the 50% Fib & 4/8 confluence. Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.
Canadian Dollar – USDCAD
The Loonie is holding the Tenkan after a 3 year high in June and corrected that in 3 waves led by the AUD and NZD. #oil price impacting direction. Watch flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.
Euro – EURUSD
Euro continues to correct in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as #EURUSD consolidates in the cloud. Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.
British Pound – USDGBP
British pound classic retest of daily cloud break with magnet pull of cloud twist after ABC correction – will need Tenkan to break through Kijun for more strength. The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.
Euro Pound – EURGBP
Back testing Tenkan in a C or 3 after inconclusive X – symbolic of BREXIT? Kijun, 50wma and clouds resistance.
Japanese Yen – USDJPY
USDJPY broke above i after weakness with Treasury yields to rush to +2/8 and channel convergence at 115.00. With that resistance the weekly chart is showing a bearish engulfing bar taking in over a month of price to close right above the Tankan should that go a re-test of 112 is alive The 108.00 level should remain massive support for dollar-yen. Any change will come from the weekly Kijun as it breaks through the old channel. Use your USDJPY Murrey 4/8 8/8 grid for now. EURJPY AUDJPY will determine risk on/off
Mexican Peso USDMXN
The Peso continues in the long triangle and consolidated despite outside uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.
Turkish Lire USDTRY
The Turkish Lira reversed after falling in 3 waves to explode over the Tenkan with the weekly cloud Kijun and 50wma below to see Turkish lira close the week at a record low 11.29 TRY/USD. The Murrey Math and Fib targets offer targets with the Lire at all time lows resistance in a hyper inflating collapse
Bitcoin performing technically to perfection. Impulse begets impulse. To understand panic, understand greed. 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 recent high over $68,000 came after the launch over the Bitcoin ETF, Bitco. 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! We watch for an ABC to develop here support is the 50wma and bottom of the weekend cloud.
We have seen what you would expect from a 5 wave impulse peak and ABC correction, a violent correction and completion. Use Murrey Math levels for corrections and targets as algorithms control the herd here, support is the cloud and sharp ABC, 1-2 moves. From there prices agitated towards those ATHs as news of a Bitcoin ETF fueled the rally, sound familiar? But this time it wasn’t signaling we are in a 3 high probability but a 5.
On the Risk Radar
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
Post 2008 it has been about easy money from Central Banks to the bank center, loan forgiveness and the like which has pumped assets at a speed and level never seen before. Given that we keep an eyes on the banking sector, it’s moves and earnings
Major US Banks Deliver Stoic Results in Q3, 2021
The major money cents banks released earnings with many record results for Q3. Mainly from trading and loss reserve releases from the pandemic kitty. Rising interest rates also help the bottom line.
- Goldman Sachs Advice on Mergers and Acquisitions Brought in a Record $1.65 billion Last Quarter
- Wells Fargo Earnings Suffer From Less Interest Income on Lower Loans
- JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
- Blackrock Earnings Beat Expectations With Record $ 9.5 Trillion Assets and ETFs Under Management
- PNC Bank Revenue Rises, Expects $900 million in Cost Savings From BBVA
- Citigroup Earnings Rise on Equity Trading and Loss Reserve Release
- Bank of America Earnings Lift With Higher Long Term Interest Rates And Steady Costs
- Morgan Stanley Acquisitions of E-Trade and Eaton Vance Boosted Wealth and Asset Management
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 also 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 2020 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
Key focus this week will be the central banks as inflation continues to spiral higher globally. The US Fed, ECB, BoE and BoJ meet to discuss monetary policy, December flash PMIs for the US, UK, Eurozone, Japan and Australia will give an insight about the state of the global economy. Ahead of Christmas we will get US and China retail sales and industrial output, UK inflation and labor market data, Eurozone industrial production, and Japan’s Q4 Tankan survey.
The question is, will the Central Bankers go hard just before Christmas on rates and tough love? Stock markets remain at elevated levels, suggesting markets are travelling with no fear.
Third-quarter earnings season is nearing an end. Earnings and updates include; Regeneron investor day, Campbell Soup investor day, Lennar earnings and Eli Lilly analyst meeting. Accenture, Adobe, Jabil, FedEx and Darden Restaurants earnings
Watch Central Banker and Geopolitics Watch speeches, reports and rate moves.
Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats.
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Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.