March 12-18, 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

Sometimes to blow the froth off you need to tip over the whole drink … we had FTX, we had Silvergate and now SVB and many in between in the last few years. We have Central Banks telegraphing what they are going to do, we have real economy companies tightening their belts yet events like SVB happen and surprise. We created the Dribbler Dirty Dozen for a reason. SVB was a poster boy for our warnings. Why we implored investors to look at available-for-sale security (AFS) in particular in annual reports. SVB ended 2022 with a $120 billion securities portfolio, the vast majority mortgage securities (MBS and CMOs). Little did we know SVB hadn’t managed them at all it seems.

Before we delve into this tripod of destruction lets look at the week we just got through. It was a busy week, and pretty clear how this latest mess unraveled.

In a busy week with the RBA, BoC and BoJ all being reasonable in the monetary policy meetings. We had Fed Chair Powel ‘s remarks to the Senate Banking Committee and House Financial Services Committee. Clearly, he was weary of the irrational exuberance out there. Investors began rethinking the possibility of a 50-basis points rate hike at the March FOMC meeting. We got a clear message from the three treasury bond auctions and the 2/10 spread going over -100bps. Stocks and commodities sold off and the US dollar rallied. Powell’s remarks from his prepared testimony that shifted the markets:

“Although inflation has been moderating in recent months, the process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy. As I mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. Restoring price stability will likely require that we maintain a restrictive stance of monetary policy for some time.”

In this environment SVB Financial Group announced Wednesday after the market a proposed offering of $1.25 billion of its common stock and $500 million of depositary shares. At the same time Silvergate Capital announced they were to wind down operations and voluntarily liquidate Silvergate Bank. By the next day SIVB had lost 70% in just a day.

Two bank failures in a week. SVB was the largest failure since Washington Mutual’s September 2008 collapse and the second largest in U.S. history. There was also this week confirmation of slowing system Credit growth.

Bank stocks globally came under pressure amid concerns about fallout from the collapse of SVB Financial.  By Friday lunch SVB Financial Group (SIVB) was being shut down. The FDIC created a Deposit Insurance National Bank of Santa Clara to protect insured depositors of Silicon Valley Bank, Santa Clara, California. On Monday it will reopen for business.

SVB Financials’ troubles created uncertainty about a potential contagion effect in the banking industry that fostered a strong flight to safety bid in the Treasury market. CBOE Volatility Index flirted with 29.00 today before settling up 9.7% at 24.80. For the week, the CBOE Volatility Index increased 34.1%. Gold futures settled $32.60 higher (+1.8%) to $1,867.20/oz. Gold ended the week +0.68% higher.

FTX, Silvergate and SVB a Tripod of Delusion and Destruction

We have been skeptical of this group. SVB is the dominant financier for Silicon Valley startups and also of their team and rumors of how they hired. That said, how they apparently had no risk management of their bond and debt portfolio, not just the underlying but duration risk is astonishing. How that is not criminal negligent is a question only a judge can answer.

How FTX, Silvergate and SVB were allowed to happen had much ado with irrational exuberance about technology and ESG changes. Putting the cart before the horse is a dangerous proposition. Opposition was shut down by a partisan world, media and the list goes on, we all know it. It’s kind of like the definition of science changed dramatically with Covid and that flew into intolerance and hate. Everyone is an expert in 2023, why we caution over dribblers who are experts of everything with knowledge of nothing. Perhaps a little harsh but this is what you get.

Irrational exuberance is a state of mania. The phrase became infamous when former Federal Reserve Chairman Alan Greenspan in 1996 used it to describe the stock market. Irrational exuberance is unfounded market optimism that lacks a real foundation of fundamental valuation. The madness of crowds takes over. Irrational exuberance is synonymous with the creation of inflated asset price bubbles. However, they spread onto everything, political views, social views and the like. Then that becomes a point of justification until the rubber meets the road, and here we are.

