Traders Market Weekly: December 14 – 19 2020

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FEAR NOT Brave Investors

Santa Drinking
 

 Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.

Deals – Market Mania – Fed

The Week That Was – What Lies Ahead?

Editorial

Another week of unbridled speculation with DoorDash $DASH and AirBnB $ABNB IPO’s kicking in at levels beyond any remotely rational valuation. November saw a record $121 billion ETF inflow , y-t-d ETF’s have received a record $659 billion. SPACs have been coming and flying at unimagined levels and the frenetic retail call option buying continues to push all historical boundaries. Wealth creation is at levels on paper that in a COVID lockdown scenario baffles all reason. rational thought waits for the bubble to pop, another week in the grand casino.

The market has the belief the Fed Put saves all and has satisfied it’s self that Janet Yellen as the next treasury secretary as a great move. Hardly an inspired choice given her being often referred to by many as he most inept Fed chair ever. The choice of the next treasury secretary is important for the market. Who follows the Mnuchin, Powell act with a $3 trillion ballooning of the Fed’s balance sheet? The reasoning is that Yellen being ex Fed will work smoothly with current Fed Chairman Powell.

Then lets shift back, what happens if this Covid resurgance becomes something deeper, such as more lockdowns, more poverty, more unrest? Just in a week since the election we saw new restrictions imposed in New Jersey, Oregon, New Mexico, Idaho, Virginia, and California. Is the market already hedged or in a speculative blinker period?  We get it, the market is pricing securities for the eventuality of a favorable post-vaccine economic landscape. Bur, oh there are so many buts. Another but, Brexit talks are still ongoing (yeah really), the EU budget and rescue fund are at risk, and OPEC+ comes in with higher prices BUT more division in the Middle East, especially with Iran. 

Contents

  • Stockmarkets
  • Energy – Oil and Gas
  • Foreign Exchange
  • Gold and Silver
  • Fixed Interest & Banks
  • Risk Radar
  • Geopolitcs and Economy 
  • Week ahead

 

Stock Markets

Highlights – USA

  • Rotation the feature again highlighted by the O&G sectors ripping higher as WTI held over $46, Equity indices near new all time highs.  Risk on was highlighted by Bitcoin, Tesla and IPO tech names such as Airbnb and DoorDash.
  • The S&P 500 declined 1.0% (up 13.4% y-t-d), and the Dow slipped 0.6% (up 5.3%). The Utilities dipped 0.3% (down 2.3%). The Banks fell 1.5% (down 16.9%), and the Broker/Dealers declined 1.4% (up 24.1%). The Transports slipped 0.5% (up 16.2%).
  • The S&P 400 Midcaps declined 0.2% (up 8.6%), while the small cap Russell 2000 rose another 1.0% (up 14.6%).
  • The Nasdaq 100 fell 1.2% (up 41.7%). The Semiconductors dropped 3.2% (up 46.2%). The Biotechs dropped 1.4% (up 9.4%).
  • With bullion little changed, the HUI gold index declined 0.3% (up 20.6%).

 US indices W 12 11 2020

Highlights – Europe

  • In Europe for the week  U.K.’s FTSE equities index was little changed (down 13.2%). France’s CAC40 dropped 1.8% (down 7.9%). The German DAX equities index fell 1.4% (down 1.0%). Spain’s IBEX 35 equities index sank 3.1% (down 15.6%). Italy’s FTSE MIB index lost 2.1% (down 7.7%).

Highlights – Asia

  • In Asia stocks. Japan’s Nikkei Equities Index declined 0.4% (up 12.7% y-t-d). South Korea’s Kospi index rose 1.4% (up 26.0%). China’s Shanghai Exchange dropped 2.8% (up 9.7%).

Highlights – Australia

  • Stocks were 

Highlights – Canada

  • Stocks were 

Highlights – Emerging Markets

  • EM equities were higher mostly. Brazil’s Bovespa index gained 1.2% (down 0.4%), while Mexico’s Bolsa was little changed (up 0.1%). India’s Sensex equities index jumped 2.3% (up 11.7%). Turkey’s Borsa Istanbul National 100 index rose 3.0% (up 19.8%). Russia’s MICEX equities index rose 2.9% (up 7.6%).

IPO mania is back in full force with Snowflake an indication of, which more than doubled on debut.

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

 SPX Top Stocks W 12 11 2020
 

S&P 500 Index Technical Analysis via @KnovaWave

The SPX spat to new all time highs after the PFE news to consolidate back to the previous high and 7/8 Murrey Math Daily with a kiss of life, We have a number of alternatives ABCDE, Continuation of Wave 1 of 5 or the higher degree C,  Keep it simple  support is Tenkan and Kijun as Chikou rebalances. Important to note the high was a retest of the initial breakdown .

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.

SPX D 12 11 2020
 

Weekly SPX spat the 50 wma and Kijun powerfully in a 1-2 to test the break trend (white) – now resistance with MM 8/8 to +2/8. Major support is top of channel and Tenkan. 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

 SPX W 12 11 2020

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.

