January 9 – 15 2022
FEAR NOT Brave Investors
Where have we been and where are we going? Join our weekly market thread on Traders Community…
Rates, Banks and Herd Mentality
The Week That Was – What Lies Ahead?
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
A week of extreme reversals, we started with euphoria for a new year and ended with fear of market doom after Fed minutes that essentially reiterated the same thing weeks before. This had a similar reaction then but ignored as end of year bonuses squeezed to new all-time highs right on cue. Guess what, those massive open interest gamma/delta option lines at 4800 on the SPX and $180 on Apple held and paid the seller.
Despite the US adding the lowest number of new jobs in twelve months in December with just 199,000 the bond market spooked on average hourly earnings (M/M) rising 0.6%. This brought similar negative reactions to the stock markets. Oil began the day over $80 cut came down with risk assets and world Russia looking to move troops away from the Ukraine border. The S&P 500 again found technical support at the 50-day moving average of 4675.
A sell off isn’t out of order, the bull market recorded a third straight year of double-digit returns for the S&P 500 in 2021. It was the best December since 2010, and at 26 times earnings. the new year has started off the same for Energy with WTI over $80 and the best-performing group for 2021, energy was the star this week, up 48 per cent in 2021 and 10% this week, after being the worst performer in 2020. Devon Energy’s 179 % surge was the top stock in the S&P 500 this year and continued its run to new highs this week.
The 2-yr yield, which tracks expectations for the fed funds rate, closed the week at to 0.87%. The 10-year yield had the largest first day jump since 2009 and hit 1.80% Friday but ended the session at 1.77%, four basis points above Thursday’s settlement.
CME FedWatch Tool shows the probability for a rate hike in March increased to 75.9% Friday, versus 54.0% week ago and 35.8% one month ago.
All this with Covid running wild, with over 475,000 Covid deaths in 2021, higher than 2020. There were 850,000 new Covid cases reported Friday. Over 130,000 Covid patients are currently hospitalized, rising with a trajectory to soon surpass the previous pandemic peak. Deaths are nearing 2,000 a day, the one millionth U.S. Covid fatality is on track for 2022. While in COVID news research continued to suggest that the Omicron variant is milder than the Delta variant despite being more contagious people are restricted from work and travel.
Bond markets appear to be neglecting any risk and the Fed has to raise, a classic case of wall street entitled out of step you could safely argue. To underscore the disconnect we get the major banks kicking off earnings this week, including BlackRock (BLK), Citigroup (C), First Republic Bank (FRC), JPMorgan Chase (JPM), and Wells Fargo (WFC).
CPI is released this week and all eyes will be on whether Inflation is still running wild with the Fed’s transitory diagnosis blown apart. Core PCE, the Fed’s favored inflation gauge, rose over 6% for the first time since 1983. Surging food and energy prices are crushing main street. Monetary inflation is running wild. In 2021 Federal Reserve Credit expanded $1.391 TN or 19% to a record $8.742 TN. The Fed’s balance sheet inflated a mindboggling $5.015 TN, or 135%, in the 120 weeks since QE was restarted in September 2019. Federal Reserve Assets have now inflated 10 times since the mortgage finance Bubble collapse.
The record rises despite this month’s deluge of central bankers this week. We had the Fed, BoJ, and ECB all either speed up or forewarn tapering QE. We had the BoE, Mexico and the Norges Bank raise rates. Meanwhile the SNB kept everything as is. Over the past few weeks, we had New Zealand, Canada, Brazil and Australia.
We need to grasp all the risks to be wary off and received plenty of flak from it. We always talk here about expect the unexpected and now that is front and center, gage the market’s reaction, the market is always right and that’s why we focused on the crowd psychology aspect over the past few weeks.
We are in an openly hawkish phase. Recall last month the New York Fed president John Williams, who is a voting member continued with his hawkish tilt of late. He said we are seeing broader based increases in inflation. Fed Governor Bullard told US Core PCE Is “Quite High” and added that the Fed should take towards a more hawkish policy in the next couple of meetings. Then we had Fed Governor Christopher Waller say the rapid improving job market market and deteriorating inflation data have pushed him towards favoring a faster pace of tapering and more rapid removal of accommodation.
