Nov 19 -18, 2025

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

Equities continued their drive higher as short squeeze dynamics playing their role. The Goldman Sachs most short index surged 7.2% in Tuesday trading, the largest one-day gain in a year (11/10/22). Indicative of squeeze dynamics, the year’s underperformers ran hard.

A late reaction to the carry trade dynamics.

• KBW Bank Index jumped 7.5%, the biggest gain in almost six months (5/17).
• Bloomberg REIT Index rose 5.4%, the strongest move in a year.
• The small cap Russell 2000 rallied 5.4%, the largest one-day gain in over a year (11/10/22).
• The “average stock” Value Line Arithmetic Index rose 4.1% Tuesday, the strongest in a year.
• The Nasdaq100 (NDX) ended the week with a y-t-d return of 45.9%, the NDX is now only 4.4% from all-time highs

Mega cap stocks contributed to index performance, but the broader market experienced more robust buying interest.

• The market-cap weighted S&P 500 rose 2.2% this week
• Invesco S&P 500 Equal Weight ETF (RSP) jumped 3.4%.
• Vanguard Mega Cap Growth ETF (MGK) logged a 2.1% gain.

The S&P 500, which flirted with 4,100 in late October, closed above the 4,500 level on Friday returning 19.3% YTD with the S&P500 less than 6% away from all-time highs.

High yield bonds (HYG ETF) have returned 6.74% y-t-d, with investment-grade bonds returning 2.46% (LQD)

Not just in the US, we saw a highly synchronized market shift, again as one would expect with the carry trade dynamic. Interesting times there in the KnovaWave major long term dollar yen trade testing the key 38% from the moves to bring the USD down that led to the Plaza Agreement of September 1985. This has indeed been a massive correction and we sit at important levels as the chart below shows.

Major equities indices globally this week were robust.

• Rising 4.5% in Germany, 4.2% in Spain, 3.5% in Italy, 3.5% in Brazil, 3.1% in Japan, and 2.8% in Mexico.
• Ten-year yields dropped 23 bps in the UK and 22 bps in Italy.
• EM (local currency) yields dropped 36 bps in Chile, 34 bps in South Africa, 30 bps in Colombia, 28 bps in Brazil, and 24 bps in Hungary.
• EM currencies were squeezed higher, as dollar bulls took profits with lower US yields.
• In China, Asia, Europe and the U.S., bank CDS prices have moved sharply lower.

Rates and bonds matter.

The belly of this week’s gains followed the October Consumer Price Index on Tuesday, which corroborated the notion that the Fed is finished raising rates. Headline CPI was flat for the month, versus expectations of 0.1% (“core” 0.2% vs. 0.3%). Ten-year Treasury yields sank 19 bps on CPI Tuesday, with yields at that point down 45 bps in 11 sessions (55bps from the 10/19 high). MBS yields dropped 27 bps, with a 64 bps 11-session collapse (77bps from 10/19). The 2-yr note yield fell 15 basis points this week to 4.90%.

The market immediately priced zero chance of an additional Fed rate hike (from Monday’s 28%). Treasury yields took a sharp turn lower in response to the data and the idea that the Fed is done raising rates. The fed funds futures market pricing out the probability of any additional rate hikes by the Fed, and now sees a 61.7% probability of the first rate cut in May 2024, according to the CME FedWatch Tool.

That report, along with the October Producer Price Index, the October Retail Sales, the weekly initial jobless claims, and the October Housing Starts data, all appeared consistent with a soft-landing scenario for the economy. The markets also found relief after Congress passed a continuing resolution to avoid a government shutdown. Geopolitically President Biden and President Xi agreed to resume high-level, direct military talks, and bilateral cooperation in combating global illicit drug manufacturing and trafficking.

In earnings Walmart (WMT) was lower and Target (TGT) sharply higher, both mentioned a more cautious-minded consumer. Gap (GPS), Ross Stores (ROST), and Macy’s (M) were also standout retail winners after reporting earnings. Leading chip equipment maker Applied Materials (AMAT) was down about 8% after reporting earnings and a Reuters report that it is the subject of a DOJ criminal probe over shipments to China’s top chipmaker, SMIC.

