Traders Market Weekly: Fed Psychosis Reaches Next Level

March 12 – March 18, 2022

FEAR NOT Brave Investors

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

War Dance Continues with Food and Energy in Focus

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 bear market in stocks played out as one would expect in a market with massive overhead supply, the major US indices were down 4 of the 5 trading days this week (spliced with one big uber rally). Major indices are down 6 of the last 7trading days with the Dow suffering its fifth straight weekly loss

Commodity prices, though off their near extremes, volatility continues to ramp up after the world changed decisively for the worse with the Russian invasion of Ukraine. Inflation is real, US CPI in February rose 0.8% m/m (consensus +0.8%). Core CPI rose 0.5% (consensus +0.5%). On a year-over-year basis, total CPI is up 7.9% (versus 7.5% in January) and core CPI is up 6.4% (versus 6.0% January). Inflation remains persistently high as Central Bankers keep trying to reassure us that soaring inflation will come under control. The surge in energy costs due to war in Ukraine is still to come. Pressure is on the Fed to begin moving aggressively when officials meet next month. This week the Fed holds it’s most important FOMC, well until the next one.

Psychosis is a mental health problem that causes people to perceive or interpret things differently from those around them. This might involve hallucinations or delusions. – NHS

To put the overwhelmed global commodities markets into perspective it is good to break it down in simple terms, Russia described as “an oil company masquerading as a country.” That is an apt description. It is wise to work through possible bifurcations that focus on the economic and political mechanisms through which the EU and Biden Administrations might hope to impose pain and punishment on the Putin regime and the multiple possible reactions.

The Many Possible Bifurcations and Unintended Consequences

Given multiple bifurcations there is multiple integration & path-following. Different types of solution evolve with stable solutions dashed by unstable branches. Each position of bifurcation points in which the stability changes can have dramatic shifts in the psychology of markets

Expect the unexpected, with many intangibles, employ a tangible approach to delimiting the probabilistic hinterland of varying outcomes. In house we employ a geometric model for the probabilistic outcomes based on intermodal network flows and probabilistic outcomes.

Let’s not forget the Ukraine, essentially the breadbasket of the region. It is a massive exporter of grains as we have seen in grain markets where the cost of grains such as wheat and corn have risen significantly as the tension has grown.

Russia’s Putin clearly underestimated the depth of Ukraine’s resolve, here we are on the third week with what is history changing with the situation deteriorated beyond what analysts and the Russians thought likely. 

We are in the murkiness of the largest European war since WWII at a critical cycle time with prices and uncertainty already in play. Putin expected a weak Biden to be indecisive at best, what he didn’t count on was Europe being wary of the weakness and filling that vacuum and some. Watchers from the region were not surprised however with little Estonia and Latvia on the front foot from the start signaling and taking on Germany to affectively shame them into taking on Russia in the financial markets.

Oil prices are another sign of a confused market, Iran sanctions coming off versus the alarms about an imminent Russian invasion of Ukraine. The potential of a supply disruption from conflict in Ukraine is massive as Russia produces around 10 million barrels of oil a day. Either way oil is still extremely high hitting pockets around the world.

Safe Haven Bonds Performance, not So Safe..

With the world in a mess markets look to “safe haven” sovereign bonds, but liquidity and inflation have caused havoc there too.

• Ten-year Treasury yields jumped 26 bps to end the week at 1.95%.
• German bund yields surged 32 bps to 0.25%.
• French yields were up 29 bps (0.72%),
• Spanish yields 27 bps (1.24%)
• Italian yields 31 bps (1.85%).
• Yields were up 28 bps (1.49%) in the UK; 27 bps (1.99%) in Canada; 26 bps (2.39%) in Australia; and 25 bps in New Zealand (2.97%).
• Swiss 10-year yields more than doubled this week to 0.29%.

Inflation, Oh inflation

Food prices are surging, with that expect to see even higher grocery store and energy bills as elevated commodity prices send the fallout from Ukraine’s humanitarian crisis rippling across the world in the coming weeks. With all the redirection of blame at the Fed about inflation one has to understand it is a global phenomenon outside the Fed’s Control. With the war drums louder than ever the supply chain issues are out of control. The Federal Reserve is not in control of global energy and commodities prices.

Chair Powell to David Scott Chairman of our House Agriculture Committee: “Sir, your point is very well taken and I think… it’s shipping, it’s corn, it’s wheat, as you pointed out, it’s fertilizer, and we see that getting into food prices and into the food supply just in these early days after the sanctions have been put in place and the war less than two weeks old now. I really — the Fed doesn’t really have the tools to address this.”