Semiconductors SMH

SMH W 12 11 2020

Apple $AAPL

 AAPL W 12 11 2020

Amazon $AMZN

 SMH W 12 11 2020

Energy and Commodities

Highights

  • The Bloomberg Commodities Index gained 0.8% (down 7.4% y-t-d). WTI crude increased 48 cents to $46.57 (down 24%). Gasoline rallied 3.6% (down 23%), and Natural Gas rose 1.5% (up 18%). Copper was about unchanged (up 26%). Wheat surged 6.5% (up 10%). Corn increased 0.8% (up 9%).
  • 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

 BDI W 12 11 2020

Copper 

Copper W 12 11 2020 

US Crude Oil (WTI)

In any break key is crowd behavior to help tell the story. We watch ABC corrections from here. he March breakdown, Support Tenkan and Kijun. In any break key is crowd behavior to help tell the story. We watch ABC corrections from here.

WTI D 12 11 2020

WTI after it’s huge run continues to rebalance chikou indicative of extreme crowd behavior in a series of fractals. We have completed 5 waves as marked, from here we watch 3 develop to confirm.

 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 50wma and Murrey Math time and price Above we have 50wma and Murrey Math time and price.  

 WTI W 12 11 2020

US Natural Gas (Henry Hub)

US Natural Gas continues to work the lows that were either (5) or (iii) of (5). After a b or ii down we have bounced over tenkan and Kijun into cloud. Key is that 3 wave low. Above top of cloud. So far consistent failed breaks despite the strength of spitting the previous low and -2/8 with an island reversal to test the Kijun and downtrend line but fell back to Tenkan The big question is was that a completed move down there or a 3? Support at cloud.  

 NG D 12 11 2020

Natty continues in large sideways pattern between weekly kijun and tenkan as they suppress. Above Cloud and 50wma. Support is downward channel and previous low. Talking fractals, remember the tenkan/kijun kiss of death brought it down from the $2 range. Much work here churning away. .

NG W 12 11 2020

Key Energy Reports

 

Precious Metals

Highlights

  • Spot Gold was little changed at $1,840 (up 21.2%).
  • Silver declined 0.9% to $24.092 (up 34.4%).

Gold

Gold (AUG) fell 0.11% to settle at $1,801.9 but gained 0.66% for the week kGold exudes strength after it back tested the previous wave 3 after finally cracked the Tenkan after correcting in 3 waves from 1556 to Murrey Math +3/8. In sight of the intraday high of $1765.43 reached on May 18. We have overcome the negative divergence between the weekly chikou, Silver spread and the recent highs. Support Tenkan & Kijun. From there does the 5 play out? Watch Fibs and chikou.

 Gold W 12 11 2020

Silver

Silver  did a fractal of the sharp C up to breakdown level above the cloud fed by divergence from gold reverting. no  Silver reverseds with much more violent impulse than gold . Given that we have to repsect this is a iii  but  here is also a chance this is an A  

 Silver W 12 11 2020

Forex Markets

Highlights

  • For the week,  the U.S. dollar index recovered 0.2% to 90.976 (down 5.7% y-t-d).
  • Majors for the week. For the week on the upside, the Australian dollar increased 1.5%, the Swiss franc 0.2%, the Japanese yen 0.1%, and the Canadian dollar 0.1%. For the week on the downside, the British pound 1.6%, and the euro 0.1%.
  • Minors for the week For the week on the upside, the Brazilian real 1.4%, the New Zealand dollar 0.5%, the South African rand 0.4%. For the week on the downside, the Mexican peso declined 1.8%, the South Korean won 0.7%, the Norwegian krone 0.2%, the Singapore dollar 0.1%. The Chinese renminbi declined 0.23% versus the dollar this week (up 6.37% y-t-d).

 Australian Dollar – AUDUSD

Aussie dollar continues higher after it competed 5 waves in emotive  fashion. with vigor spitting the 100% panic muster. It has closed over the 50 Wma in 5 waves Resistance cloud is a long way off.  Support Tenkan and Kijun. From here we watch for 2 or X

AUD W 12 11 2020

New Zealand Dollar – NZDUSD

The Kiwi mirrored the AUD and has closed over the panic breakdown (0%) correcting all of the panic muster wave. We are now above the Tenkan, which is pivotal. Resistance 50wma

NZD W 12 11 2020

Canadian Dollar – USDCAD

The Loonie continues to correct in ABC after spitting the 261% Fib & Weekly 8/8 after 5 waves lower. We closed at the old 100% 61.8% confluence. Use Fib s for support and resisitance until Tenkan and Kijun catch up, 

CAD W 12 11 2020

 Euro – EURUSD

The Euro tested and held both the channel and cloud spits after so many false breaks to close at its best level since the BRexit spike. We are still in 3 waves so we need to see development for continuation. Resistance is Fibs as marked.  Watch for impulse off Chikou rebalance and Kijun above. Again governed by EURGBP and Bund volatility. 