Let’s take a breath and look at the damage. Firstly, as we wade through the gloom merchants lets be clinical. We have to ask is the failure of Silicon Valley Bank an idiosyncratic development, or something that could blow up into systemic risk? It is certainly specific and why we linked it with FTX and SI. There are several smaller Californian-banks also likely to face intense scrutiny, First Republic Bank got hit Friday. We have to recognize how quickly the FDIC moved in and is reopening the bank on Monday. Does that stem the tide, are they able to sell the SVB assets to a money center bank?

SVB became the bank of choice for tech and VCs driving up deposits through the Covid-19 pandemic. Source: SVB Financial

The immediate damage from SVB’s collapse will be additional cash strain on technology start-ups and venture capital funds. These were among SVB’s biggest clients. This includes streaming play Roku (US$487jm) games interest Roblox and collapsed crypto lender BlockFi also had more than $US200m with SVB. Roku’s funds represent 26 per cent of its available cash, it said it had enough funds to meet its cash demands for the coming year.

Venture capital funds risk having billions in unallocated funds parked with SVB, putting at risk future funding deals.

The reality is most Americans don’t have more than $250,000 in a bank account. (The FDIC insured amount). We move to uninsured risk, that is the issue. This is a question being latched onto by doomsayers and the very entitled entwined in this tripod of destruction.

Do we bailout out the greed and mismanagement of these entities?

There is an argument that even the tech companies that bank there need a reality check. However, in the real world there is a balance of keeping the world running and spanking! A hawkish Fed Chair has to weigh this up in the face of escalating systemic risk. Clear your mind and try and look at it from Powell and crew. We know the US Administration has much to do with the problem and will be leaning on Powell’s instruction. For bad policy and ignorance, just follow Janet Yellen’s career, don’t be a partisan hack and its all before you. There are a lot of howevers in this story. Take a breath and look through what happened and how it happened, hardly a shock.

Or is this something that signals opportunity amid ongoing need for change that should be welcomed more than feared? SVB’s demise bookends the collapse of the tech bubble, expect aftershocks to come, but in itself is unlikely to trigger a new financial crisis.

(Spoiler alert we lean towards this being a necessary rinse of illicit cancers rather than a harbinger of strains in the financial system that could blow up into systemic risk? An opportunity to allow a much-needed change rather than feared? Put aside the tinfoil hat, when things get so out of balance, you need a knockout or a tap out before its broken beyond repair.)

Solid Jobs Report

SVB Financial’s failure overshadowed the release of the February jobs report. The NFP beat headline estimates (actual 311,000; consensus 205,000), but showed weaker than expected average hourly earnings growth (actual 0.2%; consensus 0.3%).

With SVB turmoil rate hike expectations came in, with the implied likelihood of a 50-bps increase falling to 39.5% from 68.3% yesterday. The 2s10s spread ended the week at -89 bps, widening by a sole basis point since last Friday from a record -102 bps Wednesday. The U.S. Dollar Index at 104.60 rose just 0.1% for the week.

The S&P 500 settled Friday near its lowest levels of the week with losses in all 11 sectors. 

For the week, the worst performing sector was the financial sector, down 8.5%, followed by a 7.6% decline in the materials sector, a 7.0% drop in the real estate sector, a 5.6% decline in the consumer discretionary sector, a 5.4% decline for the energy sector, and a 4.5% drop for the industrial sector. The best performing sector this week was the consumer staples sector, which was down 1.9%.

The warnings was clear .. from last week:

What also stood out to us with all the noise and the big option position going on was VIX closed Friday down 3.2 for the week to 18.49. The VIX was at 29 on November 9th, down from the October high of almost 35. Now with regard to being a head of the curve and collective market cognitive dissonance take a look at CDS price action.

