February 5- 10 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

The rally ignited by Chair Powell’s FOMC press conference and the 20% in Meta Platforms (META) after earnings was put on hold Friday. A blow-out US jobs report and a stronger than expected January ISM Services PMI (55.2%) that marked a return to growth mode Friday rocked global markets. The bond market told the story, U.S. Treasurys sold off with the two-year yield soaring 21 basis points to 4.29% and the benchmark 10-year note rising 14 basis points to 3.53%. The U.S. Dollar Index rose 1.2% to 102.96. On Thursday the Bank of England and the ECB raised rates by 50bps.

Perspective there, the S&P 500 held up for its fourth weekly gain in five weeks, as investors bet, since Powell uttered the phrase disinflation, inflation is headed lower. Only three S&P 500 sectors registered losses this week: energy (-5.9%), health care (-0.1%), and utilities (-1.5%). Communication services (+5.3%), information technology (+3.8%), and consumer discretionary (+2.3%) sectors logged the biggest gains. 

Data this week was in that slot of solid, but not too solid (until Friday’s drop)

• US Services Sector Rebounded Sharply from Contraction in January – ISM
• US Adds More Jobs Than Expected in January, 517K v 185K with 3.4% Unemployment.
• Improved American Productivity Helped Tame Unit Labor Costs
• US Job Openings Rise to Most in 5 Months in December to 11.0 million
• ADP Reported US Private Businesses Created 2 Year Low 106K Jobs in January
• American Consumer Confidence Falls with Concerns About the Economy
• Employment Costs Moderate in Q4 as Fed Meets on Rates

The fed funds futures market is pricing the prospect of a third 25 basis point rate hike in May. According to the CME FedWatch Tool, the probability of a rate hike in May, in addition to the one that is fully priced in for March, increased to 61.8% from 30.0% after the Friday data surprises.

Helping the disinflation argument is energy complex futures. They closed Friday on a downbeat note. WTI crude oil futures fell 3.2% to $73.28/bbl and natural gas futures fell 1.8% to $2.41/mmbtu.

The Nasdaq surged 3.3% for a fifth straight weekly advance, despite disappointing earnings reports from Alphabet (GOOG) and Amazon.com (AMZN). These downdrafts were covered by AMD, Meta Platforms (META) with a big revenue beat, as well as a massive $40B share buyback program. Apple (AAPL) post earnings moves underscored the bear/bull pull, down 4% on the earnings to reverse to close up 2%. Remember AAPL has the highest weighting for the S&P and Nasdaq. Notably the Dow Jones average fell 0.3% for the week with a number of key Dow components lower such as Merck (MRK), Exxon (XOM) and Caterpillar (CAT) after earnings.

Looking ahead the key will be the extent to which downside risks to the US economy have been reduced enough to influence global central banks. We watch two events in particular Powell and Adani.

• Fed Chair Powell will be interviewed before the Economic Club of Washington on Tuesday. Will he and other FOMC officials use payrolls as grounds for a more confidently hawkish stance this week?
• The collapse of the Adani group, it is down over $100 billion in market cap in a week. The RBI has asked banks for their exposure, what are the effects in India and ties to Modi? The tentacles are wide from the Carmichael project in Australia, Indian oil imports from Russia and, France’s Total joint venture are just a few, who else? Contagion in such a shell game can bring many surprises.

Where is the fear?

Bank CDS prices are a useful tool to gauge risk appetite.

• JPMorgan CDS closed December 14th 74 bps, down from October’s high of 130 bps. JPMorgan CDS ended this week at 60 bps, the low since February 2022 (before the Fed began raising rates).
• Goldman Sachs (78bps), Bank of America (63), Citigroup (72), and Morgan Stanley (66) also closed at lows back to last February
• The KBW Bank index year-to-date gain is 13.6%, the Broker/Dealers (XBD) is up 10.5%.

VIX continued to crater and tech stocks in particular such as Tesla were on a tear. Tesla is up over 75% from its recent lows. Reflective of over bearishness, vol crush and then delta chasing.

Some things never change, when you think Greed is Good

Globally we saw the wipeout of over $103 billion from Indian billionaire Adani’s companies market caps after a report alleging fraud, Ponzi’s and a shell game. We keep an eye on follow on from this story and its global knock-on affect.

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. The company made one of US banking world’s biggest bets on crypto. after the company’s announcement, Silvergate shares cratered a record 49%.

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!

The Credit cycle downturn is coming to the surface.

“Moody’s… raised its forecast for speculative-grade corporate defaults in 2023, warning they could more than quadruple under its most pessimistic scenario. The agency predicts the default rate will climb to 4.9% by November of next year under its baseline scenario, from a forecast of 2.9% for the end of 2022. Last month’s year-ahead projection was 4.5%.”

