Traders Market Weekly: Santa Brought Coal in 2022

December 18- 26 2022

FEAR NOT Brave Investors

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The Week That Was – What Lies Ahead?

Contents

Click on the links below to navigate to the relevant section.

Editorial

Markets reacted to two major events the US CPI report and then the Central Banker Maelstrom of rising rates following the Fed on Wednesday. The November Consumer Price Index (CPI) came in tamer-than-expected on Tuesday. What is apparent in the curve, the bond market focus has shifted towards fundamental developments and away from monetary policy. The S&P 500 fell 5.0% from where it was just ahead of the FOMC decision on Wednesday to its closing level on Friday.  By week’s end the S&P 500 was down 2.1 per cent for the week; and the Nasdaq 1 down 2.7 per cent.

It was a huge week for Bankers, we had the big central bank triple header, the Federal Reserve (Fed), Bank of England (BOE) and European Central Bank (ECB) all delivered their last meetings of 2022. Markets responded with risk off and the spread widened between European and U.S. paper. Treasury yields declined this week in the face of a surge in European yields.

Commodities saw a big bounce in energy with heating oil bouncing 12.19% on the week and Natural gas, oil and gasoline all up over 4%. The Bloomberg commodity index increased 0.9% (up 13.7% y-t-d). Palladium prices collapsed as Chinese economic data combined with the explosive COVID infection wave is a serious threat to Chinese auto consumption and as such a threat for auto catalyst inputs like palladium. Car manufacturers tumbled on Friday, Ford shares fell 7 per cent to $US12.12 and Tesla 4.7 per cent to $US150.23. Carvana, the once-hot used car market darling, fell 8 per cent to $US5.03.

The Credit cycle downturn is coming to the surface;

“Moody’s… raised its forecast for speculative-grade corporate defaults in 2023, warning they could more than quadruple under its most pessimistic scenario. The agency predicts the default rate will climb to 4.9% by November of next year under its baseline scenario, from a forecast of 2.9% for the end of 2022. Last month’s year-ahead projection was 4.5%.”

December 16 – Bloomberg (Finbarr Flynn):

China; Behind the Iron Curtain

  • “Concerns are growing about the $1.6 trillion of debt from Chinese local government financing vehicles amid one of the fastest declines in the onshore credit market. Wealth-management products, investment pools that have been selling corporate bonds to meet investor redemptions, are one of the major buyers of LGFV yuan notes. Surging yields and widening credit spreads have prompted firms, including many LGFVs, to pull a cumulative 84 billion yuan ($12.1bn) of planned bond sales since the start of November… Yields on some notes from nonfinancial firms including LGFVs rose more than 10 bps Wednesday… Redemptions of WMPs had already resulted in yield premiums for three-year AAA-rated corporate bonds reaching the highest level since August 2020… The deepening selloff in corporate notes is poised to exacerbate refinancing pressure on LGFVs and lead to higher credit risk in the sector.” December 14 – Bloomberg (Wei Zhou)
  • “Beijing’s retreat from its zero-Covid policy is causing chaos in the country’s Rmb29tn ($4.1tn) market for wealth management products, with some fund managers having to freeze withdrawals or sell down their holdings as they struggle to cope with a rush of redemptions by investors. Half of the country’s 31,000 outstanding fixed-income WMPs have reported a decline in value since the government first signalled that it would relax its strict approach to Covid-19 on November 11… Wind, a financial data provider, reported that 1,837 fixed-income WMPs, a major source of funding for China’s bond market, were trading below par value as of December 12, compared with 256 at the beginning of November.” December 7 – Financial Times (Sun Yu)

The market rupture 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

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.’”

Ahead is BoJ, Housing and PCE inflation reports

It is hard to understate the impact that major central banks had upon global markets over this past week. This week only four central banks are the on-market radar over the coming week and none of them are expected to impact global markets. The Bank of Japan delivers its latest policy decisions on Tuesday. While no changes are expected at this meeting, thoughts are for a that policy change if 2023 unfolds with growth. For the US we get Housing starts (Tuesday), Existing home sales (Wednesday) and new home sales (Friday). We also get Consumer confidence (Wednesday), Q3 GDP (Thursday). We get the Fed’s favorite PCE inflation (Friday) in the wake of the soft CPI report for November.

