Traders Market Weekly: Fear and Greed in Las Vegas.

January 30 – February 5, 2022

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Fear and Greed Feed Volatility

The Week That Was – What Lies Ahead?

Contents

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Editorial

Another wildly volatilized week in the gambler’s Snakepit they all financial markets. All three US major indices rallied fiercely Friday to close a wild week, boosted by Apple adding after 7% after earnings. Australia’s Atlassian surged 9.7% after its earnings giving shorts some headaches in tech land. In commodities Natural gas flew higher, oil saw seven-year highs and the iron ore spot price leapt 6.6 per cent to $US147.15 a tonne. Bitcoin was hanging in there around $US37,800.

  • DJIA +1.7% S&P 500 +2.4% Nasdaq +3.1%
  • Apple +7% Alphabet +3.2% Amazon +3.1% Microsoft +2.8%
  • Atlassian +9.7% NYSE Fang Index +3%

The VIX Index traded Monday to near 39, the high since October 2020. It was five sessions of unrelenting volatility. Monday trading saw the gap between intraday lows and highs in the S&P500 of 4.6%. Tuesday it was 2.9%, Wednesday 3.3%, Thursday 2.7%, and Friday 3.25%.

On Wednesday markets took volatility to another level with the FOMC and Tesla earnings. By his own admission Chair Powell’s toolkit is limited. The Fed is behind the game on inflation, balancing that with supply chain issues starting to ease in the second half of the year and hurting strong economic growth to slow inflation are all real issues. Tesla made this clear, Tesla’s December quarter revenue of $US17.7 billion beat consensus estimates of $17.1 billion, with earnings per share of $US2.54 about 7.6% above analyst predictions. TSLA gross profit margin on its automotive operations of 30.6% are easily the best in the global car industry and well ahead of the 24.1 per cent margin it started 2021 with.

Tesla increased car sales by a head turning 90% and delivered a net profit of $US5.5 billion. However, the stock sold off over 10% the next day. Why? Supply chain concerns.

Elon Musk said those supply chain pressures will last well into 2022 and Tesla’s factories will continue to run below capacity, as they’ve done for several quarters. So in a nutshell this is where the short-term concerns of Elon Musk and Jerome Powell cross over.

Meanwhile the market on Friday got its bid on with ten of the S&P 500’s 11 industry groups up, led by those sectors hardest hit lately. We saw a 4.3% pump in information technology, a 3.4% bump in real estate and a 2.9%t rise in communication services. Energy lagged, down 0.6% after Chevron earnings disappointed high expectations. Powell’s implicit message was that any concern he has about stock market movements are dwarfed by runaway inflation concerns.

The question investors have to ask is what he can do to inflation given most of it is supply driven, which he does have the tools for and how quickly can consumers and businesses alike recalibrate from Supply chain issues? Not to through in the energy crisis engulfing the world and the continuing war drums from Biden with Russia and The Ukraine. Significantly Ukraine’s President Zelensky said that media reports are making the current tension with Russia appear worse than it really is. Wag the dog from Biden crossed your mind? Did we mention Omicron?

Wedbush analyst Dan Ives summed up the euphoria. “Overall, the Apple growth story is plowing straight ahead and supply chain improvements potentially on the horizon is a major bullish data point not just for Apple, but the entire tech sector to digest.”

Inflation remains front and center the PCE Price Index increased 0.4% in December (consensus +0.4%) with core reading rising 0.5% (consensus +0.4%). Year-over-year, the PCE Price Index was up 5.8% (versus 5.7% in November) while the core PCE Index was up 4.9% (versus 4.7% in November).

Amherst Pierpont chief economist Stephen Stanley said” the most important economic (and monetary policy) question for 2022 is when and by how much headline and core inflation decelerate.