December 16 – Bloomberg (Finbarr Flynn):

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 banks may ratchet up financing to support the country’s economic restructuring, targeting low-carbon development, technological innovation, farming, SMEs and elderly care services, in expectation of more monetary easing this year, the China Securities Journal reports… Banks may direct lending in response to Beijing’s call to avoid flooding the system with liquidity without clear targets, according to Lou Feipeng, a researcher with the Postal Savings Bank of China…” February 2 – Bloomberg

•  “China’s home sales continued to slump in January, even after policy makers expanded stimulus for the sector and the nation abandoned its Covid restrictions faster than expected. The 100 biggest real estate developers saw new home sales drop 32.5% from a year earlier to 354.3 billion yuan ($52.4bn), according to preliminary data from China Real Estate Information Corp. The decline came two months after a policy shift to rescue the industry… Local authorities have since been stepping up efforts to revive demand, including by cutting mortgage rates and easing down-payment requirements.” February 2 – 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

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.’”

Ahead is Powell, RBA and

Eyes will be on top macroeconomic reports such as German and Chinese CPI as well as US CPI revisions.

Earnings reports include gaming giants; Take-Two Interactive (TTWO) and Activision Blizzard (ATVI) releasing reports alongside semiconductor stalwarts Skyworks (SWKS) and ON Semiconductor. Other include Chipotle Mexican Grill (CMG), Walt Disney (DIS), Uber Technologies (UBER), PepsiCo (PEP), PayPal (PYPL), and Philip Morris (PM).

Multiple central Bankers are out to test their resolve, and the markets resolve. For Fed watchers we have Fed Chair Powell when he will be interviewed before the Economic Club of Washington on Tuesday between about 12–1:30pm ET. For rates we have the RBA, RBI, Sweden’s Riksbank, Mexico’s central bank and Peru’s BCRP.

Earnings include Activision Blizzard, Fiserv, Vertex Pharmaceuticals, CVS Health, Uber, Walt Disney, AbbVie, PayPal, PepsiCo, and Philip Morris

Click here to see the Full Week Ahead List Below

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 rose 1.6% (up 7.7% y-t-d)
• Dow slipped 0.2% (up 2.3%)
• S&P 400 Midcaps rose 3.4% (up 11.4%)
• Small cap Russell 2000 jumped 3.9% (up 12.7%)
• Nasdaq100 advanced 3.3% (up 14.9%)

Sectors

• Utilities fell 1.4% (down 4.4%).
• Banks jumped 2.2% (up 13.6%),
• Broker/Dealers added 1.8% (up 10.5%).
• Transports surged 7.1% (up 15.9%).
• Semiconductors surged 4.6% (up 21.7%).
• Biotechs were little changed (up 6.0%).
• With bullion sinking $63, the HUI gold equities index dropped 5.7% (up 6.2%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index rallied 1.8% (up 6.0% y-t-d).
• France’s CAC40 gained 1.9% (up 11.7%).
• German DAX equities index rose 2.2% (up 11.2%).
• Spain’s IBEX 35 equities index added 1.8% (up 12.1%).
• Italy’s FTSE MIB index gained 1.9% (up 13.7%).

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 increased 0.5% (up 5.4% y-t-d).
• South Korea’s Kospi index was little changed (up 10.9%).
• India’s Sensex equities index rallied 2.5% (unchanged).
• China’s Shanghai Exchange Index was little changed (up 5.6%).

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: +0.6% Friday to 7558.1, up 0.9% in the fifth consecutive weekly gain. Just 1% shy of a record high of 7632.8 points in August 2021.
• The Commonwealth Bank hit a record intraday high of $111.43 ahead of its half-year earnings report on February 15.
• Australian 1-year government bonds yielded 3.19% ahead of the Reserve Bank’s monetary policy decision next Tuesday.

Highlights – Emerging Markets Stocks 

EM equities mixed.

• Brazil’s Bovespa index sank 3.3% (down 1.0%)
• Mexico’s Bolsa index fell 1.4% (up 11.5%).
• Turkey’s Borsa Istanbul National 100 index fell 3.7% (down 9.3%).
• Russia’s MICEX equities index rose 2.7% (up 4.4%).

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. Pull from Chip players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX

NVidia $NVDA

NVidia’s latest slide was off earnings, back to lows at 4/8 after a failed breakup retest from May 2021. NVidia is a clear leader of #SOX #SMH look for cues there and ABC failures for changes. Above is the Key Break (mauve) and Tenkan to a flat cloud. 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 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.