The Xi Jinping charm offensive gave us some classic one liners;

• “Planet Earth is big enough for the two countries to succeed.”
• “China is pursuing high-quality development, and the United States is revitalizing its economy. There is plenty of room for our cooperation.”

All interesting in the midst of Xi’s “no limits partnership” pact with Putin.

Looking ahead, markets will be closed on Thursday and close at 1:00 p.m. ET on Friday in observance of Thanksgiving, analysts to that end will be watching the great annual American shopping tradition with Thanksgiving on Thursday. Markets will be sales tracking toward the end of the week and into the following week both at the individual company level and in broader terms while assessing the durability of consumer spending. So far, 2023 sales revenue is tracking closely to 2022 on a year-to-date basis.

Recall in the past weeks we delved deeper into consumer finances. This bears repeating given recent data and market action. “What we see is they indicate an ability to pay. We are at a 22-year low in the debt-to-income ratio, record low debt payments as a share of incomes, locked-in low 30-year mortgage rates (something we harp on about, why would you move or refinance if you don’t have to?) and still high cash balances even if saving rates have normalized. Many habits changed after the pandemic and the uncertainty perpetuated by politics of hate has people more reliant on their own development.”

What Chair Powell and others have noticed is higher prices are not holding back consumption given that consumer spending was a sizeable driver of the 5% Q3 GDP growth rate. Consumers are paying higher prices, just being more selective. This was borne out in this muttering post FOMC. What many pundits have failed to grasp is massive U.S. government debt growth underpins incomes and corporate earnings, bolstering system-wide Credit. Further to those years of government sector liability expansion through the Treasury and Federal Reserve have created unprecedented gains in household and corporate sectors cash and bond holdings (along with inflated equities and real estate. The pandemic also changed the habits of many, locked in lower mortgage rates for example, lowered surplus spending and invested in dividend paying assets.

Global central banks are facing pressure after a protracted period of policy tightening and amid uncertainty over their next steps. Oil continued its rise further hampers their future path. More geopolitical influences, Saudi Arabia and Russia are planning to extend their voluntary oil production cuts of 1 million barrels per day and 300,000 barrels per day, respectively, in 2024.

Global bond market liquidity appears increasingly under the grips of deleveraging.

Some of This Week’s Main Stories We Covered

• Into the Vortex – US Natural Gas Storage Builds More Than Expected +60Bcf Last Week
• NAHB Housing Market Index Slumps Further in November Back to Lowest Since December 2022
• Around The Barrel – Crude Oil Futures Pressured by More Builds in US Crude Stocks
• US Producer Prices Deflate in October, Biggest Drop Since April 2020
• Consumer Inflation Lower Than Expectations in October, but Shelter up 0.3% Underscores Cost of Living Crisis
• OPEC Monthly Oil Market Report November 2023

Risks Being Ignored or Opportunity Being Repriced?

With the swings of psychology and dominance of unemotional algorithm models dominating markets more than ever it is critical to stay unemotional and devoid of bias where best you can. For the next six months, we stick to our technical outlook via KnovaWave, watch the curve and EURUSD and USDJPY.

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, NVDA and TSLA continue to give us give good insights into crowd behavior. Note the divergence and convergence with it and other instruments. Be proactive.

These markets are constantly evolving, the important things is why we are here and it isn’t a surprise.

Where is the fear?

We got some movement these past weeks out of the tight range in markets but as we can see from the VIX chart it quickly reverted back after the initial breaks. We are aware of built-up energy ahead of key central bank decisions and potential fundamentals to set-up rate hikes or not. There is discontent globally with central banks and politician.

With optionality dominating markets along with quant funds, algorithms, systematic trading and automated trading volatility has collapsed as has been focused on at KnovaWave. Driving quant funds is a self-reinforcing dynamic, when market volatility drops, they add which causes those funds that have paid higher volatility to cover and hence we get the churn. At the end of March, quant-focused hedge funds held about $1.13 trillion in assets, according to research firm HFR, hovering just below last year’s record high. That represents about 29% of all hedge-fund assets.

To break out of this requires a continuing break in a major down, or up move to ignite delta chasing or covering.

So-called vol-control and risk-parity funds, which tend to automatically load up on riskier assets during calmer periods, ramped up equity exposure, according to the Deutsche Bank data, available through May 18. Other quants, such as trend-following CTAs, or commodity trading advisers, have similarly piled in.

