April 2-8, 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

Climbing a wall of worry was all to see this past week. U.S. stocks, bonds flinched and then rocked higher in spite of themselves with the banking quagmire from New York and Californian regional banks to notch solid first-quarter gains. Oil and copper also joined in with risk asserts as did Bitcoin and Ethereum. WTI oil was up $11 from its recent lows Friday. The benchmark S&P 500 (SPX) recorded a 7% gain for the first quarter, rebounding after a nearly 20% drop in 2022. The Nasdaq Composite’s (IXIC) rose 16.8% in Q1, its biggest quarterly rise since 2020.

The S&P 500 spent most of the week above its 50-day moving average and climbed past the 4,100 level by Friday’s close busting through the JPM call wall, will so many novices belligerently bet on holding. The major indices coiled in a narrow range in the first half of the week, with so much premium at risk and VIX collapsing the move higher was textbook. Semiconductor stocks continue to lead. The PHLX Semiconductor Index rose 3.5% this week and a massive 27.6% this quarter.

With all that coiling and end of quarter the topside got what it needed to pierce the veil. The PCE Price Index slowed to 5.0% yr/yr in February from 5.3% in January while the core-PCE Price Index, the Fed’s preferred inflation gauge, dipped to 4.6% from 4.7%. 1-year US inflation expectations also fell to 3.6%, its lowest level since May 2021.

The doomsayers may be right, but we are seeing constant surprises to that theory. For example, early signs that the US housing market slump is finding a base are emerging, pending home sales having risen for a third month and to a 6-month high. we will keep an eye on consumer sentiment and business activity. We are far from being out of the woods, remember the market is not the economy.

What we continue to notice is how this market is still being treated by ‘experts’ as those in the past, hence the volatility and extreme in bulls/bears. Understanding crowd behavior is essential in these markets. The moves have caught analysts and strategists by surprise with the uber bear running amok in the past few weeks. Typical thinking is this from Morgan Stanley strategists; “Given the events of the past few weeks, we think … equity markets are at greater risk of pricing in much lower estimates”, noting that earnings estimates were 15-20% too high even “before the recent banking events.”

The Goldman Sachs Short Index popped 5.1% during the final week of the quarter to end the period with a 7.5% gain. This index had gained 33% y-t-d at February 2nd highs. From this high to March 23rd lows, the index dropped 25%. Indicative of that crowd behavior.

What non-traders are failing to grasp is this market with so many variables is no trading as they expect and they are constantly wrong. S&P 500 earnings for the first quarter are estimated to have fallen 5% from 2022, followed by an expected 3.9% drop in the second quarter, Refinitiv data shows. During recessions, however, earnings tumble at a 24% annual rate on average, according to Ned Davis Research. However how important is that in such a chaotic market? There is the answer structure your thinking around game theory or even chaos theory.

During the week Fed member William Barr delivered pre-prepared remarks to congress on the collapse of Silicon Valley Bank, ultimately blaming its demise on bad management and that US banks remains sound. BOE governor said that social media and the age of digital banking has helped cause lightning-quick bank runs when talking of the collapse of SVB. Both parts are surpassingly accurate. Bank stocks remained under pressure after FDIC Chairman Michael Barr told the Senate Banking Committee that he anticipates having to increase capital and liquidity standards for firms over $100 billion, adding that more regulation is needed. The S&P 500 financial sector rose 3.7% this week, but it declined 6.1% in Q1.

All 11 S&P 500 sectors gained this week. Energy (+6.2%), consumer discretionary (+5.6%), and real estate (+5.2%) were the top performer while communication services (+1.5%) and health care (+1.8%) the least gains. The 2-yr Treasury note yield rose 29 basis points this week to 4.06% and the 10-yr note yield rose 11 basis points to 3.49%.

The U.S. Dollar Index fell 0.6% to 102.52. The geopolitical games continued with China and Brazil agreeing to trade with each other in their own currencies instead of the U.S. dollar.