U.S. Treasuries finished the week on a higher note with relative strength in longer tenors. The rebound was assisted by Personal Income/Outlays report for December, which showed a smaller than expected increase in income while prices continued rising. The market expects the first hike in March, with the fed funds rate range increasing to 1.25-1.50% by the end of the year. The 2s10s spread tightened by 15 bps to 61 bps over the course of the week.

Personal income was weaker than expected, up 0.3% in December (consensus +0.5%) following a revised 0.5% increase (from 0.4%) in November. Personal spending decreased 0.6% in December (consensus -0.6%) following a revised 0.4% increase (from 0.6%) in November. Over in Europe France and Spain reported better than expected GPD growth in Q4 while Germany’s economy contracted more than expected.

CME FedWatch Tool shows the probability for a rate hike in March.  The big change has been the move to a larger bp raise in rates.

Fed March Meeting

All this with Covid running wild, with over 475,000 Covid deaths in 2021, higher than 2020. There were 850,000 new Covid cases reported last Friday. Over 130,000 Covid patients are currently hospitalized, rising with a trajectory to soon surpass the previous pandemic peak. Deaths are nearing 2,000 a day, the one millionth U.S. Covid fatality is on track for 2022. While in COVID news research continued to suggest that the Omicron variant is milder than the Delta variant despite being more contagious people are restricted from work and travel.

Monetary inflation is running wild. In 2021 Federal Reserve Credit expanded $1.391 TN or 19% to a record $8.742 TN. The Fed’s balance sheet inflated a mindboggling $5.015 TN, or 135%, in the 120 weeks since QE was restarted in September 2019. Federal Reserve Assets have now inflated 10 times since the mortgage finance Bubble collapse.

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 are in an openly hawkish phase since last month when 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 told 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 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

  • The Dow, S&P and Nasdaq each had their best day of the new year
  • Dow and S&P posted their first weekly gain in four weeks
  • NASDAQ posts its first weekly gain in five weeks
  • The Dow Jones Industrial Average rose 564.67 points or 1.65% to 34725.46 Friday. Dow industrial average rose 1.34% on the week. The Dow is down -6.18% from its all-time high at 36952.65.
  • S&P index rose 105.36 points or 2.44% to 4431.86 Friday well under its 100 dma at 4575.95. The S&P rose 0.77% on the week. The S&P is down -7.07% from its all-time high at 4818.62. First close below the 200-day moving average since June 2020
  • NASDAQ rose 417.80 points or 3.13% to 13770.58 Friday. For the week the NASDAQ rose 0.01%. The NASDAQ index is down 15.1% from its all-time high seen in November off its lowest level since June 2021.
  • Russell 2000 rose 37.22 points or 1.93% to 1968.51 for the week. The Russell 2000 closed down 19.4 points or -0.97% for the week. The Russell is -19.4% from its high close on November 8. The low price Friday at 1901.35 got within 12 points of the 38.2% retracement of the move up from the March 2020 low before bouncing higher.
  • The S&P 400 Midcaps dipped 0.6% (down 9.3% YTD)
  • CBOE Volatility 28.85 3.26 12.74%
  • The obsession of Apple hitting 3 trillion market at $182.86 was achieved (182.94 high)
  • Utilities slipped 1.8% (down 5.9%YTD).
  • Transports lost 1.3% (down 8.7%)
  • Banks recovered 1.6% (up 1.7%),
  • Broker/Dealers rose 1.3% (down 3.9%).
  • Semiconductors were clobbered gain 3.8% (down 16.3%) after -11.9% last week
  • Biotechs rallied 0.9% (down 10.3%).
  • With bullion down $44, the HUI gold index sank 6.3% (down 7.2%).
Major US Stock Indices
Cboe Daily Market Statistics

US Markets YTD

  • Dow Jones Industrial Average -4.4% YTD
  • S&P 500 -7.0% YTD
  • Nasdaq Composite -12.3% YTD
  • Russell 2000 -13.1% YTD