House Financial Services Committee hearing

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.

We are now less than a month before the Fed’s next policy meeting. February’s CPI and PPI both rose more than forecast. 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.

Volatility

Rate markets are sending an exhaustive message to the Fed that it should commence aggressive tightening measures. On the flip side is a sputtering overly extended equities bubbles they must handle with kid’s gloves.

CME FedWatch Tool shows the probability for a rate hike in March. 

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 late last year 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 surge in commodities 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

• Dow industrial average fell -1.99% for the week to close at 32944. The Dow all-time high close at 36952.65.
• S&P index at 4204.32 fell -2.87% for the week. The S&P all-time high close at 4818.62. The S&P is near 13% from its all-time high.
• NASDAQ index at 12843.82 fell -3.53% this week. Nasdaq closed over 22% from its all time high.
• Russell 2000 at 1979.66 for the week, fell -1.01%
• S&P 400 Midcaps fell 1.7% (down 9.5% y-t-d)
• The obsession of Apple hitting 3 trillion market at $182.86 was achieved (182.94 high)
• Utilities declined 0.9% (down 3.1% y-t-d)
• Transports declined 1.0% (down 7.6% y-t-d)
• Banks sank 2.3% (down 7.2% y-t-d)
• Broker/Dealers sank 3.2% (down 9.8% y-t-d)
• Semiconductors sank 3.5% (down 20.3% y-t-d)
• Biotechs lost 1.8% (down 12.9% y-t-d)
• With bullion gaining $18, the HUI gold index rose 2.6% (up 20.8% y-t-d)

US Markets YTD

• Dow Jones Industrial Average -7.5% YTD
• S&P 500 -9.2% YTD
• Russell 2000 -10.9% YTD
• Nasdaq Composite -14.9% YTD

Highlights – Europe Stocks

• European Stocks (STOXX 600), finished with a 2.4% gain for the week.
• Germany’s DAX gained 1.3%,
• UK’s FTSE gained 0.8%,
• France’s CAC gained 0.9%.
• Spain’s IBEX 35 equities index surged 5.5% (down 6.6% YTD).
• Italy’s FTSE MIB index gained 2.6% (down 15.7%).

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: -3.2% for the week
• Hong Kong’s Hang Seng: (-6.2% for the week)
• China’s Shanghai Composite: (-4.0% for the week)
• India’s Sensex: (+2.2% for the week)
• South Korea’s Kospi: (-1.9% for the week)

 Highlights – Australian Stocks

• Australia’s ASX All Ordinaries:  -1.0% Friday (-0.8% for the week).
• Iron ore -0.4% to $US156.95 per tonne (Tianjin) Friday
• The commodities squeeze took a breather this week, it has underpinned the ASX with energy, mining and agriculture stocks soaring on the back of rising prices which saw oil top $US120 a barrel this week and grain crops hit record highs.
• Macquarie Research analysts are preparing for an earnings upgrade for Australian iron ore miners as prices surge above $US160 per tonne as Ukrainian iron ore producers declare Force Majeure on supply contracts.
• The analysts believe higher prices could see BHP and Mineral Resources earnings upside of 43 per cent and 60 per cent respectively in 2021-22.

“Benchmark iron ore prices (62 per cent fines) reached $US162.75 per tonne on 7th March, 13 per cent higher week on week,” the equities team wrote in a note to clients on Tuesday.

• The Australian ASX 200 Stock Market Closed Up 13% in 2021 With Lithium Plays Starring

 Highlights – Emerging Markets Stocks 

• EM equities mostly lower.
• Brazil’s Bovespa index dropped 2.4% (up 6.6%),
• Mexico’s Bolsa was little changed (unchanged).
• Turkey’s Borsa Istanbul National 100 index jumped 3.2% (up 10.6%).
• Russia’s MICEX equities index did not trade (down 34.8%).

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

S&P 500

Daily: SPX500 bounced to top of 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 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 support is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

Recall 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.

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 index rose 23.11 points Friday or 0.52% at 4500.54. S&P index rose 1.51% for the week. The S&P all-time high close 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 tested the Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

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

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

Dow Jones

The Dow tested its weekly up channel bouncing back to test the Tenkan and Kijun we watch for the reaction here. Resistance is the median, support the channel and previous breakups.

