Traders Market Weekly: September 19 to 25 2021

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FEAR NOT Brave Investors

No money to buy secrets

 Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.

Shakey Confidence in The Fed and Markets

The Week That Was – What Lies Ahead?

Editorial

In a repeat of last Friday US stockmarkets sold off as concerns about China’s grew from a Evergrande credit event resulting in contagion and headwinds, a resurgent Covid virus, a diplomatic showdown involving China, France, Australia and the US which has fueled more Chinese selling off commodities.

The there is the worry of a Federal Reserve meeting next week. The Federal Reserve meets for two days next week and on Wednesday is expected to give further clues as to when it may start to slow its $120 billion in monthly bond purchases that have supported the recovery, but also perhaps aided in a jump in inflation.Negative sentiment around President Biden continues. He appears unable to get Senator Manchin (D-WV) on board with the $3.5 trillion infrastructure plan, a warning from the White House that not increasing the debt limit could cause a recession.

Weakness came from Covid vaccine stocks falling, Pfizer fell 1.3%, BioNTech dropped 3.6% and Moderna lost 2.4%. The move came after the Food and Drug Administration advisory committee on Friday rejected a plan to administer booster shots of Pfizer and BioNTech’s Covid-19 vaccine to the general public.

Mega-cap technology stocks were mostly down with Facebook, Alphabet, Apple and Microsoft all down around 2% Friday.  Another impact is seasonal factors, with the S&P 500 averaging a 0.4% decline for September, the worst of any month, according to the Stock Trader’s Almanac.

Confidence is down after Federal Reserve Presidents Kaplan and Rosengren said they have been trading stocks and bonds. They said they will sell individual stock holdings after the press questioned their ethics. This comes at a time of taper concerns and market top calls.

Friday volatility during September is fed by quadruple witching, which occurred at the close Friday. This is the expiration of stock index futures, stock index options, stock options, and single-stock futures. S&P 500 volatility typically increased by 27% from August to October. The Dow is down about 2.2% in September. The S&P 500 is off by nearly 2% this month and closed below its 50-day moving average at 4436 but still just 2.5% from its all-time high. The Nasdaq has lost 1.4% this month.

The U.S. 10-year Treasury rose 4 basis points to nearly 1.37% on Friday. Gold futures settled $5.30 lower (-0.3%) to $1,751.40/oz, extending losses for the week.

The consumer sentiment report showed a smaller-than-expected gain following last month’s shocking decline. The preliminary September reading for the University of Michigan Index of Consumer Sentiment increased to 71.0 ( consensus 72.0) from 70.3 in August,a pandemic-era low. Keep in mind this is all despite near record highs in a 7 month stock market rally.

Clearly high prices have led to a decline in assessments of buying conditions for homes, vehicles, and household durables. How much does this affect spending activity in the future is the big question mark. If consumers hold off on purchases either because they think prices will come down if they wait longer or if they resist paying persistently high prices altogether in the absence of offsetting income gains. This and tapering talk after a dismal unemployment report underscore how disconnected these bankers and politicians are from main street and ethical reality.

What is also feeding risk adverse positioning is the major market has gone 292 calendar days without a decline of 5% or more. This is nearly three times the average since World War II, according to data from CFRA’s Sam Stovall. Granted this is because of the base effect from the Covid collapse and trillions of dollars pumped into it since, however it is an extraordinary move nevertheless.

Valuations defy gravity, the S&P 500’s price-to-earnings ratio on a forward 12-month basis stands at 21.3, a 35% premium to its 20-year average, according to Refinitiv Datastream.

Inflation isn’t going away, Annual CPI continues is elevated at 5.3% in August, near the highest since August 2008. M/M CPI +0.3% lower than expected +0.4%. Core m/m +0.1% vs +0.3% exp. Transitory? lowest since Feb and +4.0% vs +4.2% y/y expected. Last week August’s producer price index showed a jump of 8.3% year over year, due in part to supply chain constraints, after July’s largest annual increase in over a decade. . The coronavirus Delta variant is hindering growth with these price rises and consumer restraint.