Earnings include FedEx, General Mills, Nike, Cintas, Micron Technology, and Paychex reporting.

Click here to see the Full Week Ahead List Below


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.

VIX

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

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 dropped 3.4% (down 17.5% y-t-d),
  • Dow fell 2.8% (down 7.9%).
  • S&P 400 Midcaps fell 4.1% (down 13.1%),
  • Small cap Russell 2000 lost 5.1% (down 20.0%).
  • Nasdaq100 dropped 3.6% (down 29.1%).
Major US Stock Indices

US Markets YTD

  • S&P 500 fell 2.1% (down 19.2% y-t-d)
  • Dow lost 1.7% (down 9.4%)
  • S&P 400 Midcaps fell 2.1% (down 15.0%)
  • Small cap Russell 2000 slumped 1.9% (down 21.5%).
  • Nasdaq100 dropped 2.8% (down 31.1%).

Sectors

  • Utilities slipped 0.5% (down 3.2%).
  • Banks dropped 2.8% (down 26.1%),
  • Broker/Dealers sank 4.4% (down 8.5%)
  • Transports dipped 0.2% (down 16.6%).
  • Semiconductors fell 3.1% (down 33.2%).
  • Biotechs gained 2.1% (down 3.5%).
  • With bullion slipping $4, the HUI gold equities index fell 2.5% (down 14.3%).

All 11 S&P 500 sectors fell, counter-cyclical sectors fell the least; utilities (-0.3%), health care (-1.3%), and consumer staples (-1.8%) sectors. The sharpest losses were energy (-8.4%), communication services (-5.4%), and consumer discretionary (-4.5%) sectors.

11 Sector SPDRs as well as the 500 component stocks last week.

Biggest SPX Stock Winners and Losers Last Week

Major US Indices

Global Stock Market Highlights

This image has an empty alt attribute; its file name is SP-500-Earnings-Forward.png

Highlights – Europe Stocks

  • U.K.’s FTSE 100: declined 1.9% (down 0.7% y-t-d).
  • Germany’s DAX:  lost 3.3% (down 12.5%)
  • France’s CAC 40: fell 3.4% (down 9.8%).
  • Italy’s FTSE MIB: fell 2.4% (down 13.4%).
  • Spain’s IBEX 35: declined 2.1% (down 6.9%)

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 declined 1.3% (down 4.4% y-t-d).
  • South Korea’s Kospi lost 1.2% (down 20.7%).
  • India’s Sensex declined 1.4% (up 5.3%).
  • China’s Shanghai fell 1.2% (down 13.0%). 

 Highlights – Australian Stocks

  • Australia’s ASX All Ordinaries: Australia’s ASX All Ordinaries: Friday -0.8% (-1.3% for the week)
  • Friday saw strength again in the mining sector led by January iron ore on China’s Dalian Commodity Exchange. Rio Tinto rose 1.3%, while coal player Yancoal gained 2.8%. Ampol closed 2.5% higher, and diversified energy firm New Hope rose 2.8%.

Highlights – Emerging Markets Stocks 

EM equities lower

  • Brazil’s Bovespa sank 4.3% (down 1.9%)
  • Mexico’s Bolsa declined 1.7% (down 6.8%)
  • Turkey’s Borsa Istanbul National 100 jumped 4.2% (up 181%).
  • Russia’s MICEX dropped 2.1% (down 43.7%).

Technical Analysis

S&P 500

Daily: Friday saw a key rest of the S&P 500 200-day moving average at 4,046 which it broke Wednesday. After the NFP it broke, tested the 4000 level only to spit back above that key level where it vacillated for much of the day. 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 are in the greed phase and short fear phase.

Recall last time we rallied through the daily Tenkan to retest May’s break. Kijun is key and we blew through it with a 1-2, the down sweep was fueled by the spit of the Kijun set the wave 3 or C up with power to close at the June lows. 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.

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 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.

For fractal purposes, SPX completed 5 waves up where it reversed with impulse with energy fueled from the power impulse down from +1/8 ATH spit of a spit fail. On the way down (just like up) it accelerated after it broke the Tenkan through the rejected Kijun and then through the median after tapping 8/8.