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 ended the week sharply lower note in response to the much stronger than expected Employment Situation report for January. Treasuries widened their post-NFP losses after the ISM Services Index for January (actual 55.2%; consensus 50.3%) returned into expansionary territory. The fed funds futures market is now pricing in another 25-bps rate hike in May. Today’s selling returned 10s and 30s to little changed for the week while shorter tenors turned negative for the week. The 2s10s spread tightened by seven basis points to -76 bps.

Treasury Yield Watch

• 2-yr: +21 bps to 4.29% (+8 bps for the week)
• 3-yr: +21 bps to 3.97% (+5 bps for the week)
• 5-yr: +18 bps to 3.67% (+5 bps for the week)
• 10-yr: +14 bps to 3.53% (+1 bp for the week)
• 30-yr: +7 bps to 3.63% (UNCH for the week)

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

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates declined three bps to 5.99% (up 244bps y-o-y).
• Fifteen-year rates increased three bps to 5.18% (up 241bps).
• Five-year hybrid ARM rates fell five bps to 5.42% (up 271bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 15 bps to 6.32% (up 257bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index sank 4.1% (down 5.1% y-t-d).
• Spot Gold lost 3.3% to $1,865 (up 2.2%).
• Silver dropped 5.3% to $22.35 (down 6.7%).
• WTI crude sank $6.29, or 7.9%, to $73.39 (down 9%).
• Gasoline lost 10.3% (down 6%),
• Natural Gas sank 22.5% to $2.41 (down 46%).
• Copper dropped 3.9% (up 7%).
• Wheat increased 0.9% (down 5%),
• Corn slipped 0.8% (unchanged).
• Bitcoin gained $260, or 1.1%, this week to $23,345 (up 40.8%).

Key Long Term Commodity Charts

Copper

Gold

WTI Oil

Energy

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 increased 1.0% 102.92 (down 0.6% y-t-d). 2022 gains were 8.2%
• For the week on the upside, the South Korean won increased 0.2%.
• On the downside, the Norwegian krone declined 3.2%, the British pound 2.6%, the New Zealand dollar 2.5%, the Australian dollar 2.5%, the Swedish krona 2.2%, the South African rand 1.7%, the Mexican peso 1.1%, the Japanese yen 1.0%, the Singapore dollar 0.8%, the euro 0.7%, the Canadian dollar 0.6%, the Swiss franc 0.6% and the Brazilian real 0.5%. The Chinese (onshore) renminbi declined 0.2% versus the dollar (up 1.48% y-t-d).

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 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

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 Q4, 2022

The major money cents banks released earnings with many strong results for Q4. Mainly from the interest rate spreads on the positive side. We see a reversal of loss reserve releases from the pandemic kitty as the economy slides into recession.

• 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

• Powell et al get a chance at a redo
• More revision risk, this time to US CPI
• Delayed German inflation could influence ECB thinking
• China’s inflation might have picked up on reopening
• The odds may favour another Canadian job gain
• BoC’s Macklem front-runs new minutes
• Banxico to hike again
• Peru’s central bank still hiking
• RBA to hike, perhaps signal pause
• RBI might strike a finer balance
• Riksbank’s refreshed forward guidance
• UK economy likely ended 2022 on a sour note
• Other macro

Central bank Watch

For Fed watchers we have Fed Chair Powell when he will be interviewed before the Economic Club of Washington on Tuesday between about 12–1:30pm ET. For rates we have the RBA with consensus expecting another 25bps hike Wednesday. Most economists expect another 25bps hike from the RBI into Thursday. Sweden’s Riksbank is likely to follow the ECB’s 50bps hike with one of its own on Thursday. Mexico’s central bank is expected to hike its overnight rate by 25bps on Thursday. Consensus expects Peru’s BCRP to hike by another 25bps on Thursday evening.

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

• Monday February 6, 2023
• 22:30 RBA Interest Rate Decision

• Tuesday, February 7, 2023
• 23:30 India Interest Rate Decision

• Thursday, February 8, 2023
• 03:30 Sweden Interest Rate Decision
• 14:00 Mexico Interest Rate Decision
• 18:00 Peru Interest Rate Decision