In Fed Chair Powell’s Jackson Hole speech  he feels substantial further progress has been met on inflation but not yet employment, which suggested tapering will start later this year and is data dependant. Powell also differentiates tapering criteria from rate-hike criteria.

Some sage advice from your parents, “Know what’s under your hood, not what they tell you, learn to drive a manual first before driving an automatic”

Powell is struggling to justify ongoing historic monetary inflation as transitory with intense inflationary moves abound. Perhaps with so many destroyed economically and living on the breadline the Fed is well away they are surviving at best and aware such lack of demand will become deflationary as supplies normalise.

Public confidence is eroding sharply with the US Administration and the Fed seems to be the last hope for many. What happened if the insular American masses gather what is unfolding globally?

ETF Market Mania

This is a market like no other with more wide spread participation than at any time in history 

ETFGI reported om September 10 that inflows into exchange traded funds are above 2020’s record total globally. Worldwide net investor inflows reached $834.2bn at the end of August, already surpassing the last year’s total of $762.8bn. Global assets held in ETFs have soared to $9.7tn, more than double the $4.8tn managed in the funds and products at the end of 2018.

The bulk of the $9tn exchange traded funds industry consists of plain vanilla index trackers focused on mainstream assets. However higher risk such as Cryptocurrency ETFs have taken off in non US other jurisdictions including Canada, Switzerland, Germany and Jersey. Total assets in these funds tripled from $3bn at the end of last year to $9bn as of June.

The sums committed to leveraged and inverse exchange traded products,designed to amplify gains from market rises or conversely profit from falling asset prices has risen from $79bn at the end of 2019 to a record $109bn, ETFGI reported

The three credit events that have our attention remain our key watches.

Firstly credit spreads on corporate bonds.

U.S. high-yield spreads (to Treasuries) and CDS have also turned more closely correlated to Chinese Credit developments.

September 10 – Bloomberg (Brian Smith): “The U.S. investment-grade primary market completed its busiest week in history after an eyebrow-raising 54 high-grade companies sold debt in just four days to break the record for number of deals… Weekly volume of $77.8bn ranks fifth all time, trailing only four weeks in 2020 when issuers rushed to the capital markets in search of liquidity… Bond sales nearly doubled projections of $40bn-45bn, accounting for more than half of the $140bn expected for the entire month…”

September 10 – Bloomberg (Lisa Lee): “The leveraged finance market is bracing for a surge in new deals, fueled by booming demand for M&A financing and investors hungry to get their hands on anything offering an alternative to rock-bottom interest rates. September could see as much as $110 billion of U.S. high- yield bond and leveraged loan sales, according to bankers…, making it one of the busiest months in years. The leveraged loan market already saw 12 deals launch on Tuesday, and there’s little sign the deluge is set to slow anytime soon… The impending onslaught adds to what’s already been a historic year. U.S. junk-bond issuance of about $346 billion is on pace to surpass last year’s record $432 billion. Leveraged loan supply of around $400 billion, excluding repricings, is already the most since Bloomberg began tracking the data in 2013.”

The second the world’s most indebted developer, China Evergrande Group shares and bonds.

Evergrande has over $300 billion of debt. Creditors are banks and non-bank financial institutions, domestic and international bond holders, suppliers and apartment buyers. It has bank borrowings of $90 billion, including from Agricultural Bank of China, China Minsheng Banking Corp and China CITIC Bank Corp (reports have 128 banks with exposure). Thousands of suppliers are owed around $100 billion. Evergrande and the faltering apartment Bubble remain a clear danger.

“Goldman Sachs analysts say the company’s structure has also made it ‘difficult to ascertain a more precise picture of [its] recovery.’ In a note this week, they pointed to ‘the complexity of Evergrande Group, and the lack of sufficient information on the company’s assets and liabilities.’”From CNN (Michelle Toh)

“Chinese issuers face their largest-ever wave of dollar bond maturities this year at $118bn, according to Refinitiv. But even that is dwarfed by the Rmb7.8tn ($1.2tn) of onshore debt maturing in 2021. The latter figure could have big repercussions for offshore bondholders, especially if the restructuring of onshore debt is prioritised.”- FT (Hudson Lockett and Thomas Hale)

September 16 – Bloomberg: “Chinese high-yield dollar bonds were down as much as 4 cents on the dollar Thursday, according to credit traders, led by developers amid signs of growing contagion from Evergrande’s debt woes.”