The dominance of quants has helped explain previous periods of calm trading, including long stretches in 2017 and 2018. Those periods were punctured by rapid selloffs, including the 2018 selloff dubbed “Volmageddon” when the dynamics exerting calm on the market suddenly went away. Some warn a repeat could be ahead.

Caitlin McCabe WSJ

Cboe Daily Market Statistics

Talking about manic behavior it is not hard to argue the punter is overwhelming and influencing markets like no other time, well until the next time. 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.

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.

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.

Worth repeating again in the low VIX environment.

Well, 2008 redux didn’t happen in the last few months, so the Fed moves have worked for now, much to Xi and Putin’s chagrin.

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. Saying that we got quite the distorted job picture per our main job stories which we reprise below. Are we simply taking some air out or is the beginning of the great meltdown?

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 a month ago; “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.”

What non-traders are failing to grasp is this market with so many variables is not 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.

Week Ahead: CPI, Retail Sales and Earnings

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.

Inflation updates will be a significant focus across a number of markets with updates to the following readings.

More Macro and Micro data points, some highlights include.

In a holiday shortened week for the US with Thanksgiving on Thursday global markets will primarily focus upon how the US holiday shopping season kicks off with Black Friday and how the US consumer is behaving as an important driver of world growth. We get FOMC minutes, a round of global purchasing managers’ indices, potential spillover effects of Argentina’s election upon neighboring markets, several regional central bank decisions on deck.

Earnings season is in full flight, The retailing sector reports includes financial figures from Urban Outfitters (URBN), Nordstrom (JWN), Abercrombie & Fitch (ANF), American Eagle Outfitters (AEO), Burlington Stores (BURL), Dollar Tree (DLTR), Best Buy (BBY), Lowe’s (LOW), Kohl’s (KSS) and Dick’s Sporting Goods (DKS). We also have tech giant Nvidia (NVDA), Zoom Video (ZM), HP Inc. (HPQ) and Baidu (BIDU).

How is the Consumer Hanging?

The US relies on services for up to 90% of GDP. it relies on the consumer who is being battered by the California and New York regional bank debacle. On top of that is cumbersome if not ignorant politicians, with no clear regard for main street the evidence suggests in their behavior. Key retailers all gave a cautionary note with tightened household budgets continue to hit demand for big-ticket items and curb discretionary spending.

We get more data to help us gage the consumer: Weekly MBA Mortgage, Weekly Initial and Continuing jobless claims and housing and retail sales and consumer sentiment reports.

Earnings season gives us an insight into how the consumer is coping.

Click here to see the Full Week Ahead List Below

Some things never change, when you think Greed is Good

So how Screwed are We?

• Fed Z.1 for June with the release of Q2 Credit and flow data shows seasonally adjusted and annualized Credit growth of about $4.5 TN. One-year Treasury debt expansion of about $1.7 TN. Non-Financial Debt-to-GDP exceeding previous cycle peak levels. The ratio of Total Debt Securities-to-GDP is significantly higher than prior peaks.
• Household holdings of Financial Assets above previous peak levels. Household Net Worth inflating $5.5 TN in three months. Household Equities holdings as a percentage of GDP higher than previous cycle peaks.
• The value of Household Real Estate holdings jumped $2.480 TN to a record $48.870 TN, lagging only Q1 2022’s $3.561 TN increase. It’s worth noting that the largest quarterly Real Estate gain during the mortgage finance Bubble period was Q3 2005’s $864 billion. Over the past 15 quarters, Household Real Estate holdings inflated $15.809 TN, or 47.8%.
• The banking system is on much greater Credit risk than mortgage risks were offloaded during the 2008 mortgage finance Bubble. At $25.6 TN, Banking System Assets ended 2022 almost double the 2007 level.
• In nominal dollars, system Credit expanded $795 billion during Q2 to a record $96.327 TN, with NFD expanding $1.111 TN (to $71.248 TN), while financial borrowings contracted $329 billion (to $20.350 TN) (Foreign borrowings were little changed).
• System Credit posted one-year growth of $4.193 TN, or 4.6%. Over the 14 quarters since the onset of the pandemic, System Credit has surged $21.457 TN, or 28.7%. NFD has inflated $16.722 TN, or 30.7%, since the pandemic – and has doubled (plus $35.675 TN) since 2008.
• If it doesn’t burst well, we circle back to the popular view that Financial Sector debt included in analysis would be “double counting” borrowings already included elsewhere (i.e. mortgage and business). The swift end to backs, the shocking management out there and geopolitical cold war out there has us ready to expect the unexpected and aware of moves to mitigate by central banks as we saw a few weeks ago.
• GSE Assets declined $131 billion during Q2 to $9.409 TN. FHLB Loans fell $187 billion during Q2 to $855 billion. Still, FHLB Loans posted one-year growth of $335 billion, or 64.3%.
• Over six quarters, FHLB Loans expanded $520 billion, or 155%. GSE Assets expanded $1.117 TN, or 13.5%, over six quarters, and $2.279 TN, or 32.0%, over 14 quarters.
• FHLB plays a pivotal role, last year prolonging the lending boom and stabilizing bank liquidity.