“We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise.”– MoneyNeverSleeps
Our weekly reminder for risk, timely given the V shape to ATH in just a week. The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off this continuous dip feed? At this point the Central Banks have kicked that answer down the road.
PART A – Stock Markets
Highlights – USA
- S&P index fell 19.0 points or -0.40% at 4677.04, closed lower for the fourth consecutive day and 3% from its all-time high at 4818.62. (Up 22.3% y-o-y)
- Dow industrial average felt -4.9 points or -0.01% at 36231.60, lower for the third consecutive day. All-time high at 36952.65. (Up 16.5%)
- NASDAQ index fell 144.95 points or -0.96% at 14935.91, closed lower for the fourth consecutive day, now down nearly 8% from its all-time high. NASDAQ had its worst week since February. (Up 19.0%)
- Russell 2000 fell -26.56 points or -1.2% at 2179.81, Russell 2000 closes 11% from its all-time high. (Up 4.2%)
- Russell 3000 Growth Index fell 1.1% while the Russell 3000 Value Index rose 0.2%.
- S&P 400 Midcaps lost 1.7% (up 15.6% yoy),
- Apple 172.17▲ 0.17 Friday
- The obsession of Apple hitting 3 trillion market at $182.86 was achieved (182.94 high)
- Transports declined 1.3% (up 26.4%)
- Banks surged 10.1% (up 36.9%),
- Broker/Dealers gained 2.6% (up 25.5%)
- Semiconductors dropped 3.8% (up 29.3%).
- Biotech’s fell 5.7% (down 12.7%).
- With bullion dropping $33, the HUI gold index sank 6.0% (down 19.5%).
Highlights – Europe Stocks
- U.K.’s FTSE equities index gained 1.4% (up 8.9% y-o-y).
- France’s CAC40 increased 0.9% (up 26.5%).
- German DAX equities index added 0.4% (up 13.5%).
- Spain’s IBEX 35 equities index increased 0.4% (up 4.1%).
- Italy’s FTSE MIB index rose 1.0% (up 21.2%).
Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September adding 10 new members to the German stock index from the MDAX which will be reduced from 60 to 50 members.
Highlights – Asia Stocks
- Japan’s Nikkei: UNCH (-1.1% for the week)
- Hong Kong’s Hang Seng: +1.8% (+0.4% for the week)
- China’s Shanghai Composite: -0.2% (-1.7% for the week)
- India’s Sensex: +0.2% (+2.6% for the week)
- South Korea’s Kospi: +1.2% (-0.8% for the week)
- Australia’s ASX All Ordinaries: +1.2% (-0.1% for the week).
Highlights – Australian Stocks
- Australia’s ASX All Ordinaries: +1.2% (-0.1% for the week).
- Tech went from being the best-performing sector in 2020 to the worst in 2021. Battery materials supplier Novonix was the top stock up 660 per cent for the year.
- The Australian ASX 200 Stock Market Closed Up 13% in 2021 With Lithium Plays Starring
Highlights – Emerging Markets Stocks
- EM equities were mixed
- Brazil’s Bovespa index dropped 2.0% (down 17.9%),
- Mexico’s Bolsa was little changed (up 13.9%).
- Turkey’s Borsa Istanbul National 100 index surged 9.5% (up 32.0%).
- Russia’s MICEX equities index dipped 0.4% (up 9.2%).
IPO and SPAC mania remains in full force.
Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.
Biggest SPX Stock Winners and Losers Last Week
Technical Analysis of key markets via KnovaWave
Daily: We saw a violent ABC for the 5 waves up for SPX continue right into bottom of the median line to give us an (a) or C of a 4. with impulse after completing 5. Reversed hard with energy fueled from the power impulse down from near +1/8 ATH. On the way up (just like down) It accelerated after it broke the Tenkan through the rejected Kijun and then the Kijun to close back over the median and 8/8. Bulls this was a (ii) of a 5. Bears this is a a-b of a C off a completive V of degree. We watch if this low was a (iii), (a) or C. Will determine if sharp ABC completed off all time highs around +1/8. We have to respect the number of alternatives of degree of 5. With such trends keep it simple support is Tenkan and Kijun and watch for ABC. No fear is the driving element.