 

Evergrande Property Collapse

The third was falling bond yields despite heightened inflationary pressures and further price increases.

Three-month Treasury bill rates ended the week at 0.0375%. Two-year government yields added a basis point to 0.21% (up 9bps y-t-d). Five-year T-note yields rose three bps to 0.82% (up 46bps). Ten-year Treasury yields increased two bps to 1.34% (up 43bps). Long bond yields slipped a basis point to 1.94% (up 29bps). Benchmark Fannie Mae MBS yields gained one basis point to 1.80% (up 46bps). Given the shakey China and global market developments the safe haven argument was sullied. This raises the question of how much support the Treasury market has left to offer in the event of an intensifying “risk off” dynamic. There’s always an Ebb and Flow associated with financial instability, and there is a Beijing-directed hiatus in the evolving Credit crisis. With a relatively tranquil week for China (and Asia & EM), Treasuries turned more attentive to U.S. overheating.”

Ahead of this week’s FOMC it’s worth reminding ourselves of  this insight from the The Economic Affairs Committee of the U.K.’s House of Lords report, “Quantitative Easing: A Dangerous Addiction?”

“No central bank has managed successfully to reverse quantitative easing over the medium to long term. In practice, central banks have engaged in quantitative easing in response to adverse events but have not reversed the policy subsequently. This has had a ratchet effect and it has only served to exacerbate the challenges involved in unwinding the policy. The key issue facing central banks as they look to halt or reverse quantitative easing is whether it will trigger panic in financial markets, with effects that might spill over into the real economy.”

In light of  recent ECB and FOMC meet and greets an important realisation that the Central Bankers are well of aware of the consequenses here.

“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

There is the prospect of an overheating U.S. economy, but remember we are coming off a low base and the lockdown has decimated many sectors of the economy and people’s lives. The relevaton from the speed of technology adapting and disrupting to a new world with the lockdown is transformative. The shift has enabled and transformed the traditional economy that we measure future outcomes off.

We still need to add almost 20 million jobs in the US alone to get back to par. Europe is in worse shape, so overheating at this point isnt a concern for most policymakers.  The unparalleled government monetary inflation has inflated many price levels and distorted asset markets BUT that was intended as to increase confidence in the ‘guts’ of the economy, homeowners and 401k holders. This point is missed by the uber bear community. From here is the big question. The RBA stability report gives us an insight into central banker thinking, they concluded Australian banks are in strong financial position coming out of pandemic and have abundant liquidity and funding,

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 tis continuos dip feed? At this point the Central Banks have kicked that answer down the road.

After the monthly and weekly employment data the market will be going though whether the recent stimulus rounds are working with in the background of the Federal Reserve Continuing to downplay inflation risk.

Of note during the Arctic Blast with the EV mania and the Biden Admin Green deal push we noted the spike in spot Texas electricity prices pushing the cost of electricity not on fixed plans to unheard of levels. Bloomberg reported on recharging a Tesla from about $18 to $900. Yes the price spike was fleeting but it should remind the sane amongst us the broader issue of the disconnect between the push toward electrification and our massively inadequate energy infrastructure. This is the area that needs investment, not just for our glorious EV but for all energy and possible disasters like we just saw.

Comments from Yellen and others on the same page suggest that low rates conveniently push potential debt instability far out into the future. The Fed is poised to expand its balance sheet, by adding liquidity to the tune of $1.5 TN this year with no regard for rampant asset price inflation and bubbles. Now the new administration has control of the blank checkbook and is determined to us it with no long-term thinking or planning; everything is short-term focused. Washington is gambling with our nation’s future, from kicking cans down the road to rolling drums down a hill. 