NASDAQ 100

Nasdaq spat the weekly cloud to the MM 6/8 and Kijun Tenkan confluence where it sold off. Resistance is this confluence. 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. From there we sold off right to Tenkan (as did SPX). Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue. Support Channel and cloud.

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 low-price 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 in the middle of the cloud. Needs to get traction in here for bulls. Resistance 8/8 Support cloud base, gap below

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)

NVidia $NVDA

In the bull swing following the announcement of NVDA 4/1 split some levels off the energy break NVidia didn’t look 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. Held the base channel ahead of earnings this week.

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.

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

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. 

Earnings Highlights This Week:

TICKER COMPANY EPS FORECAST

Monday includes

Tuesday includes

Wednesday Includes 

Thursday includes

Friday includes

“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 $5.359 billion, and junk bond funds posted negative flows of $1.6 billion (from Lipper).

U.S. Treasuries ended a volatile week with the 5-yr note and shorter tenors slipping, finishing just above their worst levels of the day. The 10-yr note and the 30-yr bond spent the day in positive territory with the 10-yr yield ending the day within seven basis points of its February high (2.065%) while the 30-yr yield dipped from a ten-month high that was reached Thursday. The 2s10s spread widened by two bps to 25 bps over the course of the week.

• 2-yr: +3 bps to 1.75% (+26 bps for the week)
• 3-yr: +1 bp to 1.91% (+31 bps for the week)
• 5-yr: +2 bps to 1.96% (+33 bps for the week)
• 10-yr: -1 bp to 2.00% (+28 bps for the week)
• 30-yr: -3 bps to 2.36% (+21 bps for the week)

Rates on the 10-year note traded over 1.900% on Friday, for the first time since July 2019. Yields broke out of the small symmetrical triangle highlighted the past weeks, after forming a much larger symmetrical triangle.

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 jumped nine bps to 3.85% (up 80bps y-o-y).
• Fifteen-year rates gained eight bps to 3.09% (up 71bps).
• Five-year hybrid ARM rates rose six bps to 2.97% (up 20bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 26 bps to 4.35% (up 112bps).

Highlights – Federal Reserve

• Federal Reserve Credit last week increased $3.7bn to $8.870 TN. Over the past 130 weeks, Fed Credit expanded $5.144 TN, or 138%. Fed Credit inflated $6.059 Trillion, or 216%, over the past 487 weeks.
• Fed holdings for foreign owners of Treasury, Agency Debt last week dropped $20.3bn to $3.433 TN. “Custody holdings” were down $137bn, or 3.8%, y-o-y.
• Total money market fund assets declined $30.5bn to $4.576 TN. Total money funds increased $183bn y-o-y, or 4.2%.
• Total Commercial Paper rose $11.9bn to $1.039 TN. CP was down $72bn, or 6.5%, over the past 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

• Greek 10-year yields rose 22 bps to 2.57% (up 125bps y-t-d).
• Ten-year Portuguese yields jumped 27 bps to 1.11% (up 64bps).
• Italian 10-year yields surged 31 bps to 1.85% (up 68bps). Spain’s 10-year yields rose 27 bps to 1.24% (up 67bps).
• German bund yields surged 32 bps to 0.25% (up 43bps).
• French yields jumped 29 bps to 0.72% (up 53bps).
• The French to German 10-year bond spread narrowed three to 47 bps.
• U.K. 10-year gilt yields rose 28 bps to 1.49% (up 52bps). 

Highlights – Asian Bonds

• Japanese 10-year “JGB” yields increased two bps to 0.19% (up 11bps y-t-d).

Part C: Commodities

Highlights

• Bloomberg Commodities Index declined 0.5% (up 27.5% y-t-d).
• Spot Gold gained 0.9% to $1,988 (up 8.7%).
• Silver added 0.7% to $25.87 (up 11.0%).
• WTI crude fell $6.35 to $109.33 (up 67%).
• Gasoline sank 6.5% (up 49%),
• Natural Gas fell 5.8% (up 27%).
• Copper sank 6.3% (up 4%).
• Wheat slumped 8.5% (up 44%)
• Corn gained 1.1% (up 42%).
• Bitcoin was little changed this week at $38,940 (down 16%).