While we are on China, the nation’s PMI’s expanded at a faster rate than forecast, sending the composite to a record high of 57. The question we will have to see is this a sugar high from the reopening or something more significant.

A reminder in these markets don’t get married to a view, leave biased partisan opinions at the door and find a leader. Right now, TSLA is giving us a good indicator of crowd behavior. Note the divergence and convergence with it and other instruments. Be proactive.

Nvidia surged 90%, Meta/Facebook 76%, Tesla 68%, Warner Brothers Discovery 59%, Align Technology 58%, AMD 51%, and Airbnb 46%. The ARK Innovation ETF returned 29%.

The Philadelphia Semiconductor (SOX) Index rose 27.6% for the quarter, the Nasdaq Computer Index rose25.7% and the NYSE Arca Technology Index gained 26.1%. The Nasdaq100 (NDX) jumped 20.5%.

The “average stock” Value Line Arithmetic Index gained 5.8%. The crypto currencies rocketed higher, with Bitcoin rallying 72% during Q1.

Remember when ‘they ‘ said tech bad and banks safe? The Nasdaq Bank Index lost 21.9%, and the KBW Bank Index fell 18.7%. First Republic sank 88.5%, Western Alliance Bancorp 40.3%, Zions 39.1%, Comerica 35.1%, Keycorp 28.1%, Citizens Financial 22.9%, and Huntington Bancshares 20.6%. Throw in those that have now disappeared, Signature and Silicon Valley Bank.

NB: On Sunday Tesla reported that it delivered 422,875 vehicles in Q1 to edge past the consensus expectation for 421.2K deliveries. The quarterly tally included 412,180 Model 3/Model Y vehicles and 10,695 Model S/Model X vehicles. Tesla plans to report full Q1 earnings results on April 19 and has an earnings conference call scheduled for 4:30 p.m. that day. Keep an eye on this from Monday, note the KnovaWave grid above.

So how Screwed are We?

• Federal Reserve Credit expanded $391 billion during the final three weeks of the quarter, reversing much of the QT-related contraction that commenced last June.
• The Fed lent $180 billion to the FDIC. Discount window borrowing surged to $110 billion, while the Fed’s new bank lending facility rose to $64 billion.
• The Fed’s foreign “repo” lending facility jumped to $55 billion
• Aggressive Fed measures were called upon for system stabilization. While crisis dynamics were temporarily contained, another blast of monetary inflation is highly destabilizing.
• Money Market assets surged a stunning $304 billion in three weeks to a record $5.198 TN.
• Money funds were up $384 billion during Q1, posting 32% annualized growth – with one-year expansion of $608 billion, or 13.2%.
• Money fund assets are commonly viewed as a system liquidity buffer, with some of this cash inevitably heading to the stock market.

For those taking notes: (Market Psychology)

That said markets did not seize up and got nowhere near the previous 2008 levels, Scotia Bank prepared a number of key elements of the financial market we watch that help us review and visualize the cracks. It is important to tune out the noise, particular from the talking heads and dribblers that poison social media and blogs with their inane ignorance.

The wider the bid-ask spread the more illiquid markets have become amid uncertainty around market conditions. Chart 4 shows that bid-ask spreads around trading in US 10-year Treasuries had widened toward levels that were close to the early stages of the pandemic, but they have quickly tightened again in the wake of policy measures and after a multi-year period of remarkable stability when buckets of liquidity were being thrown at markets. Corporate investment grade bid-ask spreads (chart 5) and high yield bid-ask spreads (chart 6) have performed similarly.

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 Easter, Flash PMI, RBA & US Jobs

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 given the market turmoil and the hiking of rates.

In a shortened week with Easter with markets closed for Good Friday but we still get the release of the US Nonfarm payroll report. It is also a holiday in many places for Easter Monday. As such there will be a lot of time to analyze the US Jobs report. We also get Flash PMI data for APAC, Europe and the US (and ISM, reports for the US), the RBA cash rate decision and RBA Governor Philip Lowe speaks at the National Press Club. OPEC, RBNZ Monetary Policy Review and OCR and non-OPEC Ministerial Meeting for oil traders.