Contents

  • Part A: Stockmarkets
  • 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

 

PART A – Stock Markets

Highlights – USA

  • S&P500 declined 0.6% (up 18.0% y-t-d)
  • Dow was little changed (up 13.0%)
  • Nasdaq100 lost 0.7% (up 19.0%)
  • S&P 400 Midcaps dipped 0.3% (up 16.1%)
  • Small cap Russell 2000 recovered 0.4% (up 13.3%).
  • Transports fell 0.7% (up 14.1%).
  • Utilities sank 3.3% (up 5.0%)
  • Banks rallied 1.0% (up 28.9%)
  • Broker/Dealers declined 0.8% (up 23.6%).
  • Semiconductors were little changed (up 22.4%).
  • Biotechs rallied 1.2% (up 3.8%).
  • With bullion sinking $33, the HUI gold index dropped 2.3% (down 20.7%).

US Indices W 9 17 2021

 

Highlights – Europe Stocks

  • U.K.’s FTSE equities index declined 0.9% (up 7.8% y-t-d).
  • France’s CAC40 fell 1.4% (up 18.4%).
  • German DAX equities index declined 0.8% (up 12.9%).
  • Spain’s IBEX 35 equities index rallied 0.8% (up 8.5%).
  • Italy’s FTSE MIB index was little changed (up 15.6%)

 

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 Equities Index added 0.4% (up 11.1% y-t-d).
  • South Korea’s Kospi index recovered 0.5% (up 9.3%).
  • India’s Sensex equities index jumped 1.2% (up 23.6%).
  • China’s Shanghai Exchange sank 2.4% (up 4.1%).

 Highlights – Australian Stocks

  • Australia’s S&P/ASX200 finished the week 7403.7 down a small 2.9 points for the week overall. 
  • Iron ore extended its recent slide, falling by a further 8.1% Friday to $US107.21 per tonne.Fortescue led the declines losing 11.5% and earning a downgrade from UBS, Rio Tinto -4.7 and BHP -3.4%.

 

Image

 Highlights – Emerging Markets Stocks 

  • EM equities mixed.
  • Brazil’s Bovespa index dropped 2.5% (down 6.4%),
  • Mexico’s Bolsa slipped 0.4% (up 16.4%).
  • Turkey’s Borsa Istanbul National 100 index lost 1.3% (down 3.9%).
  • Russia’s MICEX equities index added 0.8% (up 22.7%).

IPO and SPAC mania having break but 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

 

 S&P 500 Index Technical Analysis via @KnovaWave

SPX rejected the top of the daily trend & broke through the Tenkan to retest +1/8 rebalancing the Chikou after a sharp ABC to 1 month lows back into all time highs remaining in the clear channel as it tries to test +2/8. We have to respect the number of alternatives of degree of 5. With such trends keeps 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

SPX D 9 17 2021
 

SPX failed to break weekly highs (+5/8) reversing to test the recent break up. Each new high has evolved after testing the Tenkan which is key support. Look for failure if that doesn’t hold. Extensions are difficult to time, keep it simple. #ES_F #SPY

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 putcall 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 chickou rebalances

SPX W 9 17 2021
 

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

Nasdaq tested and rejected to top of the upward channel to test the consolidation triangle. Support Tenkan to Kijun which has helped fuel the more extreme moves. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

 Nas W 9 17 2021

Russell 2000

 The small cap Russell RUT has been developing a large flag which it spat though last week, only to close above the Tenkan. We need Kijun to close thru to get power to retest highs. Support the cloud should it fail.

 RUT W 9 17 2021

Semiconductors SMH

The Semiconductor segment represented by $SMH cleanly with Murray Math levels & Tenkan keys. Previous high above +4/8 and Chikou rebalance patterning. Powered by Kijun spit to as the reaction from above reverted with the retest at triple top patterning. Reaction from above reverted with $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX mainly pushing up

SMH W 9 17 2021
 

NVidia $NVDA

Following the announcement of NVDA 4/1 split some levels off the energy break. NVidia hasn’t looked back since the $NVDA 4/1 split, We saw a power move off the $200 retest (old $800)! It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.