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 on Friday, logging its best week since the week ended on Feb. 11, on higher rates across capesize segment. The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, rose 14 points to 2,718 points. The BDI was up by almost 26.5% this week.
• The capesize index gained 63 points to 2,676 points, registering its best weekly gain since mid-2020. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased $527 to $22,195.
• The panamax index was down 46 points at 3,187 points, although the index was up this week by 14.4%. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, decreased $412 to $28,685.
• The supramax index (.BSIS) rose 16 points, up 13.7% this week, to 2,939 points.

• Source: Baltic Exchange’s Capesize Index Soared 31.4% as Dalian iron Ore Jumped Over 7%

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.

Lumber

Grains

It was an ominous week for the global food supply and its price. Wheat (May contract) surged 40.6%, increasing y-t-d gains to 57%. Corn jumped 15% (up 27% y-t-d), and Soybeans rose 5.4% (up 26%).

Wheat

March 4 – Bloomberg (Megan Durisin and James Poole): “This week will go down in wheat trading history. Chicago futures for the grain have soared 40% — the most ever — as Russia’s war in Ukraine upends global grain supplies. That puts prices at a 14-year high, and milling wheat in Paris reached an unprecedented 400 euros ($438 per ton). The war is stalling shipments from one of the world’s most vital breadbaskets. Ukraine and Russia together account for a quarter of global trade of the staple, used in everything from bread to couscous and noodles.”

Corn

Corn has continued to accelerate higher after breaking cloud, corn jumped 15% this week (up 27% y-t-d)

Soybeans

Soybeans has accelerated after finally found bids after hitting weekly lows well under weekly cloud and well under 50wma to close over the weekly Tenkan, Kijun and 50wma. Impulse saw soybeans rise 5.4% (up 26% YTD).

Energy

US Crude Oil (WTI)

Daily:

Another big week for oil, April WTI crude oil (CLJ22) futures settled at $115.68 per barrel. That’s the highest close since September 2008. The high price$115.94, low price today $107.29. For the week, the price is up over 25%. The power was this move was built after hitting our initial 8/8 target completing a iii of (5) or (iii) of 5 as marked. From there we saw a sharp ABC higher and MM recalculation higher. We are in a completive mode with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 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 grid 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.

Weekly:

WTI crude Oil futures continued higher with aggression after corrected the sell off after it’s measured move reversed from 7-year highs and regained them right to the top of the weekly channel with the downside open. Support is the median and Tenkan/Kijun. Long term 61.8% target fueled the spit of a spit by ABC bull flag after rebalanced Chikou sated the 5 waves. Resistance the Murrey Math levels and previous breaks (off monthly)

These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications.” Support is previous channels, tenkan and Kijun. Above we have Murrey Math time and price 

US Natural Gas (Henry Hub)

Daily:

 US April Nymex natural gas (NGJ22) up 29.4 cents on Friday, it rallied during the week and settled at $5.016/MMBtu to close Friday, up 12% from the prior week’s finish. The energy after it 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 week’s move higher. From there we fell sharply to the Kijun, A completion of 4 (bear) or (i) of 5 (bull)

Notice the fractals of the move after completing the C of 4 bullish scenario played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. For the bulls all this needs to hold for the highs to be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.

Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term.

Weekly:  The classic double top playing out after a spit of the weekly Kijun was sent back off Tenkan only to reverse all the way to 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.

Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan.  This was energized with a series of fractals between old 38 and 50% channel, as you would expect in a seasonal commodity with weather a prime mover. Resistance is Fib/Murrey confluence, support Tenkan, Kijun – as always count your ABC’s

Key Energy Reports

• Around The Barrel – Crude Oil Outlook with A Desperate United States Turning to Iran with Prices Vertical
• Into The Vortex – Natural Gas Outlook with Threats of Russian Ukraine Conflict Hitting Global Supply
• ExxonMobil Delivers Big Earnings, Continues to Pay Down Debt as Oil and Gas Prices Surge
• The Energy Crisis and Volatility See Natural Gas and VIX the Best Performing Futures in January
• Chevron Earnings Miss on Weaker Production Outweighing Gains from Soaring Oil and Natural Gas Prices
• Natural Gas Squeezes in Largest One Day Percentage Move on Record as Traders Caught Short Molecules
• Australian Coking Coal Record High with Strong Demand in Korea and Japan
• OPEC Monthly Oil Market Report January 2022
• Lower US Producer Price Inflation Dependent on Oil Prices
• Fitch Outlook For North American Oil & Gas is Neutral in 2022

Precious Metals

• Spot Gold gained 0.9% to $1,988 (up 8.7%).
• Silver added 0.7% to $25.87 (up 11.0%)

Gold

Gold futures settled $30.70 higher (+1.6%) to $1,966.60/oz as investors flocked to haven assets following Russia’s seizure of Europe’s largest nuclear power plant in Ukraine. The yellow metal has accelerated after breaking the weekly triangle higher. Gold has bounced after support at it’s uptrend line since the August 2021 bottom and Kijun. It garnered strength after rebalancing after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we need to stay above the triangle. Murrey Math resistance, watch Fibs & Chikou.