Highlights – Europe Stocks

  • STOXX Europe 600: -2.1% for the week
  • Germany’s DAX: -1.8% for the week
  • U.K.’s FTSE 100: -0.4% for the week
  • France’s CAC 40: -1.4% for the week
  • Italy’s FTSE MIB: -1.8% for the week
  • Spain’s IBEX 35: -1.0% for the week

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: +2.1% (-2.9% for the week)
  • Hong Kong’s Hang Seng: -1.1% (-5.7% for the week)
  • China’s Shanghai Composite: -1.0% (-4.6% for the week)
  • India’s Sensex: -0.1% (-3.1% for the week)
  • South Korea’s Kospi: +1.9% (-6.0% for the week)

 Highlights – Australian Stocks

  • Australia’s ASX All Ordinaries: +2.1% (-3.0% for the week)
  • After the close Atlassian +9.7% after its earnings beat, and Iron ore rose +6.6% to $US147.90 a tonne
  • 2-year yield: US 1.16% Australia 0.93%
  • 5-year yield: US 1.61% Australia 1.65%
  • 10-year yield: US 1.78% Australia 1.94% Germany -0.05%

 Highlights – Emerging Markets Stocks 

  • EM equities were mixed
  • Brazil’s Bovespa index jumped 2.7% (up 6.8%)
  • Mexico’s Bolsa fell 1.8% (down 4.9%)
  • Turkey’s Borsa Istanbul National 100 index fell 1.4% (up 6.8%).
  • Russia’s MICEX equities index recovered 1.4% (down 7.9%).

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


Technical Analysis 

Technical Analysis of key markets via KnovaWave

S&P 500

Daily: The SPX completed 5 waves up where it reversed with impulse with 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. Bulls this was a (ii) of a 5. Bears this is a 1-2 of a (i) off a 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 support is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

Daily S&P 500 Flat Top Triangle

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:

S&P had it’s best day of the new year Friday and posted its first weekly gain in four weeks. The S&P rose 0.77% on the week. The S&P is down -6.24% from its all-time high at 4818.62. We have reversed the breakup at Tenkan from there we had had a powerful rally to ATH. Each new high evolved after testing Tenkan key support, this needs to be recovered for a resumption of the uptrend. We watch for a spit of a spit Extensions are difficult to time, keep it simple.

S&P500 Weekly Outlook

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.

Dow Jones

The Dow had their best day Friday for the new year with it’s first weekly gain in four weeks. The Dow Jones Industrial Average rose 564.67 points or 1.65% to 34725.46 Friday. Dow industrial average rose 1.34% on the week. The Dow is down -4.82% from its all-time high at 36952.65.

DJIA Weekly

NASDAQ 100

The Nasdaq had its best day of 2022 and first weekly gain in five weeks. NASDAQ rose 417.80 points or 3.13% to 13770.58 Friday. For the week the NASDAQ rose 0.01%. The NASDAQ index is down 15.0% from its all-time high seen in November off its lowest level since June 2021. 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). Resistance Tenkan to Kijun. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue. Broke 50wma at week’s end.

NASDAQ Record Highs

Russell 2000

The small cap Russell RUT had 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).

Russell 2000 rose 37.22 points or 1.93% to 1968.51 for the week. The Russell 2000 closed down 19.4 points or -0.97% for the week. The Russell is -19.4% from its high close on November 8. The low-price Friday at 1901.35 got within 12 points of the 38.2% retracement of the move up from the March 2020 low before bouncing higher.

Unlike SPX and NDX we could not get through Tenkan and Kijun which rejected the bounce highlighting its weakness. 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 8/8 through 7/8 (cloud base)

Russell Index Negative Divergence to NASDAQ

Semiconductors SMH

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)

VanEck Vectors Semiconductors ETF

NVidia $NVDA

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 failed on the retesting. It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.