NVDA W 9 17 2021
 

Apple $AAPL

Apple’s Friday dump appears to be a healthy rinse on the weekly. Support from previous highs, resistance is ATH. Potential impulse from upcoming #AppleEvent Remember the impact $AAPL has, at least short term on all the major indices.

 AAPL W 9 17 2021

Amazon $AMZN

Amazon high locked at Kijun seems …MM +3/8 and from there has built a large weekly flag after failing near the previous high. Watch Tenkan through Kijun for a bigger move down. Support is weekly cloud and resistance previous flag and Tenkan.

AMZN W 9 17 2021 

ARKK ETF

The $ARKK ETF trading clinically, tested triangle breakdown & Tenkan after bouncing off 50 WMA. Support cloud, needs to clear Tenkan to test Kijun for bulls. We saw ATH in Nasdaq and #SPX and a big week for #RUT – needs to flow through to #ARK to break up soon rather than later.

ARKK W 9 17 2021
 

US Stocks Watch

 

Earnings Week Ahead

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. 

Last week we heard from:

Palo Alto Networks analyst meeting, Zoom conference, Oracle earnings Crocs investor day Cisco investor day, Manchester United earnings

This week we hear from:

Monday starts us off with

  • Earnings: Lennar
  • Analyst meeting:

Tuesday with Earnings from

  • Earnings: FedEx, Adobe, AutoZone, Cracker Barrel, Aurora Cannabis, Stitch Fix
  • Analyst meeting: Workday

Wednesday Earnings Include

  • Earnings: General Mills, KB Home, Blackberry, Steecase
  • Analyst meeting:

Thursday Earnings Include

  • Earnings: Nike, Costco, Vail Resorts, Trip.com, Darden Restaurants, Accenture, Rite Aid, Scholastic
  • Analyst meeting: Dell

Friday Earnings include

  • Earnings: Carnival
  • Analyst meeting:

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):

IPO Wrap

The Fall IPO market is in full swing with an 11 IPO week:

The IPO market was full steam ahead this past week as 11 IPOs came to market. SPAC activity remained steady with seven blank check IPOs. New filers continue to pour into the IPO pipeline, with 15 IPOs and eight SPACs submitting initial filings

Tech consultancy Thoughtworks (TWKS) raised $774 million at a $7.0 billion market cap. This agile software developer provides premium, end-to-end digital strategy, design, and engineering services to more than 300 enterprise customers. Profitable with positive cash flow, Thoughtworks has a sticky customer base with 120%+ dollar-based net retention. Thoughtworks finished up 64%.

Swiss running shoe brand On (ONON) raised $746 million at a $7.5 billion market cap. On is a global provider of premium athletic footwear, apparel, and accessories that are designed using sustainable materials and its proprietary technology. This running shoe company has demonstrated growth and profitability, but it faces significant competition. On finished up 62%.

Sports betting and data firm Sportradar (SRAD) raised $513 million at an $8.0 billion market cap. Covering over 750,000 events annually across 83 sports, this Swiss company provides software, data, and content to sports leagues, betting operators, and media companies. Despite growth and profitability, Sportradar faces growing competition and regulatory uncertainty. Sportradar finished flat.

Drive-thru coffee chain Dutch Bros (BROS) raised $484 million at a $4.0 billion market cap. This Oregon-based company has a chain of 471 drive-thru coffee shops in the Western US, and it has been able to maintain a track record of same-store sales growth as it has expanded to new states. Insiders received pre-IPO dividends and will sell shares back to the company. Dutch Bros finished up 89%.

Healthcare intelligence platform Definitive Healthcare (DH) raised $420 million at a $4.0 billion market cap. This company provides a healthcare commercial intelligence and analytics platform, helping its customers to analyze, navigate, and sell into the complex healthcare ecosystem. With robust profitability and strong cash flow, the company has a diversified customer base but is leveraged post-IPO. Definitive Healthcare finished up 81%.