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

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 0.5% to 99.12 (up 3.6% y-t-d)

Majors:

• Japanese yen declined -2.1%,
• Swiss franc -1.9%,
• British pound -1.5%,
• Australian dollar -1.0%,
• Euro -0.2%
• Canadian dollar -0.1%.

Minors

• South African rand increased 2.3%,
• Swedish krona +1.0%,
• Mexican peso +0.2%.
• South Korean won -1.4%,
• New Zealand dollar -0.7%,
• Norwegian krone -0.6%,
• Brazilian real -0.2%,
• Singapore dollar -0.2%,
• Chinese renminbi -0.31% versus the dollar (up 0.27% y-t-d).

 Australian Dollar – AUDUSD

The Aussie dollar is still correcting since completing a 5 at the pysch 80 level to fall under the weekly cloud in emotive fashion. The Australian dollar fell to test of the August lows of 0.7106 with Omicron fears. Should that double bottom go support ia the Murrey Math Levels. Resistance the Cloud, Tenkan and Kijun like many commodities.

New Zealand Dollar – NZDUSD

The Kiwi mirrored the AUD in its wave (iii) spit and has corrected at the cloud much of the FOMO muster wave and retested the 50% Fib & 4/8 confluence. Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.

Canadian Dollar – USDCAD

The Loonie is holding the Tenkan after a 3 year high in June and corrected that in 3 waves led by the AUD and NZD. #oil price impacting direction. Watch flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.

Euro – EURUSD

Euro continues to correct in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as #EURUSD consolidates in the cloud. Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.  

British Pound – USDGBP

British pound classic retest of daily cloud break with magnet pull of cloud twist after ABC correction – will need Tenkan to break through Kijun for more strength. The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.

Euro Pound – EURGBP

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

Japanese Yen – USDJPY

USDJPY broke above i after weakness with Treasury yields to rush to +2/8 and channel convergence at 115.00. With that resistance the weekly chart is showing a bearish engulfing bar taking in over a month of price to close right above the Tankan should that go a re-test of 112 is alive The 108.00 level should remain massive support for dollar-yen. Any change will come from the weekly Kijun as it breaks through the old channel. Use your USDJPY Murrey 4/8 8/8 grid for now. EURJPY AUDJPY will determine risk on/off

Mexican Peso USDMXN

The Peso continues in the long triangle and consolidated despite outside uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.

Turkish Lire USDTRY

The Turkish Lira reversed after falling in 3 waves to explode over the Tenkan with the weekly cloud Kijun and 50wma below to see Turkish lira close the week at a record low 11.29 TRY/USD. The Murrey Math and Fib targets offer targets with the Lire at all time lows resistance in a hyper inflating collapse

Bitcoin

Bitcoin performing technically to perfection. Impulse begets impulse. To understand panic, understand greed. $BTC is testing 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.

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 recent high over $68,000 came after the launch over the Bitcoin ETF, Bitco. From that high we have 2 main alternatives a V of a 1 of a V. For bears it a completive five with impulse right to the 50wma – an incredible 26% fall in a Friday night session. That’s impulse! We watch for an ABC to develop here support is the 50wma and bottom of the weekend cloud.

We have seen what you would expect from a 5 wave impulse peak and ABC correction, a violent correction and completion. Use Murrey Math levels for corrections and targets as algorithms control the herd here, support is the cloud and sharp ABC, 1-2 moves. From there prices agitated towards those ATHs as news of a Bitcoin ETF fueled the rally, sound familiar? But this time it wasn’t signaling we are in a 3 high probability but a 5.

On the Risk Radar

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 Stoic Results in Q3, 2021

The major money cents banks released earnings with many record results for Q3. Mainly from trading and loss reserve releases from the pandemic kitty.  Rising interest rates also help the bottom line.