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.

The Fed’s aggressive tightening cycle has had little effect on loose financial conditions.

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.

Growth in China’s metric of system Credit growth, Aggregate Financing, dropped to $175 billion, down significantly from March’s $773 billion and only 61% of estimates. It was also the weakest monthly growth since last October.

November 17 – Bloomberg (Evelyn Yu): “China’s regulators told the country’s biggest banks and asset managers to meet all ‘reasonable’ funding needs from property firms, in the government’s latest bid to arrest the protracted slump in the real estate market. In a meeting on Friday, the People’s Bank of China, the National Administration of Financial Regulation and the China Securities Regulatory Commission told financial institutions to support property developers in receiving loans, issuing bonds and ensuring reasonable equity financing from capital markets.”

November 17 – Bloomberg: “China told a handful of nationwide lenders to cap interest rates on interbank funding, people familiar… said, a move that dovetailed with a sizable cash injection intended to calm the market after last month’s unexpected liquidity crunch. At least two national banks were told last week by regulators to offer

November 17 – Bloomberg: “There’s a 1.5 trillion yuan ($207bn) question weighing on Chinese bond traders’ minds right now: How will Beijing sell that much debt with just six weeks left in the year? The answer is the People’s Bank of China, the world’s only major central bank on a policy easing path, and a slowing economy that sustains voracious appetite for risk-free assets. China has issued 9.6 trillion yuan of government bonds so far in 2023, against an estimated annual target of 11.1 trillion yuan…. This year’s issuance plan, which would be a record…”

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

• Consumer Inflation Rises +0.4% in September with Hot Core Services Sector
• US Producer Prices Higher in September, Pass Through Effects to Consumer Worry
• Core PCE inflation Rises to +4.2% from 4.1% in July Keeping Fed Awake

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.

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

This move has crept up on many, to the extent the S&P 500’s is over the traditional measurement of a new bull market typically measured as a 20% gain from a significant low. The index above 4292.438 got that 20% move. That ended the longest bear market since 1948. The DAX and CAC40 have seen all-time highs recently also.

Our weekly reminder for risk. The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off this continuous dip feed? At this point the Central Banks have kicked that answer down the road.

Part A – Stock Markets

Weekly Highlights – USA

Indices

• S&P500 rose 2.2% (up 17.6% y-t-d),
• Dow gained 1.9% (up 5.4%).
• S&P 400 Midcaps rose 4.0% (up 4.4%),
• Small cap Russell 2000 surged 5.4% (up 2.1%).
• Nasdaq100 advanced 2.0% (up 44.8%).

YTD Report Card for the S&P Sectors

Sectors

The rate-sensitive S&P 500 sectors registered some of the largest gains, but all 11 sectors traded higher this week. The real estate (+4.5%), financials (+3.3%), and utilities (+3.0%) sectors were standouts in that respect. The consumer staples (+0.6%) and energy (+0.9%) sectors were the only ones to gain less than 1.0%.