Nvidia NVDA stock chart

Apple $AAPL

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. Support held at the previous break near 50wma to close over Tenkan and Kijun as it rebalanced Chikou. Resistance now Fibs and Murrey Math levels. Remember the impact $AAPL has, at least short term on all the major indices.

Apple AAPL Stock Chart

Amazon $AMZN

Amazon double top that filled the gap in 3 waves then reversed through 50wma then gained impulse. We got a KOD to accelerate through cloud to close the week at a 3/8 spit. Earnings ahead.

ARKK ETF

The ARK Innovation ETF (ARKK), which is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, is down over 26% so far this year.

The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Trying support at 61.8% of whole move. 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

Ark ARKK ETF Stock Chart

US Stocks Watch

Fourth-quarter results season kicks into high gear next week, with overall S&P 500 earnings expected to climb 23.1%, according to Refinitiv IBES. Technology sector earnings (SPLRCT) are expected to rise by 15.6%, as other groups have benefited more from the economy’s rebound from pandemic lockdowns in 2020.

Companies in the S&P 500 growth index (IGX), which is replete with tech stocks, are expected to increase earnings 16%, compared to a 26% rise for the S&P 500 value index (IVX), more heavily weighted in banks, industrials and other economically sensitive companies, according to Credit Suisse

The tech sector is trading at about 27 times earnings estimates for the next 12 months, near its highest in 18 years, compared to 21 times for the overall S&P 500, according to Refinitiv Datstream.

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. 

Earnings Highlights

Last Week:

IBM, Zions Bancorp, Halliburton, Royal Phillips, Steel Dynamics Microsoft, Johnson and Johnson, American Express, Verizon, 3M, General Electric, Texas Instruments, Raytheon Technologies, Lockheed Martin, Archer Daniels Midland, Canadian National Railway, Hawaiian Holdings, Capital One, Paccar, F5 Networks, Boston Properties Intel, Boeing, AT&T, Tesla, Whirlpool, General Dynamics, Anthem, Abbott Labs, Nasdaq, Levi Strauss, Knight-Swift Transportation, Samsung Electronics, ServiceNow, Xilinx, Seagate Technology, Lam Research, Teradyne, Raymond James, Flex, SLM, LendingClub Apple, McDonald’s, Visa, Comcast, International Paper, Blackstone, Mastercard, Mondelez, Robinhood, Altria, JetBlue, Deutsche Bank, STMicroelectronics, Diageo, Marsh and McLennan, Sherwin-Williams, T. Rowe Price, Ball Corp, Diageo, Nucor, Alaska Air, Tractor Supply, SAP, Dow, Southwest Air, Northrop Grumman, HCA Healthcare, McCormick, Textron, Valero Energy, Ethan Allen, KLA Corp, Beazer Homes, Western Digital, Eastman Chemical, Canadian Pacific Railway, Celanese, Olin, Danaher, Murphy Oil Chevron, Caterpillar, Colgate-Palmolive, Weyerhaeuser, Synchrony Financial, Charter Communications, Philips 66, Church & Dwight, Booz Allen Hamilton, LyondellBasell Industries, VF Corp

This Week:

Monday includes

TICKER COMPANY EPS FORECAST

  • CBT Cabot $1.06
  • CRUS Cirrus Logic $1.91
  • FN Fabrinet $1.28
  • HLIT Harmonic $0.09
  • NXPI NXP Semiconductors $2.67
  • PCH PotlatchDeltic $0.48
  • RYAAY Ryanair Holdings $-0.15
  • SANM Sanmina $0.91
  • TT Trane Technologies $1.31
  • WWD Woodward $0.83

Tuesday includes

  • AMD Advanced Micro Devices $0.69
  • AMCR Amcor $0.18
  • ASH Ashland Global Holdings $0.93
  • CTLT Catalent $0.79
  • CB Chubb $3.34
  • EA Electronic Arts $2.81
  • XOM Exxon Mobil $1.73
  • GM General Motors $0.84
  • NMR Nomura Holdings $0.2
  • SBUX Starbucks $0.8
  • UBS UBS Group $0.24
  • UPS United Parcel Service $3.05