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

Measuring U.S. Hotness

Key macroeconomic reports features’ Manufacturing ISM Report On Business, Dallas Fed PCE, Construction Spending, JOLTS job openings, ADP employment, mortgage data, U.S. International Trade in Goods and Services, ISM Services report on business, S&P Global composite and services (final), Jobless claims, Nonfarm payrolls report, API’s Weekly Statistical Bulletin (WSB) and consumer credit.

We get the final jobs report before the next FOMC meeting on May 2^nd–3^rd arrives on Friday and there may be significant upside risk. We include some charts from Scotia bank to explain why. Basically, service jobs and Spring Break. Remember it will be released on Good Friday so markets closed.

On the event calendar auto production and sales reports.

Earnings reports include Conagra Brands (CAG), Constellation Brands (STZ), Lamb Weston (LW), and Levi Strauss (LEVI).

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.

• “China is seeking a new international order with Beijing as the dominant player, and the European Union must be more assertive in defending its security and economic interests, including possible EU-wide controls on outbound investment, the bloc’s top official said… In a speech… ahead of her trip to China alongside French President Emmanuel Macron…, European Commission President Ursula von der Leyen said the EU must continue engaging with Beijing but needs a strategy for ‘de-risking’ its relationship and dependencies on China. She also tied the future of Europe’s links with China to Beijing’s actions over the war in Ukraine and effectively called a halt to remaining hopes of enacting a 2020 EU-China investment agreement.” March 30 – Wall Street Journal (Laurence Norman and Kim Mackrael)
• “Chinese leader Xi Jinping says he is preparing for war. At the annual meeting of China’s parliament and its top political advisory body in March, Xi wove the theme of war readiness through four separate speeches, in one instance telling his generals to ‘dare to fight.’ His government also announced a 7.2% increase in China’s defense budget… And in recent months, Beijing has unveiled new military readiness laws, new air-raid shelters in cities across the strait from Taiwan, and new ‘National Defense Mobilization’ offices countrywide. It is too early to say for certain what these developments mean. Conflict is not certain or imminent. But something has changed in Beijing that policymakers and business leaders worldwide cannot afford to ignore. If Xi says he is readying for war, it would be foolish not to take him at his word.” March 29 – Foreign Affairs (John Pomfret and Matt Pottinger)

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

• US Core PCE Inflation Comes in Lighter Than Expected in February
• US Producer Price Inflation Fell in February as Economy Faces Headwinds
• Modest Pullback in US Consumer Inflation in February as Core Services Prices Climb
• FAO World Food Price Index Fell in February for Eleventh Consecutive Month

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 jumped 3.5% (up 7.0% y-t-d),
• Dow rose 3.2% (up 0.4%).
• S&P 400 Midcaps rallied 4.5% (up 3.4%),
• Small cap Russell 2000 rose 3.9% (up 2.3%).
• Nasdaq100 advanced 3.2% (up 20.5%).

Sectors

• Utilities rallied 2.8% (down 4.5%).
• Banks recovered 4.7% (down 18.7%),
• Broker/Dealers rallied 4.8% (up 2.8%).
• Transports surged 5.3% (up 7.8%).
• Semiconductors jumped 3.5% (up 27.6%).
• Biotechs rose 3.4% (up 0.5%).
• Though bullion slipped $9, the HUI gold equities index gained 3.2% (up 11.5%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index jumped 3.1% (up 2.4% y-t-d).
• France’s CAC40 surged 4.4% (up 13.1%).
• German DAX equities index jumped 4.5% (up 12.2%).
• Spain’s IBEX 35 equities index rose 5.0% (up 12.2%).
• Italy’s FTSE MIB index jumped 4.7% (up 14.4%).