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

Economic Data Watch

US Data Focus

• Monday: Nothing of note
• Tuesday: December Trade Balance (prior -$61.50 bln) at 8:30 ET; $40 bln 3-yr Treasury note auction results at 13:00 ET; and December Consumer Credit (prior $27.90 bln) at 15:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior -9.0%) at 7:00 ET; December Wholesale Inventories (prior 1.0%) at 10:00 ET; weekly crude oil inventories (prior 4.14 mln) at 10:30 ET; and $35 bln 10-yr Treasury note auction results at 13:00 ET
• Thursday: Weekly Initial Claims (prior 183,000) and Continuing Claims (prior 1.655 mln) at 8:30 ET; weekly natural gas inventories (prior -151 bcf) at 10:30 ET; and $21 bln 30-yr Treasury bond auction results at 13:00 ET
• Friday: Preliminary February University of Michigan Consumer Sentiment survey (prior 64.9) at 10:00 ET and January Treasury Budget (prior -$85.00 bln) at 14:00 ET

Global Data Focus

• OPEC:
• Canada:  Balance of Trade, Employment Change JA
• Brazil: Retail Sales, Inflation
• Mexico: Mexico Interest Rate Decision
• Europe: Preliminary figures for Germany are expected to show consumer prices advanced again in January, bringing the yearly inflation back above 9%. Industrial production is set to fall in December despite a rebound in factory orders. Euro Area retail sales, construction PMIs; France foreign trade; Italy industrial and retail activity; Switzerland unemployment rate; Russia inflation rate; and Turkey industrial output and jobless rate. Central banks in Poland and Sweden will decide on interest rates.
• UK: Preliminary estimate of fourth-quarter GDP growth alongside business investment, trade balance, manufacturing and construction output.
• China: January’s inflation
• Japan: Current account balance for Q4.
• India: RBI is forecast to raise its key repo rate by 25bps to mark the end of its current tightening path as inflation in the country has dropped below the central bank’s upper target of 6% in the last two months. India will also release industrial and manufacturing production for December.
• South Korea:
• Australia: RBA is expected to hike its cash rate by 25bps. Other Australian releases cover December’s trade balance and the Ai Group Industry index for January.
• New Zealand: January manufacturing PMI.

Earnings and Event Watch

US Stocks Watch

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

• Monday. New Nielsen numbers on food/beverage/household products, the EIA Short-Term Energy Outlook, and asset under management numbers from brokers.
• Tuesday Shareholders with Mountain Crest Acquisition Corp III (MCAE) vote on deal to take digital health company ETAO International public in a SPAC deal. IBM (IBM) CFO James Kavanugh will hold a call with Bank of America as part of the firm’s CFO Call Series.
• Wednesday – Shareholders with Pathfinder Acquisition Corp. (PFDR) will vote on deal to take movement digitalization technology provider Movella public through a SPAC deal. Google (GOOG) will hold an event on Search and AI. It will detail the power of AI to reimagine how people search for, explore and interact with information.
• Thursday – Automakers with press conferences scheduled at the Chicago Auto Show include Subaru (OTCPK:FUJHY), Volkswagen (OTCPK:VLKAF), Honda (HMC), and Stellantis’ (STLA) Ram and Jeep brands. Immunic (IMUX) will hold a Celiac Disease R&D webcast.
• Friday – 2seventy bio (TSVT) will present full Phase 3 data on Abecma (KarMMa-3) at the EBMT-EHA 5th European CAR T-cell meeting. The cancer therapy is being marketed by Bristol Myers Squibb (BMY). It is also the last trading before the FDA action date on Regeneron Pharmaceuticals’ (REGN) Eylea

Earnings

Earnings Highlights This Week:

• Monday includes Activision Blizzard (ATVI), ON Semiconductor (ON), Tyson Foods (TSN), Pinterest (PINS), Take-Two Interactive (TTWO), Cummins (CMI), Spirit Airlines (SAVE), and Skyworks (SWKS)
• Tuesday includes Chipotle Mexican Grill (CMG), BP (BP), VF Corp. (VFC), Illumina (ILMN), Yum China (YUMC), Centene (CNC), Royal Caribbean (RCL), Fortinet (FTNT), and Valvoline (VVV)
• Wednesday includes The Walt Disney Company (DIS), Yum! Brands (YUM), CVS Health (CVS), Uber Technologies (UBER), O’Reilly Automotive (ORLY), Dominion Energy (D), Emerson (EMR), Bunge (BG), and MGM Resorts (MGM)
• Thursday includes PepsiCo (PEP), Philip Morris (PM), Abbvie (ABBV), Toyota Motor Corporation (TM_), Unilever (UL), Paypal (PYPL), Hilton Worldwide (HLT), Kellogg (K), Cloudflare (NET), L’Oreal (OTCPK:LRLCY), Canopy Growth Corporation (CGC), and Astrazeneca (AZN)
• Friday includes Newell Brands (NWL), Magna International (MGA), Spectrum Brands (SPB), and Enbridge (ENB)

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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