Daily S&P 500 3 waves

The breakup 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:

We closed over the 50wma and +1/8, 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?

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.

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.

S&P500 Weekly Outlook

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.

NASDAQ Record Highs

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.

Russell Index Negative Divergence to NASDAQ

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with retest & break of the triple top patterning in a pennant. From there been a fractal on each exhaustion. Pull from Chip players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX

VanEck Vectors Semiconductors ETF

NVidia $NVDA

NVidia’s latest slide was off earnings, back to lows at 4/8 after a failed breakup retest from May 2021. NVidia is a clear leader of #SOX #SMH look for cues there and ABC failures for changes. Above is the Key Break (mauve) and Tenkan to a flat cloud. Support the recent low at the 61.8% extension.

Nvidia NVDA stock chart

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.

Apple AAPL Stock Chart

A firm rejection at $175 at +2/8 triggered a waterfall down for Apple. On the way up Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level on the way down these levels became key energy levels all the way to $132. Support held at the May break (just like NVDA) where from there it spat the cloud pulled by a flat Tenkan and Kijun as it rebalanced Chikou. The old channel break and MM 8/8 is now key. Remember the impact $AAPL has, at least short term on all the major indices.

ARKK ETF

The ARK Innovation ETF (ARKK) finally found some support at -1/8, 78% off highs and the 423.6% extension! The fund is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, it has not been a pretty slide.

The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Some work at support at 61.8% of whole move and then wrecked again. Clear crowd behavior, we saw ATH in NASDAQ & SPX, yet this couldn’t raise a bid – very telling negative divergence. $ARKK rebalanced Chikou at week’s end

Ark ARKK ETF Stock Chart

ExxonMobil XOM

ExxonMobil Weekly Chart

Part B: Bond Markets

Bond Watch

Treasuries

U.S. Treasuries on Friday saw most tenors finish the session near their best levels of the week. The 2-yr note yield, which hit 4.38% after NFP, settled at 4.29%. The 10-yr note yield, which hit 3.60% earlier, settled at 3.51%. The long bond pressured its yield to a fresh ten-week low. This week’s action had a limited impact on the 2s10s spread, which widened by a basis point, ending the week at -78 bps.

Treasury Yield Watch

2-yr: +2 bps to 4.34% (+5 bps for the week)
3-yr: +2 bps to 4.07% (+6 bps for the week)
5-yr: +5 bps to 3.76% (+9 bps for the week)
10-yr: +8 bps to 3.57% (+6 bps for the week)
30-yr: +9 bps to 3.55% (-1 bp for the week)

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

Mortgage Market

  • Freddie Mac 30-year fixed mortgage rates dropped 11 bps to a three-month low 6.28% (up 318bps y-o-y).
  • Fifteen-year rates fell 11 bps to 5.68% (up 330bps).
  • Five-year hybrid ARM rates slipped two bps to 5.47% (up 302bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 14 bps to 6.63% (up 338bps).
Mortgage News Daily November 4, 2022

Part C: Commodities

Highlights

  • Bloomberg increased 0.9% (up 13.7% y-t-d).
  • Spot Gold slipped 0.2% to $1,793 (down 1.7%).
  • Silver declined 1.1% to $23.22 (down 0.4%).
  • WTI crude rallied $3.27 to $74.29 (down 1%).
  • Gasoline recovered 3.7% (down 4%),
  • Natural Gas jumped 5.7% to $6.60 (up 77%).
  • Copper dropped 3.0% (down 16%).
  • Wheat rallied 2.6% (down 2%),
  • Corn gained 1.4% (up 10%).
  • Bitcoin was down $550, or 3.2%, this week to $16,600 (down 64%).
Weekend December 16, 2022

Key Long Term Commodity Charts

Copper

Copper Supply Crunch

Gold

Gold in Perspective

WTI Oil

WTI Weekly KnovaWave Shape

Natural Gas

US Natural Gas KnovaWave Weekly Grid

BDI Freight Index

Baltic Dry Index Weekly

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)