• Investment-grade Credit default swap (CDS) prices dropped six this week to 71 bps (2023 low 66bps), compared to 92 bps on November 9th (September high 114bps).
• High-yield CDS sank 33 this week to 433 bps (2023 low 408bps). This compares to 540 bps on November 9th (September high 640bps).
• Investment-grade corporate yield spreads to Treasuries closed the week 32 bps lower than November 9th at 120 bps (2023 low 115bps).
• JPMorgan CDS ended Friday at 65 bps, Goldman at 83 bps,
• Bank of America at 69 bps, down significantly from November 9th levels of 90, 120, and 97 bps, respectively.
• European high-yield (“crossover”) CDS fell 22 this week to 397 bps, down from 523 bps on November 9th (September high 695bps).
• Emerging Market (EM) CDS dropped 15 this week to 229 bps. This compares to 276 bps on November 9th (September high 346bps).

What is all that telling us?

The Credit cycle downturn is coming to the surface.

We have the reflective destabilizing Monetary Disorder. Take a peek at China and the markets collective cognitive dissonance to the property market there, the shadow banking as just one example. Have a look around the world. The hope is the collective mass continues to evolve and survive, while each time the destruction is evident in massive disproportion shifts of wealth and attempts of mind, if not physical control of the masses. Dial that back and try and get in the minds of those trying to right the ship and the market components that matter, not what the dribblers think matter.

Here’s a thought, knowing about the power of cognitive dissonance does not necessarily protect you from its effects. Traders are only too aware of this eureka moment when you grasp it. Why some of the best trades you ever do, are the ones you don’t. In option parlance, being delta neutral sometimes is the best trade.

Key this coming week will be the commencement of the next round of such indicators that will test whether these gains were one-offs or something that is sustainable. The key will be the extent to which downside risks to the US economy have been reduced enough to influence global central banks, and how markets react.

Ahead is Fed Bank Meetings, ECB and Inflation

Eyes will be on top macroeconomic reports that will emphasize the health of the US and global economies. Eyes and ears will be on central bankers.

Measuring U.S. Hotness

Key macroeconomic reports include the consumer prices and producer prices reports. Updates on the Empire Manufacturing Survey and latest retail sales are both anticipated to show an economic slowdown, industrial production is forecast to see higher, and the Philadelphia Fed Business Outlook seen improving. A preliminary reading for the University of Michigan’s consumer sentiment, industrial production and housing data including building permits, housing starts and NAHB Housing Market Index. 

On the event calendar, a Microsoft event on AI in the workplace will catch some attention. While the integration of ChatGPT-like AI into Office apps like Teams, Word, and Outlook will create some buzz,

Earnings reports include FedEx (FDX), Adobe (ADBE), Dollar General (DG), Lennar (LEN) and XPeng (XPEV) as the most prominent companies to report.

Multiple central Bankers are out to test their resolve, and the markets resolve.

Click here to see the Full Week Ahead List Below

Some things never change, when you think Greed is Good

Where is the fear?

Annualizing the New York Fed’s Q4 household borrowing data, Credit card debt expanded at a 26% pace and total debt at a 9.5% rate during the quarter. The Fed’s aggressive tightening cycle has had little affect on loose financial conditions.

“The United States is on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than previously forecast, as a result of rising costs for interest payments, veterans’ health care, retiree benefits and the military, the Congressional Budget Office said“

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.

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!

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.

• “Plans by China’s Communist Party to revive a high-level economic watchdog after two decades signal President Xi Jinping push to increase oversight of the financial sector, analysts say, part of a wider tightening of control by Xi and the party. Xi… is planning to resurrect the Central Financial Work Commission (CFWC), which will be directly under central party leadership… The CFWC was introduced in 1998 during the tenure of Jiang Zemin, building a role for the party within the central bank and financial regulators but without influencing their business, state media reported at the time. It was disbanded in 2003.” Reuters (Joe Cash)
• “Xi Jinping, China’s most powerful leader since Mao Zedong, is preparing to use the upcoming rubber-stamp parliamentary session to launch a ‘forceful’ overhaul of the government by appointing his most trusted acolytes to oversee the financial, technology and other sectors. The annual National People’s Congress, which kicks off on Sunday, will replace Premier Li Keqiang, the head of government, and his team of technocrats that has been credited with steering the economy through the turmoil of the past five years… Xi pledged… that the party was planning ‘far-reaching’ changes, which aside from financial sector reform would include exerting closer control over the technology and science sectors and — perhaps most ominously for business — increased party involvement in ‘non-public enterprises’.” March 1 – Financial Times (Joe Leahy and Sun Yu in Beijing and Cheng Leng and Andy Lin)

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

After the hotter US CPI, PPI and Core PCE we will see the last Eurozone inflation report before the ECB’s March meeting.