The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the Tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in
Weekly: The weekly shows us the reenergized SPX tripped in 3 to test recent break up at Tenkan from there we had had a powerful rally to ATH. Again notice what happened “Each new high has evolved after testing Tenkan key support which is the next line after Friday’s dump & minor bounce.” We watch for a spit of a spit Extensions are difficult to time, keep it simple.
Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan. To repeat “We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.” Keep an eye on the put/call ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as Chikou rebalances
A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets.
Nasdaq move to ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. From there we sold off right to Tenkan (as did SPX) and bounced hard Support Tenkan to Kijun. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.
The small cap Russell RUT has been developing a large flag which it did a false break to fuel the selling from there we replicated to the down (Adam’s theory). Unlike SPX and NDX we could not get through Tenkan and Kijun which rejected the bounce. This is the index showing more of the fast money crowd and is trading like it. Closed right at the top of the cloud and at the channel. the flag. Needs to get traction in here for bulls. Support +1/8 through 7/8 (cloud base)
Semiconductors SMH clean with reaction from above reverted with the retest & break of the triple top patterning in a pennant. Pull from Chip Shortage players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX saw Semiconductors rise 2.9% (up 40.0% YTD)
Following the announcement of NVDA 4/1 split some levels off the energy break NVidia hasn’t looked back with many gaps below. We saw another power move off the $200 retest (old $800) & earnings off $300 which are retesting. It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.
Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level. These levels will be key energy levels. Support from previous highs, resistance now Fibs and Murrey Math levels. Remember the impact $AAPL has, at least short term on all the major indices.
Amazon double top that filled the gap in 3 waves held at the 50wma but little impulse – compare to $AAPL for example.. From from there failing near the previous high. Watch action around support is 200wma and previous breaks. Resistance previous flag.
The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Support previous lows, needs to clear 130 to build C or iii for bulls. We saw ATH in NASDAQ & SPX yet this couldn’t raise a bid – very telling negative divergence. $ARKK circa 80 & 90 reversals and 200ma.
US Stocks Watch
This three-month period is the second to be compared to year earlier profits that were affected by the pandemic. According to Refinitiv, earnings for the second quarter are looking to be up 78.1%. With the US stock markets at record highs the downside to increasing profit expectations is the potential for some disappointments and that could cause adverse or stalled markets potentially.
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.
Bed Bath and Beyond, Constellation Brands, Conagra, Walgreen Boots Alliance, PriceSmart, WD-40, Lamb Weston
Monday starts us off with JPMorgan Health Care Conference and Commercial Metals, Accolade, Tilray earnings
Tuesday includes Albertsons earnings and Dell Technologies investor meeting
Wednesday Includes Jefferies Financial, Infosys, KB Home, Wipro Home earnings
Thursday includes Delta Air Lines, Taiwan Semiconductor earnings
Friday Wells Fargo, JPMorgan, BlackRock and Citigroup
These are the highlighted earnings for the US this week. Please check daily schedules for more reports.
“U.S. companies are rushing to cash in on soaring stock prices. It isn’t just the white-hot market for initial public offerings. Companies are returning to the public markets to issue shares and raise cash from investors at the same time that existing shareholders are tapping the public market to unload their stockholdings at a record clip. Companies including Zoom Video Communications Inc. and Norwegian Cruise Line Holdings Ltd. have sold billions of dollars of shares this year… There have been 556 follow-on offerings, or stock sales by companies or existing shareholders, among U.S. companies this year, the most since 1996, according to Dealogic… They have raised a total of $133 billion. Behind the boom in share issuance? An ascendant stock market.” August 25 – Wall Street Journal (Gunjan Banerji):
US IPO Week Ahead:
Part B : Bond Markets
Highlights – Treasuries
Investment-grade bond funds saw inflows of $3.831 billion, and junk bond funds posted positive flows of $584 million (from Lipper).