EUR W 12 11 2020

 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.

EURGBP W 12 11 2020

 Japanese Yen – USDJPY

Japanese Yen still stuck in channel trade, a series of failures and sharp bounces after X led 3 wave panic. Any change will come from the weekly Kijun Tenkan kiss. Use your #USDJPY Murrey 6/8 0/8 grid for now. #EURJPY #AUDJPY will determine risk on/off

JPY W 12 11 2020

 Mexican Peso USDMXN

The Peso has been correcting in ABC since it collapsed and spat 261% 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. 

MXN W 12 11 2020

  Turkish Lire USDTRY

USDTRY after completing the large 5 waves corrected back to the channel acceleration point and finished testing Tenkan. The lira has stabilized somewhat over the last month going above 8 to the dollar, before paring losses. Alternative is we are still in Wave 5 and this is another 1- Kijun support well above cloud  Impulse is needed to pull away from here.  Keep an eye on geopolitical risk factors. 

TRY W 12 11 2020

Bitcoin

Nothing new for Bitcoin, more of the same as it continues to falter after 61.8% spit. Well under the tenkan and kijun. Needs to test downtrend for higher correction. Use your MM rules as algos control the herd here, support is the cloud – we said be wary of sharp ABC, 1-2 moves.

 Bitcoin W 12 11 2020

Bond Markets (and Fed Watch)

Investment-grade bond funds saw inflows of $2.898 billion, while junk bond fund flows were only slightly positive (from Lipper).

Highlights – Treasuries

  • Three-month Treasury bill rates ended the week at 0.0625%.
  • Two-year government yields declined three bps to 0.12% (down 145bps y-t-d).
  • Five-year T-note yields fell five bps to 0.37% (down 133bps).
  • Ten-year Treasury yields dropped seven bps to 0.90% (down 102bps).
  • Long bond yields sank 11 bps to 1.63% (down 76bps).
  • Benchmark Fannie Mae MBS yields fell six bps to 1.35% (down 136bps).

TNX W 12 11 2020 

Outstanding Treasury Securities jumped $530 billion during the quarter to a record $22.900 trillion. Treasuries were up $3.882 trillion over three quarters, with year-over-year growth of a staggering $4.329 trillion, or 23.3%. Since the end of 2007, Treasuries outstanding have inflated $16.849 trillion, or 278%. Q3 federal Expenditures were up 50% y-o-y, while Receipts were about flat. Borrowings accounted for about half of federal spending during the quarter. Noteworthy as well, at $429 billion the federal deficit for the first two months of the new fiscal year (post Q3) is running 25% ahead of the year ago level.

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.

Highights – Mortgages

  • Freddie Mac 30-year fixed mortgage rates were unchanged at a record low 2.71% (down 102bps y-o-y). Fifteen-year rates were unchanged at an all-time low 2.26% (down 93bps). Five-year hybrid ARM rates dropped seven bps to 2.79% (down 57bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps to 2.91% (down 107bps).

Highlights – Federal Reserve

  • Federal Reserve Leaves Rates and Bond Buying Unchanged After Election
  • Freddie Mac 30-year fixed mortgage rates were unchanged at a record low 2.71% (down 102bps y-o-y). Fifteen-year rates were unchanged at an all-time low 2.26% (down 93bps).
  • Five-year hybrid ARM rates dropped seven bps to 2.79% (down 57bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps to 2.91% (down 107bps).
  • Federal Reserve Credit last week expanded $15.0 billion to $7.192 trillion.
  • Over the past year, Fed Credit expanded $3.145 trillion, or 77.7%. Fed Credit inflated $4.366 trillion, or 155%, over the past 422 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt last week rose $16.2 billion to $3.484 trillion.
  • “Custody holdings” were up $78.6 billion, or 2.3%, y-o-y. M2 (narrow) “money” supply dropped $123 billion last week to $18.998 trillion, but with an unprecedented 40-week gain of $3.490 trillion.
  • “Narrow money” surged $3.632 trillion, or 23.6%, over the past year. For the week,
  • Currency increased $1.8 billion. Total Checkable Deposits jumped $310 billion, while Savings Deposits contracted $420 billion. Small Time deposits declined $7.6 billion. Retail Money Funds fell $7.1 billion.
  • Total money market fund assets jumped $22.9 billion to $4.343 trillion. Total money funds surged $711 billion y-o-y, or 20%. Total Commercial Paper increased jumped $21.2 billion to $990.1 billion. CP was down $149 billion, or 13.1% year-over-year.
  • 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

Friday we saw a record $18 trillion of negative-yielding global bonds. including over-indebted Portugal and Spain). Bund yields at negative 0.64%. .