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 gained 2.4% (up 7.5% y-t-d).
• South Korea’s Kospi index rose 2.6% (up 10.8%).
• India’s Sensex equities index rallied 2.5% (down 3.0%).
• China’s Shanghai Exchange Index increased 0.2% (up 5.9%). 

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: +0.8% Friday to 7177.8 (+3.3% for the week)
• ASX rose every day rebounding from its longest weekly losing streak since global financial crisis in 2008 as the US banking crisis spread to Europe. Breaking from seven consecutive weekly falls, bounced off a four-month low of 6895 points the previous week..
• Friday materials sector up 1.8% as a 2% rise in iron ore prices gave heavyweights BHP (up 2.5%), Fortescue (up 4.1%) and Rio Tinto (up 2.5%). Gold miners Evolution Mining (up 3%) and Northern Star Resources (up 2.3 ) rebounded from losses on Thursday as the gold price recovered.

Highlights – Emerging Markets Stocks 

EM equities rallied.

• Brazil’s Bovespa index rallied 3.1% (down 7.2% YTD),
• Mexico’s Bolsa index gained 2.2% (up 11.3%).
• Turkey’s Borsa Istanbul National 100 index dropped 4.4% (down 12.6%).
• Russia’s MICEX equities index gained 2.5% (up 13.8%).

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. The Philadelphia Semiconductor (SOX) Index returned 27.6% for Q1 2023. Pull from Chip players’ Nvidia surged 90% and AMD 51%.

NVidia $NVDA

NVidia surged 90% in Q! 2023. The Philadelphia Semiconductor (SOX) Index returned 27.6% for the quarter, with the Nasdaq Computer Index up 25.7% and the NYSE Arca Technology Index gaining 26.1%. The Nasdaq100 (NDX) jumped 20.5%. NVDA took off after the breakup retest from May 2021. NVidia is a clear leader of SOX & SMH look for cues there and ABC failures for changes. NVDA never looked back after the Key Break (mauve) and Tenkan to a flat cloud and holding 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 ARK Innovation ETF returned 29% for Q1 2023. 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. For the quarter, Nasdaq Computer Index up 25.7% and the NYSE Arca Technology Index gaining 26.1%. The Nasdaq100 (NDX) jumped 20.5%.

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 closed out March modestly higher, adding to their first quarter gains. The yield on the 2-year Treasury fell to 4.06%, down 3.7 basis points on Friday and posting the biggest monthly drop since January 2008. Money Market assets surged a stunning $304 billion in three weeks to a record $5.198 TN. Treasuries advanced to fresh highs and continued building on their gains after the much-watched Personal Income/Outlays report for February showed some disinflation.

Treasury Yield Watch

• 2-yr: -5 bps to 4.06% (+29 bps for the week; -74 bps in March; -36 bps for Q1)
• 3-yr: -6 bps to 3.83% (+24 bps for the week; -68 bps in March; -41 bps for Q1)
• 5-yr: -5 bps to 3.61% (+20 bps for the week; -56 bps in March; -39 bps for Q1)
• 10-yr: -6 bps to 3.49% (+11 bps for the week; -43 bps in March; -39 bps for Q1)
• 30-yr: -6 bps to 3.69% (+5 bps for the week; -24 bps in March; -29 bps for Q1)

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

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates dropped 15 bps to a seven-week low 6.24% (up 157bps y-o-y).
• Fifteen-year rates declined seven bps to 5.55% (up 172bps).
• Five-year hybrid ARM rates added a basis point to 5.56% (up 206bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up six bps to 6.94% (up 203bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index rallied 2.4% (down 6.5% y-t-d).
• Spot Gold slipped 0.5% to $1,969 (up 8.0%).
• Silver jumped 3.8% to $24.10 (up 0.6%).
• WTI crude recovered $6.41, or 9.3%, to $75.67 (down 6%).
• Gasoline rallied 4.3% (up 10%),
• Natural Gas was unchanged at $2.22 (down 51%).
• Copper added 0.5% (up 8%).
• Wheat increased 0.5% (down 13%),
• Corn jumped 2.7% (down 3%).
• Bitcoin increased $1,170, or 4.3%, this week to $28,590 (up 73%).