Wednesday Includes 

  • EAT Brinker International $0.5
  • CHRW C.H. Robinson Worldwide $1.85
  • CPRI Capri Holdings $1.67
  • CTSH Cognizant Technology Solutions $1.03
  • RACE Ferrari $1.08
  • FB Meta Platforms $3.78
  • MET MetLife $1.63
  • TMUS T-Mobile

Thursday includes

  • ABB ABB $0.38
  • ALL Allstate $2.72
  • COP ConocoPhillips $2.23
  • LLY Eli Lilly $2.37
  • HON Honeywell International $2.09
  • PRU Prudential Financial $2.44
  • SU Suncor Energy$0.95
  • SYNA Synaptics $2.63

Friday includes

  • APD Air Products & Chemicals $2.51
  • AON Aon $3.33
  • BMY Bristol Myers Squibb $1.85
  • CBOE Cboe Global Markets $1.41
  • ETN Eaton

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):

IPO Wrap

US IPO Week Ahead:


Part B: Bond Markets

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.’”

Highlights – Treasuries

Investment-grade bond funds saw outflows of $465 million, and junk bond funds posted negative flows of $2.807 billion (from Lipper).

U.S. Treasuries finished the week on a higher note with relative strength in longer tenors. The rebound was assisted by Personal Income/Outlays report for December, which showed a smaller than expected increase in income while prices continued rising. The market expects the first hike in March, with the fed funds rate range increasing to 1.25-1.50% by the end of the year. The 2s10s spread tightened by 15 bps to 61 bps over the course of the week.

  • 2-yr: -2 bps to 1.17% (+18 bps for the week)
  • 3-yr: -4 bps to 1.38% (+11 bps for the week)
  • 5-yr: -4 bps to 1.62% (+7 bps for the week)
  • 10-yr: -3 bps to 1.78% (+3 bps for the week)
  • 30-yr: -1 bp to 2.08% (+2 bps for the week)

Rates on the 10-year note are trading within a pennant after completing a sizeable symmetrical triangle since March, both of which are bullish in the underlying uptrend. The bear guess is this is a rising wedge.

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 marked the fastest pace of increase on record in data from 1988.

  • Freddie Mac 30-year fixed mortgage rates slipped a basis point to 3.55% (up 82bps y-o-y).
  • Fifteen-year rates added a basis point to 2.80% (up 60bps).
  • Five-year hybrid ARM rates rose 10 bps to 2.70% (down 10bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates surge 19 bps to a 21-month high 3.78% (up 89bps).

Highlights – Federal Reserve

  • Federal Reserve Credit last week expanded $12.9bn to a record $8.839 TN. Over the past 124 weeks, Fed Credit expanded $5.112 TN, or 137%. Fed Credit inflated $6.028 Trillion, or 214%, over the past 481 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week gained $11.3bn to $3.458 TN.
  • “Custody holdings” were down $74.7bn, or 2.1%, y-o-y.
  • Total money market fund assets jumped $28.6bn to $4.645 TN. Total money funds increased $321bn y-o-y, or 7.7%.
  • Total Commercial Paper dropped $19bn to $1.025 TN. CP was down $43.6bn, or 4.1%, over the past year.
Fed Total Assets

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 17 bps to 1.85% (up 54bps y-t-d).
  • Ten-year Portuguese yields rose six bps to 0.62% (up 16bps).
  • Italian 10-year yields slipped a basis point to 1.28% (up 11bps).
  • Spain’s 10-year yields gained six bps to 0.70% (up 13bps).
  • German bund yields increased two bps to negative 0.05% (up 13bps).
  • French yields rose three bps to 0.37% (up 1bps).
  • The French to German 10-year bond spread widened about one to 42 bps.
  • U.K. 10-year gilt yields jumped seven bps to 1.24% (up 27bps). 