  • In Europe Greek 10-year yields declined three bps to 0.60% (down 84bps y-t-d). Ten-year Portuguese yields sank eight bps to negative 0.04% (down 48bps). Italian 10-year yields fell seven bps to 0.59% (down 85bps). Spain’s 10-year yields dropped eight bps to 0.00% (down 47bps).
  • German bund yields sank nine bps to negative 0.64% (down 45bps). French yields fell seven bps to negative 0.38% (down 50bps). The French to German 10-year bond spread widened two to 26 bps.
  • U.K. 10-year gilt yields sank 18 bps to 0.17% (down 65bps).

Highlights – Asian Bonds

  • Japanese 10-year “JGB” yields slipped a basis point to 0.01% (up 3bps y-t-d).

 

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

Fed Financial Stability Report Risks May 2020

Geopolitical Tinderbox Radar

Trade Imbalances IMF

Italy CDS
Turkey Geopolitical

Economic and Geopolitical Watch

Job Losses

October’s job report  showed  again the effect of return to school as highlighted by well over 1 million women leaving the workforce and many men also to take care of their children not returning to work. What is clear is the disconnect from the realities by pundits, particarlarly partisn biased rhetoric of the true damage to the economy, the social fabric and the selling of that as a new normal. Covid19 brought with it a new reality of brutal times for workers.

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. The September employment report, the last before the election, showed a slower pace of job growth than in August. There were 616,000 nonfarm payrolls, from 1.37 million in August. The unemployment rate expected dropped to 7.9% from 8.4%.As economies slowly reopened, the economy generated than 12 million jobs in May through September. Still a huge shortfall in jobs, and the big question is will they come back?

US Politics

The electoral college gathers on Monday and is expected to formalize Joe Biden’s presidential victory. President Trump continues to declare the election a fraud, the great steal but a multitude of lawsuits have been thrown out where no fraud has been found to justify the accusations. From here the focus is on the Georgia Senate runoff-races. Democrats need to win both seats to have a split Senate, with VP Harris having the tie-breaking vote. Most political experts expect the Republicans to win at least one of the races and keep control of the Senate. The market certainly expects such an outcome.

Biden has proposed increasing the corporate tax rate to 28% from 21%, potentially weighing on companies’ earnings. A separate proposal to tax capital gains and dividends as ordinary income could prompt some investors to sell winners in order to lock in lower tax rates.

Stay alert to the political and geopolitical shifts with the world in flux. Government policies related to the environment, trade and tech sit high on the watch list.  Political and economic agendas that Influence policy-making is top of the list. For the US it is not just external threats, including increased political tensions between countries but also internal threats highlighted by the partisan impeachment devide. Politics influence all, directly or indirectly. 

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.

Global Watch

Hot Spots

  • 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.
  • US prepared to sanction Turkey over its purchase of Russian S-400 air defence systems last year.
  • China tightened its grip on Hong kong and threats with Taiwan continue. New US sanctions on China officials and telcos. China detained a Bloomberg reporter in Beijing this week.
  • Russia is showing the affects of low energy prices, filtering into the socio economic dynamic
  • Brexit and the EU is bubbling along with increasing antagonism with UK PM Johnson wanting new deal based on Northen Island security anf freedom.
  • For emerging markets the lower US dollar is helping the Fragile 5. Argentina and Turkey are still red letter risks with Covid however. Voters will also be going to the polls in Indonesia, the Philippines and Thailand this year.
  • 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

  • Despite all the US and Chinese rhetoric we are led to believe trade talks between U.S. and China are still expected to recommit to the Phase one deal. China has increased purchases of U.S. oil ahead of their trade deal review, according to Reuters.On a more upbeat note, the UK struck its first post-Brexit trade deal with Japan as it seeks to make a success of leaving the EU.
  • Trump did say Phase 2 will be difficult and he sees the virus more important then trade with China..
  • 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..

Fat Tail Virus Risk

U.S. daily COVID cases have spiked to near 200,000, with Friday setting a new single-day record of over 195,000 new cases according to data compiled by Johns Hopkins University. Unlike the first two “waves,” the surge in new infections is not dominated by particular metropolitan areas or a few large states. COVID has methodically dispersed throughout the heartland, with rural America in the crosshairs. This is a particularly troubling development for small town hospitals and healthcare systems facing limited capacity and scarce resources. Ominously, outbreaks have slammed many northern states early in the winter season. Over the coming weeks, the virus can be expected to shadow cooler weather advancing south. 

Covid US cases 11 15 2020

Several countries are tightening restrictions and contemplating lockdowns as infections accelerate, prompting concerns about the impact on world economies attempting to recover. Earlier this month when adjusting for population, the number of new coronavirus infections in Europe has now overtaken the United States in new cases per million people, based on a seven-day average.