Key Long Term Commodity Charts

Copper

Gold

Energy

WTI Oil

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 declined 0.6% to 102.51 (down 1.0% y-t-d). 2022 gains were 8.2%
• For the week on the upside, the Brazilian real increased 3.6%, the Mexican peso 2.2%, the South African rand 2.0%, the Canadian dollar 1.7%, the New Zealand dollar 0.9%, the British pound 0.9%, the euro 0.7%, the Australian dollar 0.6%, the Swiss franc 0.5%, the Swedish krona 0.2%, the Singapore dollar 0.1%, and the Norwegian krone 0.1%
• On the downside, the Japanese yen declined 1.6% and the South Korean won fell 0.6%. The Chinese (onshore) renminbi declined 0.09% versus the dollar (up 0.36%).

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 be plaything of levered speculators, this week we saw the markets turn against those short. An incredibly intense squeeze engulfed the Treasury market which flowed through to crypto. Intense squeeze dynamics also spurred a huge rally in crypto, with bitcoin surging a crazy 34%.

Where did this come from? Forced coverage from yield curve punts blowing up. Yen shorts and levered “carry trades” were at risk. JGB and European yields sank. Corporate spreads were blowing out, inflicting losses on levered corporate bond portfolios. Energy prices tanked. The favored (so called safe) financial stocks were collapsing, while the heavily shorted technology stocks rallied. For the week, the KBW Bank Index sank 14.6%, while the Nasdaq100 (NDX) jumped 5.8%.

It had been a 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

So that went quick….. its all about the crisis that just kept holding off until it didn’t

“Just hours after Wall Street opened for trading on Friday morning, US regulators had seized control of Silicon Valley Bank, which had imploded under the strain of depositors pulling out their money en masse. What at first seemed like the failure of a one-of-its-kind lender with deep ties to the technology industry quickly appeared as though it might spiral out of control. Within 48 hours, regulators were preparing a package of emergency measures to quell panic among depositors and prevent contagion in the rest of the banking system. For some working on the effort, it evoked memories of the response to the coronavirus pandemic in 2020 and the great financial crisis of 2008. By Sunday evening, the US government announced it would guarantee all deposits held at SVB and crypto lender Signature Bank, which was also shut down by regulators at the weekend. The Federal Reserve, meanwhile, launched a lending facility that would be available to lots of other banks in order to ensure depositors’ demands could be met.”

March 13 – Financial Times (Colby Smith, James Politi, Ortenca Aliaj and James Fontanella-Khan)

“The Federal Reserve on Sunday unveiled a new program to ensure banks can meet the needs of all their depositors amid escalating chances of bank runs following the abrupt collapse of two major banks in the space of 72 hours. The Bank Term Funding Program (BTFP) will offer loans with maturities of up to a year to banks, savings associations, credit unions and other eligible depository institutions. Here are some key elements of the Fed’s program: A key element of the program is acceptable loan collateral – including U.S. Treasuries and mortgage-backed securities among others – will be valued at ‘par’… Loans of up to a year in length will be available under the new facility… Interest rates will be the one-year overnight index swap (OIS) rate plus 10 bps and will be fixed for the term of the advance on the day the advance is made… The loan commitments made by the Fed’s 12 regional banks will be backstopped with $25 billion from the U.S. Treasury’s Exchange Stabilization Fund.”