- Three-month Treasury bill rates ended the week at 0.09%.
- Two-year government yields rose 13 bps to 0.86% (up 73bps y-o-y).
- Five-year T-note yields jumped 24 bps to 1.50% (up 102bps).
- Ten-year Treasury yields surged 25 bps to 1.76% (up 65bps).
- Long bond yields rose 21 bps to 2.12% (up 24bps).
- Benchmark Fannie Mae MBS yields spiked 34 bps higher to 2.41% (up 94bps).
All good while markets hold up but take note that the loosest financial conditions in history have supported record corporate debt issuance. While easy credit availability has supported economic activity, funding new investment whilst keeping vulnerable companies afloat. The combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.
Highlights – Mortgage Market
Unprecedented cash payments by the U.S. government to households, changing consumer preferences and lowest mortgage rates in history have fueled a pandemic boom in housing, the fastest pace of increase on record in data from 1988 and prices surpassing the peak from the last property boom in 2005. The S&P CoreLogic Case-Shiller U.S. National Home Price Index has mark the fastest pace of increase on record in data from 1988 in 2.
- Freddie Mac 30-year fixed mortgage rates surged 11 bps to a 19-month high 3.22% (up 57bps y-o-y).
- Fifteen-year rates rose 10 bps to 2.43% (up 27bps).
- Five-year hybrid ARM rates were unchanged at 2.41% (down 34bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates jumping 13 bps to a nine-month high 3.36% (up 42bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week declined $21.5bn to $8.720 TN. Over the past 121 weeks, Fed Credit expanded $4.994 TN, or 134%. Fed Credit inflated $5.909 Trillion, or 210%, over the past 478 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week gained $2.4bn to $3.415 TN.
- “Custody holdings” were down $74bn, or 2.1%, y-o-y.
- Total money market fund assets slipped $2.6bn to $4.703 TN. Total money funds increased $393bn y-o-y, or 9.1%.
We do know we have massive speculation pockets, viz a viz the Meme or GameStop, Weed stocks and cryptocurrency spectacles in just the matter of weeks. The Fed is today throwing additional fuel on historic speculative manias.
The Fed QE infinity programme is a yield curve control policy with long government bond yields coming down. Bond supply and continued central bank resistance to more negative policy rates limits the move. Central banks have been cutting rates and adding liquidity to avoid systematic failure.
Highlights – European Bonds
- Greek 10-year yields jumped 20 bps to 1.52% (up 93bps y-o-y).
- Ten-year Portuguese yields rose 11 bps to 0.58% (up 60bps).
- Italian 10-year yields gained 14 bps to 1.31% (up 78bps).
- Spain’s 10-year yields increased eight bps to 0.65% (up 61bps).
- German bund yields jumped 13 bps to negative 0.04% (up 48bps).
- French yields rose nine bps to 0.29% (up 60bps).
- The French to German 10-year bond spread narrowed about four to 33 bps.
- U.K. 10-year gilt yields surged 21 bps to 1.18% (up 89bps).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields rose seven bps to 0.14% (up 11bps in y-o-y).
Part C: Commodities
- The Bloomberg Commodities Index advanced 2.1% (up 27.2% y-o-y).
- Spot Gold fell 1.8% to $1,797 (down 2.8%).
- Silver dropped 4.0% to $23.37 (down 9.2%).
- WTI crude jumped $3.69 to $78.90 (up 51%).
- Gasoline gained 3.2% (up 49%),
- Natural Gas surged 5.0% (up 45%).
- Copper declined 1.2% (up 20%).
- Wheat fell 1.6% (up 19%),
- Corn jumped 2.3% (up 22%).
- Bitcoin sank $4,800, or 10.4%, this week to $41,560 (up 3.8%).