Identity management platform ForgeRock (FORG) raised $275 million at a $2.3 billion market cap. The company provides identity and access management software, with a platform to provision, authenticate, and govern all types of digital identities. ForgeRock has seen strong growth but is unprofitable with high S&M spend. ForgeRock finished up 89%.

Mortgage insurance spinoff Enact Holdings (ACT) raised $253 million at a $3.1 billion market cap. Being spun out of Genworth Financial, this company provides mortgage insurance primarily to consumers that purchase homes with less than 20% down payments. Enact Holdings finished up 5%.

Immunology biotech DICE Therapeutics (DICE) raised $204 million at a $618 million market cap. This biotech is developing oral small molecule therapies to treat chronic diseases in immunology and other therapeutic areas. DICE filed a CTA for its lead candidate in July 2021 and plans to initiate a Phase 1 trial. DICE Therapeutics finished up 118%.

Oncology biotech Tyra Biosciences (TYRA) raised $173 million at a $689 million market cap. This preclinical biotech is developing FGFR kinase inhibitors for solid tumors. Tyra’s lead candidate is initially focused on bladder cancer, and the company expects to submit an IND in mid-2022. Tyra Biosciences finished up 24%.

Surgical robotics developer PROCEPT BioRobotics (PRCT) raised $164 million at a $1.2 billion market cap. This commercial-stage company develops surgical robotic systems for minimally-invasive urologic surgery with an initial focus on treating benign prostatic hyperplasia. Highly unprofitable, PROCEPT BioRobotics saw revenue increase more than sixfold in the 1H21.

PROCEPT BioRobotics finished up 60%. Micro-cap gas delivery service EzFill Holdings (EZFL) raised $25 million at a $104 million market cap. This mobile-fueling company provides an on-demand fuel delivery service in Florida via mobile app. Highly unprofitable with explosive growth, EzFill states that it is the dominant player in the South Florida market. EzFill Holdings finished up 14%.

Seven blank check companies raised $1.2 billion this past week led by former Stericycle CEO-led Sierra Lake Acquisition (DWACU), which raised $300 million.

 

US IPO Week Ahead:

Software, consumer products, and payment tech lead a diverse 14 IPO week

IPO market is just heating up as 14 IPOs are slated to raise $5.3 billion in the week ahead. The diverse group includes software, consumer products, payment technology, and more.

The largest deal of the week, Freshworks (FRSH) plans to raise $855 million at a $9.6 billion market cap. The company’s core product is its customer support software, and it also offers IT service management software and a nascent competitor to CRM solutions. While losses are expected to increase with S&M spending, Freshworks has delivered solid growth and 100%+ net dollar-based revenue retention as of 6/30/21.

Canadian consumer products company Knowlton Development (KDC) plans to raise $800 million at a $3.1 billion market cap. Over the past three years, Knowlton has been responsible for co-developing 9,000+ products across a variety of categories, and its products are sold by its brand partners in 70+ countries. Despite using offering proceeds to pay down debt, Knowlton will be leveraged post-IPO.

Restaurant payment processor Toast (TOST) plans to raise $685 million at a $17.9 billion market cap. Toast provides a suite of integrated payment and software solutions that are designed to streamline restaurant operations. The company grew ARR over 100% in the 1H21, though it has historically been unprofitable, and growth could slow as tailwinds from restaurants reopening abate.

Global money transfer firm Remitly Global (RELY) plans to raise $487 million at a $7.5 billion market cap. Remitly provides digital financial services for immigrants and their families in over 135 countries, and it has expanded its core cross-border remittance product to over 1,700 corridors worldwide. The company has demonstrated growth and margin improvement, though it remains unprofitable.

Software firm Clearwater Analytics (CWAN) plans to raise $450 million at a $3.7 billion market cap. Clearwater provides its 1,000+ clients with cloud-native software that allows them to simplify their investment accounting operations, and the company has a 100% recurring revenue model. A new investor and certain existing shareholders intend to purchase $150 million worth of shares in the IPO.