• Goldman Sachs Advice on Mergers and Acquisitions Brought in a Record $1.65 billion Last Quarter
• Wells Fargo Earnings Suffer From Less Interest Income on Lower Loans
• JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
• Blackrock Earnings Beat Expectations With Record $ 9.5 Trillion Assets and ETFs Under Management
• PNC Bank Revenue Rises, Expects $900 million in Cost Savings From BBVA
• Citigroup Earnings Rise on Equity Trading and Loss Reserve Release
• Bank of America Earnings Lift With Higher Long Term Interest Rates And Steady Costs
• Morgan Stanley Acquisitions of E-Trade and Eaton Vance Boosted Wealth and Asset Management

Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don’t exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.

Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.

Banks are also benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 2020 to a record $60.113 trillion.

Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008.  

“Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch”

The Week Ahead – Have a Trading Plan

Plenty of data to get the machines going. A big week for geopolitics, outside the Russia Ukraine war. Two significant events relating to the west’s response to the conflict. First, Boris Johnson, UK prime minister, will host the leaders of the V4 countries — Poland, Hungary, the Czech Republic and Slovakia — in London to discuss the Ukraine crisis. Perhaps most interesting will be the British prime minister’s conversations with his Hungarian counterpart Viktor Orban. The Hungarian government has nurtured a close relationship with the Kremlin over the past decade, but it has also condemned Russia’s invasion of Ukraine and agreed to most European sanctions.

On Thursday Emmanuel Macron, French president, will host a gathering of EU leaders in Versailles for an informal European Council summit. On the agenda is a wave of applications from former Soviet states to be fast-tracked into EU membership, a move framed as a way to show solidarity with Ukraine but one that is unlikely to be fulfilled, not least because it is fraught with complexity.

South Koreans go to the polls on Wednesday to decide a presidential contest that has been tainted by scandal, family drama and insinuations of corruption, criminality and nepotism, and fraud. It is the world’s 10th-largest economy.

Monday: 

• India, February consumer price index (CPI) data,
• UK, Office for National Statistics annual review of the “shopping basket” of items making up the suite of consumer price inflation indices

Tuesday: 

• Canada, January manufacturing data
• China, monthly retail sales figures
• EU, January industrial production data France, February inflation rate Germany, research group ZEW economic sentiment survey
• India, trade statistics
• Japan, balance of trade data
• Opec monthly oil market report
• UK, March payroll employment figures plus February insolvency numbers
• US: February labour statistics US February PPI (prior 1.0%), Core PPI (prior 0.8%), and March Empire State Manufacturing Survey (prior 3.1) at 8:30 ET

Wednesday: 

• Canada, February CPI data
• International Energy Agency monthly oil market report
• Italy, February CPI data
• Japan, January industrial production figures
• US: Weekly MBA Mortgage Index (prior 8.5%) at 7:00 ET; February Retail Sales (prior 3.8%), Retail Sales ex-auto (prior 3.3%), and February Import/Export Prices at 8:30 ET; January Business Inventories (prior 2.1%) and March NAHB Housing Market Index (prior 82) at 10:00 ET; weekly crude oil inventories (prior -1.86 mln) at 10:30 ET; and March FOMC Rate Decision (prior 0-0.25%) at 14:00 ET

Thursday:

• St Patrick’s day: Irish taoiseach Michael Martin will hold the annual shamrock ceremony with US president Joe Biden in Washington
• Norway, 23 Nato members plus Finland and Sweden begin winter exercises in northern Norway in the Cold Response 2022 event
• Australia, Reserve Bank of Australia’s quarterly bulletin
• EU, February inflation data
• Japan, two-day Bank of Japan monetary policy committee meeting begins plus February CPI data
• Spain, January trade balance figures
• UK, Bank of England’s monetary policy committee vote on interest rates
• US: February Housing Starts (prior 1.638 mln), Building Permits (prior 1.899 mln), weekly Initial Claims (prior 227,000), Continuing Claims (prior 1.494 mln), and March Philadelphia Fed Survey (prior 16.0) at 8:30 ET; February Industrial Production (prior 1.4%) and Capacity Utilization (prior 77.6%) at 9:15 ET; and weekly natural gas inventories (prior -124 bcf) at 10:30 ET

Friday: 

• Holi, the Hindu festival of colors
• Sikh festival of Hola Mahalla begins
• Canada, January retail trade figures EU, January trade figures Italy, January trade balance figures UK, February retail sales figures
• US: Quadruple Witching Day, when stock index futures, stock index options, stock options and single-stock futures expire February Existing Home Sales (prior 6.50 mln) at 10:00 ET

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 2022.

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