Risk markets continue to respond to a Coronavirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
BDI Freight Index
- The Baltic Exchange Dry Index dropped 0.3% to 2,289 on Friday, after three consecutive sessions of gains, amid weakness across its smaller vessel segments. The Baltic Dry Index rose more than 3% this week, after posting two straight weeks of losses.
- The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, fell 1.9% to 2,957;
- The supramax index declined 50 points to its weakest level since April of 2021 at 2,074.
- The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, rose 3.2% to 2,432. The Baltic Dry Index rose more than 3% this week, after posting two straight weeks of losses. Source: Baltic Exchange
Copper rebounded sharply off the 50wma pulled up by the flattening Tenkan and Kijun to close right at the channel break – a key juncture. #HG shrugged off demand concerns from resurgence in Covid-19 supply disruptions. The power spits of +8/8 and +2/8 were rebalanced by the Tenkan breaking the Kijun with 50wma and cloud below. Copper had been a leader in the risk on movement for commodities.
Soybeans finally found bids after hitting weekly lows well under weekly cloud and well under 50wma to close over the weekly Tenkan, Kijun and 50wma. – Watch for impulse
US Crude Oil (WTI)
On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs. The completion in 5 waves saw heavy selling with eventual confluence kiss of death with 50dma at the top of the cloud. From there down in 3 waves, completing a C or a? Support wasn’t found until 0-8. From there we have accelerated higher through the cloud twist. Support Kijun and Tenkan. Closed above 50dma with gid above
The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit – hence the fractal energies reverberations. Support is previous lows, Murrey Math levels and Fib cluster. Support is the 50dma, kijun, tenkan and prev high confluence.
WTI crude Oil futures continues to correct the sell off after it’s measured move reversed from 7-year highs. Long term 61.8% target fueled by ABC bull flag after rebalanced Chikou sated the 5 waves. Weekly Tenkan & Kijun closed touching the 6a.8% to give next impulse clue after holding above 50wma after regaining energy above Tenkan and Kijun.
These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications.” Support is previous channels, tenkan and Kijun. Above we have Murrey Math time and price
US Natural Gas (Henry Hub)
US Natural Gas completed 3 waves correcting the daily 8/8 spit after a classic euphoria wave 5. However, it was rejected hard at the Kijun and cloud top at 6/8. Meaning that 3 was either an a of a C or a iii – impulse in a nutshell. The adjunct failure of the 50dma and Tenkan opened up the retest of 3.80-3.60.
Notice the fractals of the move after completing the C of 4 bullish scenario played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. For the bulls all this needs to hold for the highs to be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.
Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term.
Weekly: The classic double top playing out after a spit of the weekly Kijun was sent back off Tenkan only to reverse all the way to and through the 50wma. Natural gas continued to retrace with impulse after reaching its major target, the double top potential from 2014 which equated nicely to over 8/8 Weekly and showed true impulse off that to rebalance Chikou. It’s now a question of degree, 3 or 5? Impulse just shy of the 8/8 and Tenkan confluence. A question of continuation with the 50wma as resistance and cloud as support.
Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan. This was energized with a series of fractals between old 38 and 50% channel, as you would expect in a seasonal commodity with weather a prime mover. Resistance is Fib/Murrey confluence, support Tenkan, Kijun – as always count your ABC’s
Key Energy Reports
- Around The Barrel – US Crude Oil Builds +6088Kbbl But WTI Cushing Around 2018 Lows
- Into The Vortex – EIA Reports Build of 81 Bcf in Natural Gas Inventories
- EIA Forecasts U.S. Natural Gas Inventories To Enter Winter Heating Season Below Average
- U.S. Natural Gas Consumption Down With Switch to Coal Due To Higher Gas Prices
- Desperate China Orders Inner Mongolia Coal Mines To Boost Production by 55%
- Natural Gas Flowing on Nord Stream 2 From Russia to Germany
- Natural Gas Volatilty a Lesson in The Reversal of Fortunes
- Record High Chinese Coal Futures Prices After Biggest Coal Producing Region Floods
- East China Manufacturing Hub Zhejiang Orders Production Suspensions to Meet Energy Targets
- ConocoPhillips Buys Shell’s Delaware Basin Assets for $9.5 bln in Cash.