March 13 – Reuters (Dan Burns)

“The biggest banks in the U.S. swooped in to rescue First Republic Bank with a flood of cash totaling $30 billion, in an effort to stop a spreading panic following a pair of recent bank failures. JPMorgan…, Citigroup Inc., Bank of America Corp. and Wells Fargo are each making a $5 billion uninsured deposit into First Republic, the banks said… Morgan Stanley and Goldman Sachs… are kicking in $2.5 billion apiece, while five other banks are contributing $1 billion each. The bank’s executives came together in recent days to formulate the plan, discussing it with Treasury Secretary Janet Yellen and other officials and regulators in Washington, D.C…”

March 16 – Wall Street Journal (David Benoit, Dana Cimilluca, Ben Eisen, Rachel Louise Ensign and AnnaMaria Andriotis):

“Credit Suisse shares rebounded sharply on Thursday after the lender revealed plans to borrow up to SFr50bn ($54bn) from the Swiss central bank and buy back about SFr3bn of its debt in an attempt to boost liquidity and calm investors. The Swiss National Bank had said on Wednesday it was willing to provide a liquidity backstop following a plunge of as much as 30% in the troubled lender’s stock… In a statement on Thursday, Credit Suisse said it had taken the decision ‘to pre-emptively strengthen its liquidity’ by borrowing the funds from the Swiss central bank under a loan facility and short-term liquidity facility.”

March 16 – Financial Times (Joshua Frankli, Owen Walker and Laura Noonan)

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

• US nonfarm could get a Spring Break bounce
• Ditto for Canadian jobs
• Eurozone inflation & holiday plans
• US services PMI may have jumped
• BoC’s inflation expectations pre-date turmoil
• RBA may pause
• RBNZ could deliver the final hike
• RBI expected to raise its policy rate
• Most expect BCCh to hold
• Inflation: Latam, Asia-Pacific
• Other global macro

Central bank Watch

We have key monetary policy meetings from

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? In this environment we get pivots daily. 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.)

Tuesday, April 4, 2023

• 00:30 RBA Interest Rate Decision and Statement
• 16:00 Chile Interest Rate Decision
• 22:00 RBNZ Interest Rate Decision & Statement

Thursday, April 6, 2023

• 00:30 RBI Interest Rate Decision

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

Economic Data Watch

US Data Focus

• Monday: March IHS Markit Manufacturing PMI (prior 49.3) at 9:45 ET; February Construction Spending (consensus 0.0%; prior -0.1%) and March ISM Manufacturing Index (consensus 47.5%; prior 47.7%) at 10:00 ET
• Tuesday: February Factory Orders (consensus -0.5%; prior -1.6%) and February job openings (prior 10.824 mln) at 10:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior 2.9%) at 7:00 ET; March ADP Employment Change (consensus 205,000; prior 242,000) at 8:15 ET; February Trade Balance (consensus -$69.0 bln; prior -$68.3 bln) at 8:30 ET; final March IHS Markit Services PMI (prior 53.8) at 9:45 ET; March ISM Non-Manufacturing Index (prior 54.5%; prior 55.1%) at 10:00 ET; and weekly crude oil inventories (prior -7.49 mln) at 10:30 ET
• Thursday: Weekly Initial Claims (consensus 203,000; prior 198,000) and Continuing Claims (prior 1.689 mln) at 8:30 ET; and weekly natural gas inventories (prior -47 bcf)
• Friday: March Nonfarm Payrolls (consensus 239,000; prior 311,000), Nonfarm Private Payrolls (consensus 265,000), Unemployment Rate (consensus 3.6%; prior 3.6%), Average Hourly Earnings (consensus 0.3%; prior 0.2%), and Average Workweek (consensus 34.5; prior 34.5) at 8:30 ET; and February Consumer Credit (consensus $18.0 bln) at 15:00 ET