A breakdown of the performance of the S&P 500 sectors this week:

• Utilities rallied 2.8% (down 14.2%).
• Banks surged 6.9% (down 17.3%),
• Transports jumped 3.5% (up 11.5%).
• Broker/Dealers added 2.1% (up 9.2%).
• Semiconductors jumped 4.4% (up 48.0%).
• Biotechs recovered 3.2% (down 9.4%).
• With bullion up $41, the HUI gold equities index rallied 4.3% (down 4.8%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

Week/YTD

• U.K.’s FTSE equities index rallied 2.0% (up 0.7% y-t-d).
• France’s CAC40 rose 2.7% (up 11.7%).
• German DAX equities index surged 4.5% (up 14.3%).
• Spain’s IBEX 35 equities index jumped 4.2% (up 18.6%).
• Italy’s FTSE MIB index rose 3.5% (up 24.4%).

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

Week/YTD

• Japan’s Nikkei Equities Index jumped 3.1% (up 28.7% y-t-d).
• South Korea’s Kospi index rose 2.5% (up 10.4%).
• India’s Sensex equities index gained 1.4% (up 8.1%).
• China’s Shanghai Exchange Index increased 0.5% (down 1.1%).

Highlights – Australian Stocks

• Australia’s S&P/ASX 200: -0.1% on Friday to 7049.4 (+1.00% for the week)
• Mining led gains, tracking Dalian iron ore futures fifth consecutive weekly gain.
• Rio Tinto rose 0.4% to $125.62, BHP gained 0.1% to $46.61 and Fortescue up 0.1% to $25.22.
• Uranium play NexGen Energy up 4.8% to $9.96 after fund manager Jeremy Bond at Terra Capital made it its top pick at the annual Sohn Hearts & Minds conference in Sydney. He said NexGen was poised to become one of the world’s “top 10” mining stocks.

Highlights – Emerging Markets Stocks

Week/YTD 

• Brazil’s Bovespa index jumped 3.5% (up 13.7%),
• Mexico’s Bolsa index gained 2.8% (up 8.7%).
• Turkey’s Borsa Istanbul National 100 index gained 1.1% (up 42.6%).
• Russia’s MICEX equities index declined 1.1% (up 48.8%).

Technical Analysis

S&P 500

Daily: The daily SPX closed above the previous roof (Key Spits) which were also at 7/8 and clustered around the 50% & August breakdown. With energy and with a very low VIX it has mirrored the get cloud to get through overhead. The bullish take is that we completed the correction off last year’s high at the low and this is a larger 1-2 to go higher with support at the previous resistance and cloud. The bearish outlook is this move becomes a rising wedge and we are working out the uber bears before new lows.

When we talk about crowd psychology this is a great example. The market after spitting the 4100 and 38.2% retracement broke to capture the Tenkan. 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.

It is worth looking back at the completive highs (all-time highs) and how we played out so far. 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. 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: The SPX has a clear channel off the lows on the weekly timeframe off the sphere of influence and has ground higher since it closed over the cloud above the Tenkan. Key support is the Tenkan, channel and +1/8. Power initially came from launching out of the sphere of influence as one would expect in a 3 or C. We had the Kijun spit also. Above is the channel and +3/8.

In the bigger picture 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.

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.

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.

Semiconductors

NVidia $NVDA

NVidia surged 179.3% in H1 2023. It has been relentless since earnings and is the focus of the AI craze. With all manic moves beware of the pullbacks and topping potential. That said the extensions have played out and so far to +2/8 on the weekly. This was a classic set up as we can see. It has a textbook of KnovaWave methodology and rules from the 61.8% break and reverse through the sphere. NVDA accelerated after it broke the double top spheres at 5/8 giving is a near 4/8 move. A reminder that the dominance was in.

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

Apple has consistently driven upwards after it held the sphere of influence after retesting 6/8 & break up. Kijun and Tenkan crossing and then the 50wma with the cloud twist have been magnetic. 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 last year. We regathered that and more and broke the weekly bull flag higher. 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 +2/8 is now key. Remember the impact $AAPL has, at least short term on all the major indices.

MicroSoft MSFT

Microsoft hit a new all-time high testing the outer trend line from the previous spike. Key now is the weekly trend it has been in all year.

ExxonMobil XOM

XOM has completed 5 waves from -3/8 to +3/8 on the weekly. with a double top. Alternatives 5 complete of degree. We are in a 1-2 (A-B depending on degree. Support is the cloud which has held 3 times since the high and the 50WMA resistance the tenkan and Kijun. Pattern wise we are in the bull flag until proven otherwise.