Covid Global cases 11 15 2020

  • AstraZeneca and Johnson and Johnson (J&J) announced they had received permission to resume trials on a COVID-19 vaccine. AstraZeneca was on track to have a vaccine ready before the end of the year, while J&J had said its candidate would be ready by early next year.
  • The US deals with a number of pharmaceutical giants have topped roughly $10.79 billion as part of Operation Warp Speed, a program led by several departments within the federal government to accelerate the development, manufacturing, and distribution of vaccines and treatments to fight the coronavirus.
  • The operation aims to provide at least 300 million doses of a coronavirus vaccine by January 2021. The companies are Moderna Johnson & Johnson Sanofi and GlaxoSmithKline Pfizer and BioNTech Novavax and AstraZeneca
  • Hopes and fears of reopening can outweigh mixed earnings results. No surprise after increased testing, weeks of protesting, people in large airconditioning indoors we have record daily U.S. cases. The U.S. reported 1000 deaths 4 days in a row with coronavirus cases,
  • There does appear to a concerted effort to put the blame on an economy reopening and miraclously the mass ongoing priotests have nothing to do with that. Take that for what it is worth. There is little mention of the younger age group in the new cases and much lower mortality rate. Fear is the feature. Use commonsense in your own protection, spreading and decision making.

 

Banks

  • Bank earnings season last quarter with J.P. Morgan Chase, Citigroup, BlackRock, Bank of America, Wells Fargo, Morgan Stanley and Bank of New York Mellon underscored the cheap money they have access to, yet not distrubted to main street.
  • Morgan Stanley continues in its aim to become the leading wealth and investment services firm with another aggressive aquisition. $MS announced an intention to buy Eaton Vance $EV for $7 billion. This follows the bank completing its $13 bln acquisition of E*TRADE $ETFC.
  • In times of recession and credit tightening Banks risk becomes problematic, though since 2008 the World’s Central Banks have been quick to loosen the strings. Add massive QE and purcahse failing assets.
  • Banks are benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 to a record $60.113 trillion. Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008.
  • Banks are responding to the Federal Reserve in their annual stress test capped bank dividend payments and suspended share-buybacks for the third quarter.

BE AWARE: Stay rational and be prepared for many alternatives, either way. With crisis comes opportunity. From a market point of view this is not unprecedented, many other bubbles have popped with similar results. What is unprecedented is the pandemic, the mass media and social media fear mongering, the massive QE and printing and the strange era of entitlement and no responsibilty fed down from politicians to the youth of today for electoral purproses.

Put all that together and we see the result.  Again this isn’t unprecedented just a different catalyst and fuel. Stay tuned. take a breath and think clearly. Oh and now we have the riots to throw on the kindling ….

  • Expect the Fed Stability Report warning on what happens if the pandemic worsens to be the go tto by Fed speakers (We are all watching to see if I spike aftet the Floyd protests and riots with no social distancing).
  • The backdrop is the Covid-19 crisis. Despite that the stockmarket is up over 40% from lows and stubborn bears and bulls alike are frustrated based on cognitive biases.
  • We continually focus on overcoming our biases and as the accompanying chart highlights stocks and the economy are NOT the same thing despite what we are told by our influencers and biased or selective recalls.

 

“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”

Akio Morita mistakes

The Week Ahead – Have a Trading Plan

Central Bank Watch speeches, reports and rate moves

Monday: December 14, 2020

  • 04:45 ECB’s Panetta Speaks’
  • 06:00 German Buba Monthly Report
  • 08:30 ECB’s Schnabel Speaks
  • 19:30 RBA Meeting Minutes

Tuesday December 15, 2020

  • 09:05 ECB’s Lane Speaks
  • 14:30 BoC Gov Council Member Macklem Speaks

Wednesday December 16, 2020:

  • 04:50 German Buba Vice President Buch Speaks
  • 09:00 ECB’s Enria Speaks
  • 10:30 ECB’s De Guindos Speaks
  • 11:15 ECB’s Schnabel Speaks
  • 12:00 EUR German Buba President Weidmann Speaks
  • 14:00 USD Interest Rate Projection – 1st Yr (Q4)
  • 14:00 USD Interest Rate Projection – 2nd Yr (Q4)
  • 14:00 USD Interest Rate Projection – 3rd Yr (Q4) 
  • 4:00 USD Interest Rate Projection – Current (Q4)
  • 14:00 USD Interest Rate Projection – Longer (Q4)
  • 14:00 FOMC Economic Projections
  • 14:00 FOMC Statement
  • 14:00 Fed Interest Rate Decision
  • 14:30 FOMC Press Conference

Thursday December 17, 2020

  • 03:30 SNB Interest Rate Decision
  • 03:30 SNB Monetary Policy Assessment
  • 04:00 SNB Press Conference
  • 07:00 BoE QE Total (Dec)
  • 07:00 BoE Interest Rate Decision (Dec)
  • 11:00 ECB’s Schnabel Speaks
  • 12:30 ECB’s De Guindos Speaks
  • Tentative BoJ Interest Rate Decision
  • Tentative BoJ Monetary Policy Statement
  • Tentative  BoJ Press Conference