Highlights – Asian Bonds

  • Japanese 10-year “JGB” yields rose three bps to 0.17% (up 10bps y-t-d). 

Part C: Commodities

Highlights

  • The Bloomberg Commodities Index rose 1.7% (up 8.0% y-t-d).
  • Spot Gold dropped 2.4% to $1,792 (down 2.1%).
  • Silver sank 7.5% to $22.47 (down 3.6%).
  • WTI crude gained $1.68 to $86.82 (up 15%).
  • Gasoline jumped 4.1% (up 14%),
  • Natural Gas surged 16.0% (up 24%).
  • Copper sank 4.7% (down 3%).
  • Wheat gained 0.8% (up 2%),
  • Corn jumped 3.2% (up 7%).
  • Bitcoin rallied $1,409, or 3.9%, this week to $37,801 (down 18.5%).

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 Index rose 79 points, or 6.1%, to 1,381. The BDI was still down 2% for the week, its fourth consecutive weekly decline.
  • The Capesize index climbed 257 points, or 31.4%, to 1,075, its highest level in more than a week and bouncing off its lowest since June 2020. The index was down 40.4% this week, its biggest drop since the week ended Dec. 17. Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, rose by $2,138 to $8,918.
  • The Panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, eased 6 points to 1,840, its lowest since April. The index was down 15.3% last week. Average daily earnings for Panamaxes fell by $58 to $16,557.
  • Among smaller vessels, Supramax index fell 16 points to its lowest level since February 2021 at 1,597.
  • Source: Baltic Exchange’s Capesize Index Soared 31.4% as Dalian iron Ore Jumped Over 7%
Baltic Dry Index Weekly

Copper

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.

Weekly Copper Outlook
Copper Supply Crunch

Corn

Corn Futures Outlook

Lumber

Lumber Futures

Soybeans

Soybeans finally found bids after hitting weekly lows well under weekly cloud and well under 50wma to close over the weekly Tenkan, Kijun and 50wma. – Watch for impulse

Soybeans Weekly Outlook

Energy

US Crude Oil (WTI)

Daily:

Another big week for oil, after hitting our initial 8/8 target completing either a iii of (5) or (v) of 5 as marked. Ita question of degree on the topside, use the Murrey math grid. On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs. Recall prior to this move the completion in 5 waves (iii or i) 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 IV? Support wasn’t found until 0-8. From there we have accelerated higher through the cloud twist. Support Kijun and Tenkan. Closed above 50dma with gid above

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 50 dma 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 prev high confluence.

WTI Daily KnovaWave

Weekly:

WTI crude Oil futures continued higher after corrected the sell off after it’s measured move reversed from 7-year highs and regained them. Long term 61.8% target fueled the spit of a spit by ABC bull flag after rebalanced Chikou sated the 5 waves. Support previous high and Weekly Tenkan & Kijun which closed turning up under the 61.8% to give next impulse clue after holding above 50wma after regaining energy above Tenkan and Kijun. Resistance the Murrey Math levels and previous breaks (off monthly)

WTI Weekly KnovaWave Shape

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 

Oil Price Recovery

US Natural Gas (Henry Hub)

Daily:

US Natural Gas completed 3 waves correcting the daily 8/8 spit after a classic euphoria wave 5. Two clear alternatives, we are correcting the highs 5 or that was a 3 and we go higher. The Cloud top after broke Kijun and Tenkan with a kiss of life. Meaning that 3 was either an a i or iv– impulse in a nutshell. The adjunct failure of the 50dma and Tenkan opened up the retest of 3.80-3.60 last time which fueled this move higher.

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.

US Natural Gas KnovaWave Daily Grid

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 spit the 50wma for the energy needed. Resistance is Kijun and Murrey Grid. The Natural gas rebalanced after continued to fail and retrace with impulse after reaching its 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. A question of continuation with the 50wma as resistance and cloud as support.