• Yields Jump as US Core PCE Inflation Comes in Hotter, Prior Month Revised Higher
• US Producer Price Inflation Hotter Than Expected in January, Prior Month Revised Higher
• US Consumer Inflation Moderating in January but Services Prices Still Accelerating

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.’”

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.

Cboe Volatility Index call options volume on average day in February more than at any time since March 2020C Cboe data shows. Had three consecutive weeks of declines in SPX, up 3.4% in 2023, down 5% from Feb. 2.

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 sank 4.5% (up 0.6% y-t-d),
• Dow fell 4.4% (down 3.7%).
• S&P 400 Midcaps sank 7.4% (up 0.9%),
• Small cap Russell 2000 dropped 8.1% (up 0.9%).
• Nasdaq100 declined 3.7% (up 8.1%).

Sectors

• Utilities lost 2.7% (down 9.9%).
• Banks were clobbered 15.7% (down 8.6%),
• Broker/Dealers slumped 9.3% (up 0.7%).
• Transports dropped 6.0% (up 6.1%).
• Semiconductors fell 3.4% (up 15.5%).
• Biotechs slumped 6.5% (down 4.2%).
• While bullion gained $12, the HUI gold equities index dropped 5.5% (down 7.0%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index slumped 2.5% (up 4.0% y-t-d)
• France’s CAC40 fell 1.7% (up 11.5%).
• German DAX equities index declined 1.0% (up 10.8%).
• Spain’s IBEX 35 equities index slumped 1.9% (up 12.8%).
• Italy’s FTSE MIB index dropped 2.0% (up 15.1%). 

Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September, 2021 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 0.8% (up 7.9% y-t-d).
• South Korea’s Kospi index declined 1.5% (up 7.1%).
• India’s Sensex equities index lost 1.1% (down 2.8%).
• China’s Shanghai Exchange Index sank 3.0% (up 4.6%).
• Hong Kong’s Hang Seng: -6.1% for the week

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: -2.3% Friday (-1.8% for the week)
• Silicon Valley Bank (SVB) causing Commonwealth Bank of Australia down 3.3%, National Bank of Australia off 3%, ANZ shares fell 2.6% and Westpac losing 2.6%
• Lithium prices extended their losses in 2023 as spot prices in China fell to ¥346,500 ($US49,757) at a one-year low. Lithium producer Mineral Resources fell 6.2% to $83.50, Pilbara Minerals tumbled 7% to $3.98, Piedmont Lithium fell 6.3% and Atlantic Lithium closed down 23.1%

Highlights – Emerging Markets Stocks 

EM equities mixed.

• Brazil’s Bovespa index slipped 0.2% (down 5.6%),
• Mexico’s Bolsa index sank 2.6% (up 8.9%)
• Turkey’s Borsa Istanbul National 100 index fell 3.3% (down 2.3%).
• Russia’s MICEX equities index added 0.2% (up 5.7%).

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 rose sharply Friday, which extended the market’s strong bounce that took shape on Thursday. Treasuries surged with growing uncertainty over SVB Financials’ future and a concern that the bank’s share price collapse could be indicative of a bigger issue in the banking system. FDIC announced the seizure of SVB Financials’ assets, making for the second largest bank failure in the history of the United States. Treasury Secretary Yellen said that the banking system remains resilient, but she also acknowledged that “a few” banks are being monitored by the Treasury Department. The 2s10s spread ended the week at -89 bps, widening by a sole basis point since last Friday.