Friday December 18, 2020

  • 07:00 BoE Quarterly Bulletin
  • 09:00 ECB’s Enria Speaks
  • 10:30 ECB’s Enria Speaks
  • 11:10 FOMC Member Brainard Speaks

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, December 13, 2020

  • 15:00 NZD Westpac Consumer Sentiment (Q4) ‘
  • 18:50 JPY Tankan CAPEX (Q4)
  • 18:50 JPY Tankan Manufacturing Outlook Index (Q4)
  • 18:50 JPY Tankan Non-Manufacturers Index (Q4)
  • 19:01 GBP Rightmove House Price Index (MoM)
  • 20:30 CNY House Prices (YoY) (Nov)
  • 23:30 JPY Capacity Utilization (MoM) (Oct)
  • 23:30 JPY Industrial Production (MoM) (Oct)
  • 23:30 JPY Tertiary Industry Activity Index (MoM)

Monday: December 14, 2020

  • 02:00 EUR German WPI (MoM) (Nov)
  • 03:30 HKD GDP (QoQ)
  • 05:00 EUR Industrial Production (MoM) (Oct)
  • 06:00 USD OPEC Monthly Report
  • 06:00 EUR German Buba Monthly Report
  • Tentative U.S. Electoral College to vote for the next U.S. president
  • 11:30 USD 3-Month Bill Auction
  • 11:30 USD 6-Month Bill Auction
  • 15:00 NZD Westpac Consumer Sentiment (Q4)
  • 19:30 AUD RBA Meeting Minutes
  • 19:30 JPY Services PMI
  • 21:00 KRW Trade Balance (Nov)
  • 21:00 CNY Fixed Asset Investment (YoY) (Nov)
  • 21:00 CNY Industrial Production (YoY)
  • 21:00 CNY Chinese Industrial Production YTD (YoY) (Nov)
  • 21:00 CNY Retail Sales (YoY)
  • 21:00 CNY Chinese Retail Sales YTD (YoY) (Nov)
  • 21:00 CNY Chinese Unemployment Rate
  • 21:00 CNY NBS Press Conference

Tuesday December 15, 2020

  • 01:45 CHF SECO Economic Forecasts
  • 02:00 GBP Employment Change 3M/3M (MoM) (Oct)
  • 02:00 GBP Unemployment Rate (Oct)
  • 02:30 CHF PPI (MoM) (Nov)
  • 02:45 EUR French CPI (MoM) (Nov)
  • 04:00 USD IEA Monthly Report
  • 04:00 EUR Italian CPI (MoM) (Nov)
  • 04:00 EUR Wages in euro zone (YoY)
  • 04:00 EUR Labor Cost Index (YoY)
  • 06:00 EUR Reserve Assets Total (Nov)
  • 08:15 CAD Housing Starts (Nov)
  • 08:30 USD Import Export Price Index (MoM) (Nov)
  • 08:30 USD NY Empire State Manufacturing Index (Dec)
  • 08:30 CAD Manufacturing Sales (MoM) (Oct)
  • 08:55 USD Redbook
  • 09:05 EUR ECB’s Lane Speaks
  • 09:15 USD Capacity Utilization Rate (Nov)
  • 09:15 USD Industrial Production (MoM) (Nov)
  • 09:30 NZD GlobalDairyTrade Price Index
  • 10:00 USD IBD/TIPP Economic Optimism
  • 14:30 CAD BoC Gov Council Member Macklem Speaks
  • 16:00 USD TIC Transactions (Oct)
  • 16:30 USD API Weekly Crude Oil Stock
  • 16:45 NZD Current Account (QoQ) (Q3)
  • 17:00 AUD Manufacturing PMI
  • 17:00 AUD Services PMI
  • 18:00 KRW Unemployment Rate (Nov)
  • 18:30 AUD MI Leading Index (MoM)
  • 18:50 JPY Trade Balance (Nov)
  • 19:00 AUD HIA New Home Sales (MoM)
  • 19:00 NZD Budget Balance (Feb)
  • 19:00 NZD Net Debt Forecast (Feb)
  • 19:00 NZD Economic Forecast (Feb)
  • 19:30 JPY Manufacturing PMI (Dec)

Wednesday December 16, 2020:

  • All Day Holiday South Africa – Day of Reconciliation
  • 02:00 GBP CPI (MoM) (Nov)
  • 02:00 GBP PPI Input (MoM) (Nov)
  • 02:00 GBP PPI Output (MoM) (Nov)
  • 03:15 EUR French Manufacturing PMI (Dec)
  • 03:15 EUR French Markit Composite PMI (Dec)
  • 03:15 EUR French Services PMI (Dec)
  • 03:30 EUR German Composite PMI (Dec)
  • 03:30 EUR German Manufacturing PMI (Dec)
  • 03:30 EUR German Services PMI (Dec)
  • 04:00 EUR Italian Industrial New Orders (MoM) (Oct)
  • 04:00 EUR Italian Industrial Sales (MoM) (Oct)
  • 04:00 EUR Manufacturing PMI (Dec)
  • 04:00 EUR Markit Composite PMI (Dec)
  • 04:00 EUR Services PMI (Dec)
  • 04:30 GBP Composite PMI
  • 04:30 GBP Manufacturing PMI 04:30 GBP Services PMI
  • 05:00 EUR Construction Output (MoM) (Oct)
  • 05:00 EUR Eurogroup Meetings
  • 05:00 EUR Wages in euro zone (YoY) (Q3)
  • 05:00 EUR Labor Cost Index (YoY) (Q3)
  • 05:00 EUR Trade Balance (Oct)
  • 07:00 USD MBA 30-Year Mortgage Rate
  • 07:00 USD MBA Mortgage Applications (WoW)
  • 07:00 USD MBA Purchase Index
  • 07:00 USD Mortgage Market Index
  • 07:00 USD Mortgage Refinance Index
  • 08:30 USD Export Price Index (MoM)
  • 08:30 USD Import Price Index (MoM)
  • 08:30 USD Retail Sales (MoM) (Nov)
  • 08:30 CAD CPI (MoM) (Nov)
  • 08:30 CAD Foreign Securities Purchases (Oct)
  • 08:30 CAD Foreign Securities Purchases by Canadians (Oct)
  • 08:30 CAD Wholesale Sales (MoM) (Oct)
  • 09:45 USD Manufacturing PMI (Dec)
  • 09:45 USD Markit Composite PMI (Dec)
  • 09:45 USD Services PMI (Dec)
  • 10:00 USD Business Inventories (MoM) (Oct)
  • 10:00 USD NAHB Housing Market Index (Dec)
  • 10:30 USD Crude Oil Inventories
  • 14:00 USD Fed Interest Rate Decision
  • 14:30 USD FOMC Press Conference
  • 16:45 NZD GDP (QoQ) (Q3) 1B
  • 19:30 AUD Employment Change (Nov)
  • 19:30 AUD Unemployment Rate (Nov)
  • 19:30 SGD Trade Balance
  • 21:00 NZD RBNZ Offshore Holdings

Thursday December 17, 2020:

  • 02:45 EUR French Business Survey (Dec)
  • 03:30 CHF SNB Interest Rate Decision
  • 04:00 CHF SNB Press Conference
  • 05:00 EUR Construction Output (MoM)
  • 05:00 EUR CPI (MoM) (Nov)
  • 07:00 GBP BoE Interest Rate Decision (Dec)
  • 08:30 USD Building Permits (Nov)
  • 08:30 USD Jobless Claims
  • 08:30 USD Housing Starts (Nov)
  • 08:30 USD Philadelphia Fed Manufacturing Index (Dec)
  • 08:30 CAD ADP Nonfarm Employment Change
  • 10:30 USD Natural Gas Storage
  • 11:00 USD KC Fed Composite Index (Dec)
  • 11:00 USD KC Fed Manufacturing Index (Dec)
  • 11:30 USD 4-Week Bill Auction
  • 11:30 USD 8-Week Bill Auction
  • Tentative FDA panel will review Moderna’s (NASDAQ:MRNA) COVID-19 vaccine.
  • 16:45 NZD Trade Balance (MoM) (Nov)
  • 18:30 JPY CPI, n.s.a (MoM) (Nov)
  • 19:00 NZD ANZ Business Confidence
  • 19:01 GBP GfK Consumer Confidence (Dec)
  • Tentative CNY FDI
  • Tentative JPY BoJ Interest Rate Decision
  • Tentative JPY BoJ Press Conference

Friday December 18, 2020

  • 02:00 GBP Retail Sales (MoM) (Nov)
  • 02:00 EUR German PPI (MoM) (Nov)
  • 04:00 EUR German Business Expectations (Dec)
  • 04:00 EUR German Current Assessment (Dec)
  • 04:00 EUR German Ifo Business Climate Index (Dec)
  • 04:00 EUR Spanish Trade Balance
  • 04:00 EUR Current Account (Oct)
  • 05:00 EUR Italian PPI (MoM) (Nov)
  • 08:30 USD Current Account (Q3)
  • 08:30 CAD New Housing Price Index (MoM) (Nov)
  • 08:30 CAD Retail Sales (MoM) (Oct)
  • 10:00 USD US Leading Index (MoM) (Nov)
  • 11:00 CAD Budget Balance (Oct)
  • 13:00 USD U.S. Baker Hughes Total Rig Count
  • 15:30 USD CFTC speculative 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. 