US Natural Gas KnovaWave Weekly Grid

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

US Natural Gas 2014 and 2021 cycle Double Top

Key Energy Reports

Precious Metals

  • Spot Gold dropped 2.4% to $1,792 (down 2.1%).
  • Silver sank 7.5% to $22.47 (down 3.6%)

Gold

February gold (GCG22) on Friday closed down -10.80 (-0.59%) after for the week up $14 with the high price $1847.94 on Thursday. Again, the yellow metal failed to break the weekly triangle higher. After a three-day plunge of 3.74% amid USD strength, gold found support above its uptrend line since the August 2021 bottom and Kijun. Above base of weekly cloud after closing over 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.

Gold Weekly
Gold in Perspective

Silver

Silver, like Gold bounced under the cloud base. Back underr 50wma after spitting Tenkan providing support after reversed. Closing under weekly Kijun which is now resistance. Major support is previous lows

Silver Weekly Outlook

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 1.7% to 97.27 (up 1.7% y-t-d).
  • Majors for the week on the upside, no majors. On the downside, the Australian dollar 2.7%, the Swiss franc 2.0%, the euro 1.7%, the Canadian dollar 1.5%, the Japanese yen 1.4%, the British pound 1.1%,
  • Minors for the week on the upside, the Brazilian real increased 1.3%. On the downside, the South African rand declined 3.2%, the New Zealand dollar 2.5%, the Swedish krona 2.5%, the Mexican peso 1.6%, the South Korean won 1.1%, the Norwegian krone 0.8%, the Singapore dollar 0.5%, Chinese renminbi declined 0.35% versus the dollar (down 0.08 y-t-d).
  • For 2021, the Turkish lira declined 44.1%, the Argentine peso 18.1%, the Chilean peso 16.5%, the Colombian peso 15.9%, the Thai baht 10.3%, the Peruvian sold 9.6%, the South Koran won 8.6%, the Romanian leu 8.6%, the Hungarian forint 8.5%, the Polish zloty 7.5%, the Bulgarian lev 6.8%, the Philippine peso 5.8%, the Malaysian ringgit 3.5%, the Czech koruna 1.9%, the Indian rupee 1.7%, the Indonesian rupiah 1.4% and the Hong Kong dollar 0.6%.

 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.

Australian Dollar KnovaWave Weekly Outlook

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.

New Zealand Dollar KnovaWave Weekly Outlook

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.  

Euro KnovaWave Weekly Outlook

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.

British Pound KnovaWave Weekly Outlook

Euro Pound – EURGBP

Back testing Tenkan in a C or 3 after inconclusive X – symbolic of BREXIT? Kijun, 50wma and clouds resistance.

Euro v British Pound KnovaWave Weekly Outlook

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

Japanese Yen v Dollar KnovaWave Weekly Outlook

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.

Mexican Peso KnovaWave Weekly Outlook

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

Turkish Lire KnovaWave Daily Outlook

Bitcoin

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.

Bitcoin KnovaWave Weekly Outlook

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.

Bitcoin Mania in Perspective

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Turkey Geopolitical
Turkey Risk Monitor

Economic and Geopolitical Watch

Banks

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

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.

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”

Akio Morita mistakes

The Week Ahead – Have a Trading Plan

We had the Fed last week, this week we get the major central banks, ECB, BOE, RBA all with interest rate decisions. Then to finish the week US Nonfarm Payrolls release Friday. We get global Manufacturing and Service PMIs. OPEC+ meeting is expected to offer guidance into the production plans from March.

The earnings season has another busy phase in the coming week, GM, Alphabet, Meta, Advanced Micro, Exxon Mobil, Honeywell, Ford, PayPal, Wynn Resorts, Amazon Qualcomm, PayPal, and Ford due to report and stand out.

Watch Central Banker and Geopolitics Watch speeches, reports and rate move

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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