- Europe Energy Crisis Years in the Making With Reactionary Environmental policy
- Oil Supply is Tighter Than Industry Estimates Morgan Stanley Says
- Spot Gold fell 1.8% to $1,797 (down 2.8%).
- Silver dropped 4.0% to $23.37 (down 9.2%).
Gold rally failed after it held trend line and top of cloud. From there broke back under base of weekly cloud closing between the Tenkan, Kijun and 50wma after wave (ii) alt gains favor to top of cloud, can it sustain it? Still rebalancing after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.
Silver, like Gold bounced under the cloud base. Back underr 50wma after spitting Tenkan providing support after reversed. Closing under weekly Kijun which is now resistance. Major support is previous lows
Part D: Forex Markets
John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
- For the week the U.S. Dollar Index little changed at 95.72 (up 6.3% y-o-y).
- Majors for the week on the upside, the British pound 0.4%. For the week on the downside, the Australian dollar declined 1.1%, the Swiss franc 0.6%, the Japanese yen 0.4%, the Euro 0.1%, and the Canadian dollar 0.1%.
- Minors for the week on the upside, the South African rand increased 2.3%, the Mexican peso 0.6%. For the week on the downside, the South Korean won 1.1%, the Brazilian real 1.0%, the New Zealand dollar 0.7%, the Singapore dollar 0.5%, the Norwegian krone 0.2% and the Chinese renminbi declined 0.34% versus the dollar (up 1.84% y-o-y).
- For 2021, the Turkish lira declined 44.1%, the Argentine peso 18.1%, the Chilean peso 16.5%, the Colombian peso 15.9%, the Thai baht 10.3%, the Peruvian sold 9.6%, the South Koran won 8.6%, the Romanian leu 8.6%, the Hungarian forint 8.5%, the Polish zloty 7.5%, the Bulgarian lev 6.8%, the Philippine peso 5.8%, the Malaysian ringgit 3.5%, the Czech koruna 1.9%, the Indian rupee 1.7%, the Indonesian rupiah 1.4% and the Hong Kong dollar 0.6%.
Australian Dollar – AUDUSD
The Aussie dollar is still correcting since completing a 5 at the pysch 80 level to fall under the weekly cloud in emotive fashion. The Australian dollar fell to test of the August lows of 0.7106 with Omicron fears. Should that double bottom go support ia the Murrey Math Levels. Resistance the Cloud, Tenkan and Kijun like many commodities.
New Zealand Dollar – NZDUSD
The Kiwi mirrored the AUD in its wave (iii) spit and has corrected at the cloud much of the FOMO muster wave and retested the 50% Fib & 4/8 confluence. Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.
Canadian Dollar – USDCAD
The Loonie is holding the Tenkan after a 3 year high in June and corrected that in 3 waves led by the AUD and NZD. #oil price impacting direction. Watch flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.
Euro – EURUSD
Euro continues to correct in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as #EURUSD consolidates in the cloud. Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.
British Pound – USDGBP
British pound classic retest of daily cloud break with magnet pull of cloud twist after ABC correction – will need Tenkan to break through Kijun for more strength. The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.
Euro Pound – EURGBP
Back testing Tenkan in a C or 3 after inconclusive X – symbolic of BREXIT? Kijun, 50wma and clouds resistance.
Japanese Yen – USDJPY
USDJPY broke above i after weakness with Treasury yields to rush to +2/8 and channel convergence at 115.00. With that resistance the weekly chart is showing a bearish engulfing bar taking in over a month of price to close right above the Tankan should that go a re-test of 112 is alive The 108.00 level should remain massive support for dollar-yen. Any change will come from the weekly Kijun as it breaks through the old channel. Use your USDJPY Murrey 4/8 8/8 grid for now. EURJPY AUDJPY will determine risk on/off
Mexican Peso USDMXN
The Peso continues in the long triangle and consolidated despite outside uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.