Earnings Week Ahead

Big banks kicked off third-quarter earnings reports on Oct. 13, helping to set the tone for the broader U.S. stock market, as businesses cope with the eighth month of the pandemic. Banks reaped the rewards of the initial public offerings and record corporate borrowings during the pandemic. Investors (and algos) will focus pn the conference calls and outlooks. Everyone is expecting the worse. We will see 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 JKS Jinkosolar IESC Ies Holdings SVA Sinovac COUP Coupa Software EFX Equifax SMAR Smartsheet CASY Casey’s General Stores TOL Toll Brothers HQY Healthequity SFIX Stitch Fix SGU Star Group, NEM Newmont BF.B Brown-Forman AZO Autozone THO Thor Industries HRB H&R Block CMD Cantel Medical $CHWY Chewy MDB Mongodb GWRE Guidewire Software AVAV Aerovironment PHR Phreesia GME Gamestop GATO Gatos Silver CPB Campbell Soup UNFI United Natural Foods PLAB Photronics LOVE Lovesac DBI Designer Brands VERU Veru Vera Bradley ADBE Adobe RH RH NCNO Ncino ASAN Asana VRNT Verint Systems GEF Greif SNEX Stonex OXM Oxford

This week we hear from:

  • Monday starts us off with MDU Mdu Resources AVNT Avient HEXO QD Qudian CSBR Champions Oncology
  • Tuesday with earnings from LLY Eli Lilly BDC Belden MTSC MTS Systems INFU Infusystems UEC Uranium Energy NDSN Nordson ASPU Aspen Group AOUT American Outdoor Brands DTEA Davidstea GTIM Good Times Restaurants
  • Wednesday Earnings Include: TTC Toro IDCC Interdigital CNTG LEN Lennar ABM Abm Industries MLHR Herman Miller QTT Qutoutiao ACAM Acamar DL China Distance Education Holdings
  • Thursday Earnings Include:
  • Friday Earnings include  (LB)

IPO Week Ahead

Six IPOs and five SPACs are scheduled to raise $2.8 billion in the week ahead as the IPO market starts to slow down before the holidays.

Bargain e-commerce platform Wish (WISH) plans to raise $1.1 billion at a $16.4 billion market cap. The company provides an e-commerce platform that connects primarily China-based merchants with value-conscious customers mostly in Europe and North America. Despite accelerating growth and a large market opportunity, Wish is highly unprofitable and has had issues with counterfeit and fraudulent goods.

Lending platform Upstart (UPST) plans to raise $252 million at a $1.9 billion market cap. The company believes its AI-powered lending models better predict credit risk. Upstart has achieved strong growth and profitability in the year-to-date period, but depends heavily on partnerships for traffic and a majority of originations.

Solid tumor biotech BioAtla (BCAB) plans to raise $150 million at a $527 million market cap. This biotech is developing a novel class of specific and selective antibody therapies. Its two latest stage antibody-drug conjugate candidates are currently in Phase 2 trials for multiple cancer indications, with interim data expected in 2021.

Research device developer 908 Devices (MASS) plans to raise $100 million at a $463 million market cap. The company provides handheld and desktop mass spectrometry devices. Since its inception, it has sold more than 1,200 handheld and desktop devices to over 300 customers in 32 countries, including 18 of the top 20 pharmas by 2019 revenue.

OTC-listed Midwest Holding (MDWT) plans to raise $72 million at a $269 million market cap. The company develops and distributes insurance products through third-party IMOs. Midwest turned profitable on an EBITDA basis in the 9mo20, though it has limited operating history under its current business plan.

Chinese online food retailer Wunong Net Technology (WNW) plans to raise $30 million at a $125 million market cap. The company currently offers a portfolio of 352 products from a network of suppliers. It plans to open franchise restaurants throughout China where customers can rent its facilities to cook and serve food purchased from the company

Five SPACs are currently on the calendar led by Michael Klein’s Churchill Capital Corp V (CCV.U), which plans to raise $400 million to target industries with compelling long-term growth prospects, opportunities to affect valuation improvements, attractive competitive dynamics, and consolidation opportunities.

IPO data via Renaissance Capital

 

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Last Week’s Big Stories

The Week That Was – Last Weeks Recap

  • Into The Vortex – EIA Reports Build of +8 Bcf in Natural Gas Inventories
  • Around The Barrel – EIA Reports Crude Oil +4277k bbls Build v API -5147k bbls Draw
  • OPEC Monthly Oil Market Report November 2020
  • EIA Expects Natural Gas Prices To Rise On Rising Domestic Demand, LNG Exports and Reduced Production
  • EIA Says New Oil Drilling Activity Production Will Not Offset Existing Wells Declines
  • US Employment Continues To Recover From Coronavirus Lockdown
  • Federal Reserve Leaves Rates and Bond Buying Unchanged After Election
  • U.S. New Auto Sales Fell For First Time Since April in Uncertain Times
  • Mexico Business Confidence Improves With Peso and Easing Covid Restrictions
  • RBA Cuts Australian Rates To Record Low 0.25%, Targets Yield Curve
  • US Manufacturing Continues Recovery, New Orders Highest Since January 2004 

Stocks

  • Chevron Reports Profit Boosted by Capital Spending down 48% Operating Expenses down 12%
  • ExxonMobil Posts Third Straight Quarterly Loss But Seeing Early Demand Recovery

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