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


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 rebounded 0.3% to 104.81 (up 9.6% y-t-d).
  • For the week on the upside, the South African rand increased 0.9%, the Swiss franc 0.3%, the New Zealand dollar 0.1%, the Australian dollar 0.1%, euro 0.1%, Chinese (onshore) renminbi gained 1.37% versus the dollar (down 8.66% y-t-d).
  • On the downside, the Norwegian krone declined 2.2%, the Mexican peso 1.9%, the Japanese yen 1.7%, the Canadian dollar 1.3%, the Brazilian real 0.5%, the British pound 0.2%, the Singapore dollar 0.2% and the South Korean won 0.1%.
Weekend December 16, 2022

For our complete Forex Weekly Analysis and Outlook visit our Forex Traders Weekly Outlook:

Charts and commentary via KnovaWave on the US Dollar, Euro, Japanese Yen, British Pound, Euro Pound, Swiss Franc, Canadian Dollar, Australian Dollar, New Zealand Dollar, Turkish Lira, Mexican Peso. Currency dynamics are complex. There are myriad facets to analyze and contemplate that influence all markets.

Cryptocurrencies

Bitcoin

Bitcoin continues to churn following the FTX collapse. BTC had been stuck in the sphere of influence in continuation awaiting a catalyst, and it came. Continues to perform technically to perfection. Impulse begets impulse. To understand panic, understand greed. $BTC tested the top of a rising channel after the preceding sharp downturn which was the downside breakout of an earlier bearish flag, after breaking downside a H&S top and then down it went….

Recall Bitcoin exploded higher following it’s correction impulsively upon completing 5 waves up at +2/8. Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we have seen extreme volatility.

Looking back Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking. The high over $68,000 came after the launch over the Bitcoin ETF. From that high we have 2 main alternatives a V of a 1 of a V. For bears it a completive five with impulse right to the 50wma – an incredible 26% fall in a Friday night session. That’s impulse!

Bitcoin KnovaWave Weekly Outlook
Bitcoin Mania in Perspective

Ethereum

Ethereum Weekly

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Turkey Geopolitical
Turkey Risk Monitor

Economic and Geopolitical Watch

Banks

Major banks kicking off earnings this quarter, including BlackRock (BLK), Citigroup (C), First Republic Bank (FRC), JPMorgan Chase (JPM) and Wells Fargo (WFC).

Major US Banks Deliver Mixed Results in Q3, 2022

The major money cents banks released earnings with many strong results for Q3. 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.

Banks are 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.

Akio Morita mistakes

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 ..

  • China’s tumbling mobility…
  • …and the risk of further supply shocks
  • BoJ: No pivot yet…
  • …but the BoJ could disrupt world markets in 2023
  • Chinese banks might cut lending rates
  • Bank Indonesia likely to hike again
  • Turkey’s central bank is probably done messing up
  • Canadian inflation: soft headline, solid core?
  • Canadian economy: modest Q4 growth?
  • US macro dump

Central bank Watch

The most notable events are the PCE price index, which will provide further insights into the Federal Reserve’s rate path given it is their favorite inflation indicator. The Bank of Japan delivers its latest policy decisions on Tuesday. While no changes are expected at this meeting, we watch if policy change may be ahead in 2023. The Central Bank of Turkey is likely to keep rates steady when it meets on Thursday, after cutting its key rate by 1000 bps since September 2021. The People’s Bank of China will meet to decide on its loan prime rate after leaving it unchanged for three consecutive meetings. The Indonesian central bank’s monetary policy decision is due. In Australia, the RBA releases minutes from its latest meeting for insights on the bank’s third straight 25bps rate increase.