Turkish Lire USDTRY
The Turkish Lira reversed after falling in 3 waves to explode over the Tenkan with the weekly cloud Kijun and 50wma below to see Turkish lira close the week at a record low 11.29 TRY/USD. The Murrey Math and Fib targets offer targets with the Lire at all time lows resistance in a hyper inflating collapse
Bitcoin performing technically to perfection. Impulse begets impulse. To understand panic, understand greed. Bitcoin exploded higher following it’s correction impulsively upon completing 5 waves up at +2/8. Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we have seen extreme volatility.
Looking back Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking. The recent high over $68,000 came after the launch over the Bitcoin ETF, Bitco. From that high we have 2 main alternatives a V of a 1 of a V. For bears it a completive five with impulse right to the 50wma – an incredible 26% fall in a Friday night session. That’s impulse! We watch for an ABC to develop here support is the 50wma and bottom of the weekend cloud.
We have seen what you would expect from a 5 wave impulse peak and ABC correction, a violent correction and completion. Use Murrey Math levels for corrections and targets as algorithms control the herd here, support is the cloud and sharp ABC, 1-2 moves. From there prices agitated towards those ATHs as news of a Bitcoin ETF fueled the rally, sound familiar? But this time it wasn’t signaling we are in a 3 high probability but a 5.
On the Risk Radar
Fed Warnings on Possible Medium To Long Term Risks
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
Major banks kicking off earnings this week, including BlackRock (BLK), Citigroup (C), First Republic Bank (FRC), JPMorgan Chase (JPM) and Wells Fargo (WFC).
Major US Banks Deliver Stoic Results in Q3, 2021
The major money cents banks released earnings with many record results for Q3. Mainly from trading and loss reserve releases from the pandemic kitty. Rising interest rates also help the bottom line.
- Goldman Sachs Advice on Mergers and Acquisitions Brought in a Record $1.65 billion Last Quarter
- Wells Fargo Earnings Suffer From Less Interest Income on Lower Loans
- JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
- Blackrock Earnings Beat Expectations With Record $ 9.5 Trillion Assets and ETFs Under Management
- PNC Bank Revenue Rises, Expects $900 million in Cost Savings From BBVA
- Citigroup Earnings Rise on Equity Trading and Loss Reserve Release
- Bank of America Earnings Lift With Higher Long Term Interest Rates And Steady Costs
- Morgan Stanley Acquisitions of E-Trade and Eaton Vance Boosted Wealth and Asset Management
Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don’t exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.
Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.
Banks are also benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 2020 to a record $60.113 trillion.
Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008.
“Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch”
The Week Ahead – Have a Trading Plan
The week’s events kick off a notch with inflation data from the US, China, India, and Brazil. The consumer price report for December is forecast to inflation at 7.1 percent, its highest since June 1982 and well above the Federal Reserve’s target of about 2 percent. We also get Michigan consumer sentiment, retail sales, industrial production, producer and foreign trade prices, business inventories, IBD/TIPP economic optimism index, the government’s monthly budget statement, and the final reading of wholesale inventories.
We get the major banks kicking off earnings this week, including BlackRock (BLK), Citigroup (C), First Republic Bank (FRC), JPMorgan Chase (JPM), KB Home (KBH), Tilray (TLRY), and Wells Fargo (WFC).
Watch Central Banker and Geopolitics Watch speeches, reports and rate move.
The Fed is back in focus as the Federal Reserve Chairman Jerome Powell testifies Tuesday at his nomination hearing before a Senate panel. Fed Governor Lael Brainard appears Thursday for a hearing on her nomination to the post of Fed Vice Chair.
We also get the Beige book. Fed speakers include Kansas City Fed President Esther George, St. Louis Fed President James Bullard, Richmond Fed President Thomas Barkin, Chicago Fed President Charles Evans and New York Fed President John Williams.
The Bank of Korea will be deciding on interest rates on Friday.
Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats.
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Note these charts, opinons news and estimates and times are subject to change and for indication only. Trade and invest at your own risk.