Treasury Yield Watch

• 2-yr: -29 bps to 4.59% (-27 bps for the week)
• 3-yr: -28 bps to 4.28% (-32 bps for the week)
• 5-yr: -27 bps to 3.95% (-30 bps for the week)
• 10-yr: -23 bps to 3.70% (-26 bps for the week)
• 30-yr: -17 bps to 3.70% (-19 bps 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 6.71% (up 286bps y-o-y).
• Fifteen-year rates rose 10 bps to 6.09% (up 300bps).
• Five-year hybrid ARM rates added three bps to 6.00% (up 303bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down 15 bps to 7.02% (up 267bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index dropped 3.5% (down 7.3% y-t-d).
• Spot Gold increased 0.6% to $1,868 (up 2.4%).
• Silver fell 3.4% to $20.54 (down 14.3%).
• WTI crude lost $3.00 to $76.68 (down 5%).
• Gasoline fell 3.8% (up 8%),
• Natural Gas sank 19.2% to $2.43 (down 46%).
• Copper declined 0.9% (up 6%).
• Wheat dropped 4.2% (down 14%),
• Corn lost 3.5% (down 9%).
• Bitcoin sank $1,920, or 8.6%, this week to $20,415 (up 23.2%).

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 little changed at 104.58 (up 1.0% y-t-d) 2022 gains were 8.2%
• For the week on the upside, the Swiss franc increased 1.7%, the Japanese yen 0.6% and the euro 0.1%.
• On the downside, the Mexican peso declined 3.0%, the Australian dollar 2.8%, the Swedish krona 2.3%, the Norwegian krone 2.3%, the South Korean won 1.8%, the Canadian dollar 1.7%, the New Zealand dollar 1.5%, the South African rand 1.0%, the Singapore dollar 0.4%, the Brazilian real 0.3%, and the British pound 0.1%. The Chinese (onshore) renminbi declined 0.19% versus the dollar (down 0.27% 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

• Why SVB’s failure shouldn’t impede Fed tightening
• US CPI inflation to inform Fed’s next steps
• ECB: 50 times ‘X’
• US retail sales probably softened post-surge
• RBA watchers to have keen eye on jobs
• PBoC boxed in by the yuan and the Fed
• UK jobs moving sideways
• More Canadian rebound evidence
• BI expected to extend pause
• Other global macro

Central bank Watch

Eyes and ears will be on central bankers. We have the backdrop of a more hawkish Fed Chair in the face of escalating systemic risk. How will this affect Fed policy given the massive treasury positions out there and the risk of uninsured funds? Ahead the ECB and the Bank of Indonesia will decide on the course of monetary policy. In this environment we get US inflation and retail sales data. How much damage is the Federal Reserve willing to do in the guise of controlling inflation?

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

• Thursday, March 16, 2023
• 02:30 BI Interest Rate Decision
• 08:15 ECB 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: February NFIB Small Business Optimism Index (prior 90.3) at 6:00 ET; February CPI (prior 0.5%) and Core CPI (prior 0.4%) at 8:30 ET
• Wednesday: Weekly MBA Mortgage Index (prior 7.4%) at 7:00 ET; March Empire State Manufacturing survey (prior -5.8), February Retail Sales (prior 3.0%), Retail Sales ex-auto (prior (2.3%), February PPI (prior 0.7%), and Core PPI (prior 0.5%) at 8:30 ET; January Business Inventories (prior 0.3%) and March NAHB Housing Market Index (prior 42) at 10:00 ET; weekly crude oil inventories (prior -1.69 mln) at 10:30 ET; and January Net Long-Term TIC Flows (prior $152.80 bln) at 16:00 ET
• Thursday: Weekly Initial Claims (prior 211,000), Continuing Claims (prior 1.718 mln), February Housing Starts (prior 1.309 mln), Building Permits (prior 1.339 mln), March Philadelphia Fed survey (prior -24.3), February Import Prices (prior -0.2%), Import Prices ex-oil (prior 0.3%), Export Prices (prior 0.8%), and Export Prices ex-agriculture (prior 0.8%) at 8:30 ET; and weekly natural gas inventories (prior -84 bcf) at 10:30 ET
• Friday: February Industrial Production (prior 0.0%) and Capacity Utilization (prior 78.3%) at 9:15 ET; February Leading Indicators (prior -0.3%) and preliminary March University of Michigan Consumer Sentiment survey (prior 67.0) at 10:00 ET