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

Economic Data Watch

US Data Focus

  • Monday: December NAHB Housing Market Index (consensus 34; prior 33) at 10:00 ET
  • Tuesday: November Housing Starts (consensus 1.395 mln; prior 1.425 mln) and Building Permits (consensus 1.480 mln; prior 1.526 mln) at 8:30 ET
  • Wednesday: Weekly MBA Mortgage Index (prior 3.2%) at 7:00 ET; Q3 Current Account Balance (consensus -$224.00 bln; prior -$251.10 bln) at 8:30 ET; November Existing Home Sales (consensus 4.20 mln; prior 4.43 mln) at 10:00 ET; weekly crude oil inventories (prior +10.23 mln) at 10:30 ET; and $12 bln 20-yr Treasury bond reopening results at 13:00 ET
  • Thursday: Q3 GDP — third estimate (consensus 2.9%; prior 2.9%), Q3 GDP Deflator — third estimate (consensus 4.3%; prior 4.3%), weekly Initial Claims (consensus 225,000; prior 211,000), and Continuing Claims (prior 1.671 mln) at 8:30 ET; and weekly natural gas inventories (prior -50 bcf) at 10:30 ET
  • Friday: November Durable Orders (consensus -1.0%; prior 1.0%), Durable Orders ex-transportation (consensus 0.1%; prior 0.5%), November Personal Income (consensus 0.3%; prior 0.7%), Personal Spending (consensus 0.1%; prior 0.8%), PCE Prices (consensus 0.2%; prior 0.3%), and core PCE Prices (consensus 0.3%; prior 0.2%) at 8:30 ET; November New Home Sales (consensus 600,000; prior 632,000) and final December University of Michigan Consumer Sentiment survey (consensus 59.1; prior 59.1) at 10:00 ET

Global Data Focus

  • OPEC:
  • Canada: CPI and retail sales data. The headline inflation is seen falling 0.1% month-on-month, resulting in the annual rate of inflation easing to 6.5% from 6.9%.
  • Brazil:
  • Mexico:
  • Europe:  Eurozone flash consumer confidence. German GFK consumer indicator and the Ifo business climate indicator, Euro Area construction output; German producer inflation; Italy’s business and consumer survey; Sweden’s house prices index and Switzerland’s balance of trade and current account. Central Bank of Turkey meets on Thursday, after cutting its key rate by 1000 bps since September 2021.
  • UK:  UK final estimate of third-quarter GDP, current account, public sector net borrowing, and the CBI gauges for industrial trends orders and distributive trades.
  • China: People’s Bank of China will meet to decide on its loan prime rate.
  • Japan: Bank of Japan monetary policy, CPI print
  • India:
  • South Korea:
  • Australia:  RBA minutes from its latest meeting
  • New Zealand: Trade figures for November and business confidence gauges for December.

Earnings and Event Watch

US Stocks Watch

Investors (and algos) will focus on the conference calls and outlooks. Last quarter everyone expected the worse, we saw critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals. 

Events

  • Monday. Cinema names on watch with weekend numbers for Avatar: The Way of Water (DIS) expected to impress AMC; Cineworld (CNNWQ), Cinemark (CNK), IMAX (IMAX), Marcus (MCS), Reading International (RDI), Cineplex (CGX:CA), and National CineMedia (NCMI).
  • Tuesday Results of the European antitrust review of the planned Broadcom (AVGO) acquisition of VMware (VMW) is expected to be announced. Arcus Biosciences (RCUS) and Gilead Sciences (GILD) will present on Phase 2 data on Domvanalimab at ASCO plenary Series.
  • Wednesday The IPO lockup period expires for a block of shares of Loop Media (LPTV). Shares of LPTV trade almost 20% above the level the IPO was priced at.
  • Thursday Natural gas weather Models heading into Christmas break
  • Friday – FDA action date on Coherus BioSciences’ (CHRS) toripalimab. Mullen Automotive (MULN) shareholders will vote on 1-for-25 reverse stock split and issuance of $150B in convertible notes and up to $190Min convertible preferred stock. Shareholders with Viveon Health Acquisition (VHAQ) will meet to vote on taking aesthetics company Suneva public in a SPAC deal.

Earnings

Earnings Highlights This Week:

  • Monday includes HEICO Corp. (HEI), Steelcase (SCS) and Blade Air Mobility (BLDE)
  • Tuesday includes Nike (NKE), FedEx (FDX), General Mills (GIS) and Cal-Maine Foods (CALM)
  • Wednesday includes Carnival Corp. (CCL), Micron Technology (MU), Cintas (CTAS)
  • Thursday includes CarMax (KMX), Paychex (PAYX) and Apogee Enterprises (APOG)
  • Friday includes *day prior to the Christmas holiday weekend has no confirmed earnings reports of note.
For Q3 2022, the estimated earnings growth rate for the S&P 500 is 2.9%. If 2.9% is the actual
growth rate for the quarter, it will mark the lowest earnings growth rate reported by the index since Q3 2020 (-5.7%).

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.

-comment section below data-

Real Time Economic Calendar provided by Investing.com.

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