Global Data Focus

• OPEC: OPEC and non-OPEC Ministerial Meeting
• Canada: Business Outlook Survey and Canadian Survey of Consumer Expectations, Building Permits, Labour Force Survey, IVEY PMI
• Brazil:
• Mexico:
• Europe: S&P Global Manufacturing PMI – final (Italy, Spain, France, Germany, Eurozone), Switzerland: CPI (March, EU: House Price Index, producer prices, building permits, German trade balance, EU Balance of payments, industrial orders (Germany), manufacturing output (Germany), Services PMI – final (Italy, France, Spain, Germany, Eurozone), EU Retail trade, S&P Global Eurozone Construction PMI (Italy, France, Germany, Eurozone)
• UK: S&P Global Manufacturing PMI – final, BOE member Silvana Tenreyro: Keynote speech at The Scottish Economic Society Economic Policy, Imports and exports of services by country, S&P Global Services PMI – final, Halifax house prices, S&P Global Construction PMI,
• China: Caixin manufacturing PMI Caixin services PMI
• Japan: Tankan quarterly economics survey, Jibun Bank Japan Manufacturing PMI, Monetary base y/y, Jibun Bank Japan Services PMI, Household spending, Foreign investment
• India:
• South Korea:
• Australia: Judo Bank manufacturing PMI (final), building approvals (Feb), Leading indicators (Feb), retail trade (final), RBA cash rate decision, RBA Governor Philip Lowe speaks at the National Press Club, AIG manufacturing index, Judo Bank services and composite PMI (final), RBA Chart Pack: Graphs on the Australian economy and financial markets, RBA Financial Stability Review, Trade balance (Feb), weekly payroll data
• New Zealand: RBNZ shadow board meet, NZIER Quarterly Survey of Business Opinions, RBNZ Monetary Policy Review and OCR

US Stocks Watch Earnings and Event Watch

Earnings Highlights This Week:

• Monday includes Science Applications (SAIC) and Digital Ally (DGLY).
• Tuesday includes CMSC Industrial (MSM), Dlocal Limited (DLO), Smart Global (SGH), and Lindsay (LNN).
• Wednesday includes Conagra Brands (CAG), Simply Good Foods (SMPL), and Seadrill Limited (SDRL).
• Thursday includes Constellation Brands (STZ), Lamb Weston (LW), and Levi Strauss (LEVI).
• Friday includes U.S. stock markets will be closed for observance of the Good Friday holiday.

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 World Vaccine Congress will feature appearances by a large number of healthcare companies, including Vaxart (VXRT), Tonix Pharmaceuticals (TNXP), Vaxxinity (VAXX), Sanofi (SNY), Johnson & Johnson (JNJ), Moderna (MRNA), Zoetis (ZTS), and Oragenics (OGEN).

Monday

• Tesla (TSLA) (Reported already – see above) and Rivian Automotive (RIVN) will report Q1 deliveries. General Motors (GM) and Ford (F) will issue Q1 U.S. sales reports, Chinese automakers Nio (NIO), Li Auto (LI), and XPeng (XPEV) will post monthly delivery reports.
• Monthly updates on Macau gaming revenue, discount broker DARTs, Nielsen sales, Class 8 truck sales, and National Instant Criminal Background Check System firearm checks.

Tuesday

• Academy Sports and Outdoors (ASO) will host its first-ever Analyst + Investor Event.
• Donaldson Company (DCI) will host an Investor Day in Bloomington, Minnesota.
• Domo (DOMO) will hold an investor and financial analyst session.
• 10:00 a.m. Progress (PRGS) will host a virtual Investor Day
• 2:00 p.m. Yext (YEXT) will host an Investor Day event.

Wednesday

• Waste Management (WM) will host a virtual sustainability investor day
• Walmart (WMT) will host its 2023 Investment Community Meeting with presentations being webcast
• Costco (COST) will report on monthly sales

Thursday

• Absci Corporation (ABSI), Nautilus Biotechnology (NAUT), and Quantum-Si incorporated (QSI) will appear at the B. Riley Securities’ Life Sciences Tools Conference.

Friday

• The U.S. stock markets will be closed for observance of the Good Friday holiday.
• The Rogers Communications (RCI)-Shaw Communications merger is expected to close.
• The U.S. jobs report for March will be released despite the stock market being closed.
• The Manheim Used Vehicle Value Index will be released.

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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