Part B: Bond Markets

Bond Watch

Treasuries

U.S. Treasuries U.S. Treasuries finished the week mixed with the long bond rebounding from Thursday’s slide after its woeful auction Thursday. The offering tailed by a record 5.3 bps with the lowest bid-to-cover ratio in nearly two years and lowest indirect takedown in two years. The long bond yield settled within a basis point of its 50-day moving average (4.728%). Shorter tenors extended this week’s show of relative weakness. Reports about a ransomware attack that crippled the Industrial and Commercial Bank of China’s access to the U.S. Treasury market on Thursday was just another worry for investors. This week’s underperformance in shorter tenors compressed the 2s10s spread by 12 bps to -42 bps. Crude oil lost another $3.57, or 4.4% this week, while the U.S. Dollar Index gained 0.8% this week.

Treasury Yield Watch

Friday/Week

• 2-yr: +4 bps to 5.05% (+19 bps for the week)
• 3-yr: +5 bps to 4.82% (+21 bps for the week)
• 5-yr: +3 bps to 4.67% (+18 bps for the week)
• 10-yr: UNCH at 4.63% (+7 bps for the week)
• 30-yr: -4 bps to 4.73% (+2 bps for the week)

Higher for longer is a serious threat. (Reprise)

Surging market yields are a serious issue for a banking system loaded with long duration securities portfolios. This may well be a push over the cliff for troubled commercial real estate (CRE). Leveraged lending and leveraged finance gets more costly. Simply there are trillions of floating rate loans among individuals, speculators, businesses, and nations.

Remember this? There is a reason why we focused on it recurring, you didn’t need Fitch to remind you:)

• The iShares Investment Grade Corporate ETF (LQD) declined 1.01% Thursday, the largest loss since May 1st. The 2.40% loss for the week was the largest since February.
• The iShares High Yield ETF (HYG) declined 0.73% Thursday, also the largest decline since May 1st. The 1.63% loss for the week, the worst weekly performance since early-March.
• Friday Bloomberg headlines: “HYG ETF Daily Outflows $1.13 Bln, Biggest Move Since March 28th.” and “Two Giant Credit ETFs Hit by $2 Billion Exit on Hawkish Fed Bets.”

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

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates sank 37 bps to 7.35% (up 27bps y-o-y).
• Fifteen-year rates dropped 28 bps to 6.79% (up 41bps).
• Five-year hybrid ARM rates fell 18 bps to 7.03% (up 97bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down three bps to 7.89% (up 105bps).

Global Debt Monitor

Highlights Unprecedented and Ongoing Surge in Global Debt

Last week, the Institute of International Finance (IIF) released their Q1 2023 Global Debt Monitor (GDM), highlighting the unprecedented – and ongoing – surge in global debt.

GDM Highlights:

• “The global debt stock grew by $8.3 trillion to a near-record $305 trillion in Q123; the combination of high debt levels and rising interest rates has pushed up debt service costs, prompting concerns about leverage in the financial system.”
• “Total debt of emerging markets hit a fresh record high of over $100 trillion (or 250% of GDP) – up from $75 trillion in 2019.”
• “At close to $305 trillion, global debt is now $45 trillion higher than its pre-pandemic level and is expected to continue increasing rapidly.”
• “Rise of private debt markets: Non-bank financial institutions (NBFLs) continue to gain prominence in global credit intermediation. The so-called ‘shadow banks’ now account for more than 14% of financial markets, with the majority of growth stemming from a rapid expansion of U.S. investment and private debt markets.”
• “The Size of Private Debt Markets Surpassed $2.1 Trillion in 2022, Up From Less Than $0.1 Trillion in 2007.”

From the end of Q3 2019 through Q1 2023, Total Global Debt jumped $52.3 TN, or 20.7%, to $305 TN.

Over this period, “Mature” economy debt expanded 13.4%, while “Emerging” economy debt surged 38.9%. It’s worth nothing that in the “Emerging” category, “Household” debt surged 41.7%, “Non-Financial Corporate” 35.1%, and “Government” 55.7%. Since 2016, total global debt-to-GDP has surged from 210% to 360%. Global financial conditions remain loose. When they inevitably tighten, be prepared for serious dislocation.