Global Data Focus

• OPEC: OPEC will publish its monthly oil market report Tuesday
• Canada:  
• Brazil:
• Mexico:
• Europe: ECB is expected to raise interest rates by another 50 bps to combat high inflation. Eurozone’s final inflation figures and industrial production; Germany’s wholesale prices; Italy’s industrial activity.
• UK: Chancellor Jeremy Hunt’s Spring Budget statement on March 15, as households hope for more help with energy bills. UK’s job report
• China: Industrial production, retail sales, labor market, and fixed investment data for both January and February.
• Japan: Minutes from the bank’s monetary policy decision and February trade data.
• India: Retail inflation in India is set to remain above the RBI’s upper target band of 6% for a second straight month, increasing the likelihood of another rate hike in April. India February’s trade balance. Elsewhere,
• South Korea: South Korea February unemployment rate
• Australia: Westpac consumer confidence for March and NAB business confidence for February. Unemployment
• New Zealand: Fourth-quarter GDP growth.

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

Notable conferences running during the week include: the Loop Capital Investor Conference, Oppenheimer 33rd Annual Healthcare Conference, JPMorgan Industrials Conference, Bank of America 2023 Consumer & Retail Conference, Barclays Global Healthcare Conference, UBS Global Consumer and Retail Conference, and Citi 2023 Global Consumer Conference.

• Monday. Viridian Therapeutics (VRDN) will present Phase 2 data on VRDN-001 and VRDN-002 at the NANOS Conference. Delcath Systems (DCTH) will present Phase 3 trial data on Hepzato at ASCO. Connect Biopharma Holdings Limited (CNTB) set to present Phase 2B data on CBP-201. Paysafe Limited (PSFE) will hold an Analyst & Investor Day
• Tuesday – Allegro MicroSystems (ALGM) will host the first Analyst Day in the company’s history. Shareholders with Ritchie Bros. (RBA) will vote on the planned buyout from IAA (IAA). OPEC will publish its monthly oil market report. JPMorgan Industrials Conference will feature presentations by Delta Air Lines (DAL), Southwest Airlines (LUV), Honeywell (HON), Rockwell Automation (ROK), and dozens of other industrial sector companies. Caterpillar (CAT) will be in the spotlight at the CONEXPO construction trade show in Las Vegas. AMC Entertainment (AMC) will hold a shareholder vote on the conversion of the AMC Preferred Equity units (APE) into common shares ARK Invest will hold its monthly webinar.
• Wednesday – Parsons (PSN) will hold its Investor Day. Airgain (AIRG) will host an Analyst Day
• Thursday – Nissan (OTCPK:NSANY) will face a union challenge with the National Labor Relations Board holding a secret ballot for about 86 tool and die technicians at the automaker’s Smyrna, Tennessee plant. Microsoft (MSFT) will hold a special event where CEO Satya Nadella and other execs will detail the future of work with AI. Quest Diagnostics (DGX) will hold its Investor Day event.
• Friday – Incyte (INCY) will present multiple abstracts at the American Academy Of Dermatology Annual Meeting.

Earnings Highlights This Week:

• Monday includes GitLab (GTLB). Amylyx Pharmaceuticals (AMLX)
• Tuesday includes Lennar (LEN), Smartsheet (SMAR), and Guess (GES).
• Wednesday includes Adobe (ADBE) and Five Below (FIVE).
• Thursday includes FedEx (FDX), Dollar General (DG), and Signet Jewelers (SIG).
• Friday includes XPeng (XPEV).

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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