Part C: Commodities

Highlights

Key Long Term Commodity Charts

Copper

Gold

China added to its gold reserves for an eighth consecutive month. People’s Bank of China holdings of bullion rose by 680,000 troy ounces last month, according to official data. That’s equivalent to 23 tons.

Energy

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

WTI Oil

Natural Gas

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 gained 0.8% to 105.86 (up 2.3% y-t-d). 2022 gains were 8.2%
• For the week on the upside, the South Korean won increased 0.4%.
• On the downside, the South African rand declined 2.5%, the Australian dollar 2.3%, the New Zealand dollar 1.8%, the Japanese yen 1.4%, the British pound 1.2%, the Canadian dollar 1.0%, the Mexican peso 1.0%, the Norwegian krone 0.6%, the Singapore dollar 0.5%, the Swiss franc 0.4%, the euro 0.4%, and the Brazilian real 0.1%. The Chinese (onshore) renminbi declined 0.14% versus the dollar (down 5.31%).

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. Where did this come from? Forced coverage from yield curve punts blowing up. Yen shorts and levered “carry trades” at risk.

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!

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

Earnings season kicks off with the major Banks each quarter:

Major US Banks for Q3, 2023

America’s big money center banks kicked off third second quarter earnings with a solid start with solid beats by JP Morgan Chase, BlackRock, Wells Fargo, and Citigroup.

Q323 Reports

• Morgan Stanley Stock Falls 8% to 52 Week Low After Key Earnings Metrics Miss
• Goldman Sachs Profits Continue Slide, Drop 33% to $2.06 billion on Consumer, Real Estate Woes
• Bank of America Earnings Boosted by Trading as Debt Securities Portfolio Losses at $131.6 bln from $105.8 Billion
• Citigroup Earnings Boosted by Investment Banking and Transaction Services Fees
• Wells Fargo Earnings with Improving Wealth Management and Higher Net Interest Income
• JPMorgan Profit Soars with Net Interest Income, Low Loan Losses Ahead of Expectations

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

• Global macro readings

Central Bank Watch

In the week ahead eyes will be on what looks like an overload of Fed. BoE and ECB Governor speeches again around key data releases. The only rate decision comes from the Philippines central bank, Bangko Sentral ng Pilipinas (BSP) who resumed monetary tightening following an emergency meeting three weeks ago lifting the key rate to 6.5%.

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.)

In the week ahead we get one central bank delivering policy decision.

Thursday, November 16, 2023

• 02:00 Philippines Interest Rate Decision

For our complete Central Bank Analysis and Outlook Visit our Central Bank Watch:

U.S. Economic Data Watch

US Data Focus

• Monday: October Leading Indicators (prior -0.7%) at 10:00 ET and $16 bln 20-yr Treasury bond auction results at 13:00 ET
• Tuesday: October Existing Home Sales (prior 3.96 mln) at 10:00 ET and November FOMC Minutes at 14:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior 2.8%) at 7:00 ET; weekly Initial Claims (prior 231,000), Continuing Claims (prior 1.865 mln), October Durable Orders (prior 4.7%), and Durable Orders ex-transportation (prior 0.5%) at 8:30 ET; final November University of Michigan Consumer Sentiment (prior 60.4) at 10:00 ET; weekly crude oil inventories (prior 3.60 mln) at 10:30 ET; and weekly natural gas inventories (prior +60 bcf) at 12:00 ET
• Thursday: Bond and equity markets closed for Thanksgiving
• Friday: Treasury Market to close early at 14:00 ET while NYSE will close at 13:00 ET

US Stocks Watch Earnings and Event Watch

Earnings Highlights This Week:

The Q3 2023 reporting season companies reporting this week.

• Monday includes Zoom Video Communications (ZM) Agilent (A), BellRing Brands (BRBR), Keysight (KEYS), Legend Biotech (LEGN), Keysight Technologies, Inc. (KEYS), Trip.com Group Limited (TCOM), Niu Technologies (NIU), Xiaomi Corporation (OTCPK:XIACF), BioLineRx Ltd. (BLRX), Remark Holdings, Inc. (MARK), FinVolution Group (FINV), Zepp Health Corporation (ZEPP), Polished.com (POL), Yalla Group Limited (YALA), Enanta Pharmaceuticals, Inc. (ENTA), Tucows (TCX), BM Technologies (BMTX)
• Tuesday includes Nvidia (NVDA) Abercrombie & Fitch (ANF), Analog Devices (ADI), Baidu (BIDU), Best Buy (BBY), Burlington Stores (BURL), Caleres (CAL), Dick’s Sporting Goods (DKS), Dycom (DY), Embecta Corp. (EMBC), Hibbett (HIBB), Jacobs Engineering (J), Kingsoft Cloud (KC), Kohl’s (KSS), Lowe’s (LOW), Medtronic (MDT), NJ Resources (NJR), Autodesk (ADSK), dLocal Limited (DLO), Guess? (GES), HP (HPQ), Jack In The Box (JACK), Nordstrom (JWN), Urban Outfitters (URBN).
• Wednesday includes Deere & Company (DE) Baozun Inc. (BZUN), EHang Holdings Limited (EH), DLocal Limited (DLO), Gaotu Techedu (GOTU), GDS Holdings Limited (GDS), LexinFintech Holdings (LX), Allot Ltd. (ALLT), Tremor International Ltd (TRMR)
• Thursday includes Thanksgiving Day
• Friday includes Black Friday. Stock trading will close at 1 p.m. ET.

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:

Monday

• Guangzhou Auto Show At least 20 concept cars are expected to be shown for the first time. Automakers BMW (OTCPK:BMWYY), Mercedes-Benz AG (OTCPK:MBGAF), Audi (OTCPK:VLKAF), Volvo (OTCPK:VLVLY), Toyota Motor (TM), Honda Motor (HMC), and Nissan Motor (OTCPK:NSANY) all plan to participate at the show, while local players NIO (NIO), Li Auto (LI), XPeng (XPEV), Leapmotor, and Neta will also be showing off models.
• European Automobile Manufacturers’ Association will release monthly data on auto registrations for October.
• WTI crude December futures will expire. Crude oil futures (CL1:COM) have seen extra volatility over the last year on contract expiration dates.
• 11:20 a.m. Etsy (ETSY) executives will participate in the Needham Consumer Tech Conference in New York City.

Tuesday

• Los Angeles Auto Show will feature displays and brand showcases from Acura (TM), Cadillac (GM), Chevrolet, Ford (F), Genesis, Honda (HMC), Hyundai (OTCPK:HYMTF), Jaguar, Kia, Land Rover, Lexus, Lincoln, Lucid (LCID), Mazda (OTCPK:MZDAY), Nissan, Polestar (PSNY), Porsche, Subaru, Toyota, Volkswagen (OTCPK:VLKAF) and Volvo. There will also be driving and demo opportunities with Cadillac, Chevrolet, Ford, Hyundai, Kia, Lucid, Nissan, Polestar, Porsche, Verge Motorcycles, Volkswagen, and Volvo.
• MDU Resources Group (MDU) investor day event at the New York Stock Exchange.

Wednesday

• Executives from Mercedes-Benz AG (OTCPK:MBGAF), Volkswagen (OTCPK:VLKAF), and Vitesco Technologies (OTCPK:VTSCY) will participate at the Bernstein Electric Revolution Conference.

Thursday

• The U.S. stock markets will be closed for the observance of the Thanksgiving holiday.

Friday

• Black Friday shopping will take place across the U.S. Retail giants Walmart (WMT), Target (TGT), Costco (COST), Best Buy (BBY), Dick’s Sporting Goods (DKS), and Macy’s (M) have been running deals in advance of the annual holiday shopping event. Analysts will be watching for the level and intensity of promotions in certain categories. Deloitte’s annual holiday retail forecast expects retail sales will increase 3.5% to 4.6% to $1.54T to $1.56T during the November to January timeframe.
• It is the last trading day before the OPEC meeting on November 25-26. Saudi Arabia and Russia said they will extend their voluntary production and export cuts into 2024.
• It is the last trading day before Broadcom (AVGO) and VMware (VMW) can walk away from their merger.
• 1:00 p.m. The U.S. stock markets will close early.

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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