Food company Sovos Brands (SOVO) plans to raise $350 million at a $1.5 billion market cap. Formed by Advent International, Sovos Brands offers a select group of acquired premium food brands. According to the company, its largest brand of products, Rao’s, included the #1 selling SKU in the pasta and pizza sauce category. Profitable with solid growth, Sovos will be leveraged post-IPO.

Customer engagement software provider EngageSmart (ESMT) plans to raise $349 million at a $4.1 billion market cap. The company provides software that simplifies online workflows like paperless billing, electronic payment processing, scheduling, and client communication. While growth may slow post-pandemic, EngageSmart has a sticky customer based and a long track record of profitability.

Hiring solutions provider Sterling Check (STER) plans to raise $300 million at a $2.1 billion market cap. Sterling is one of the leading US providers of background checks for corporate and government customers. The company serves more than 50% of the Fortune 100, often with exclusive contracts, though it operates in a highly competitive market.

Jewelry retailer Brilliant Earth Group (BRLT) plans to raise $250 million at a $1.4 billion. Brilliant Earth is a digital-first jewelry company and a global leader in ethically sourced fine jewelry. The company has sold to consumers in all US states and over 50 countries, and has served over 370,000 customers through its e-commerce platform and 13 showrooms.

Online fashion platform a.k.a. Brands (AKA) plans to raise $250 million at a $2.3 billion market cap. a.k.a. acquires digitally-focused fashion brands oriented toward millennial and Gen Z consumers, starting with its acquisition of Princess Polly in 2018. The company has successfully expanded Princess Polly and has a long runway to grow its brands in the US, but its M&A strategy carries execution risk.

COVID-19 test maker Cue Health (HLTH) plans to raise $200 million at a $2.4 billion market cap. Cue’s first commercially available diagnostic test for use with its Cue Health Monitoring System is its COVID-19 Test Kit, which has been authorized by two EUAs. Cue has five additional Test Kits in late-stage technical development, for which it expects to begin seeking FDA authorization or clearance in the 2H22.

London-listed crypto mining company Argo Blockchain (ARBK) plans to raise $138 million at an $855 million market cap. Argo states that it is a leading blockchain technology company focused on large-scale mining of Bitcoin and other cryptocurrencies. Argo has a fleet of more than 21,000 purpose-built computers (mining machines) and can generate more than 1,075 petahash per second.

Personalized supplements seller Thorne Healthtech (THRN) plans to raise $126 million at an $892 million market cap. The company’s vertically integrated brands, Thorne and Onegevity, provide actionable insights and personalized data, products, and services. Profitable with strong growth, Thorne has a base of more than 3 million customers.

Canadian bank VersaBank (VBNK) plans to raise $50 million at a $269 million market cap. VersaBank is a Canadian Schedule I chartered bank and states that it is one of the world’s first fully digital financial institutions. As of July 31, 2021, VersaBank had $1.8 billion in assets, $1.6 billion in loans, $1.5 billion in deposits, and $202 million in stockholders’ equity.

 IPO Calendar W 9 17 2021

Part B : Bond Markets

Highlights – Treasuries

Why the angst in the bond market?

The After the FOMC presented new economic projections including a forecast of 6.5% for gross domestic product this year with PCE inflation going to 2.4% this year, but falling to 2% next year. Powell reiterated that the Fed sees only a temporary pickup in inflation this year because of the base effects against last year’s numbers when prices fell. The Fed will target an average range of inflation around 2%, meaning it could exceed that threshold for some time which is a change to the Fed’s ground rules. The majority of Fed officials did not see any interest rate hikes through 2023.

What concerns bond holders and impacts stocks over the past weeks is the Fed appears to be too Blaise about inflation. This view got added weight when crude oil hit the highest prices since 2019 after OPEC decided to stay pat on production for April. But since then Crude has fallen over 12% in just a week from those highs. Hence why Powell has said “We’re going to wait to see signs of actual inflation or the appearance of other risks that could threaten the achievement of our goals. And we’ve seen that the economy can sustain exceptionally low levels of unemployment without inflation.”

There is a view that Powell also refuses to be dictated to and set the bond bullies up for failure. The V reversal this month suggests that. Air needs to come out of the market, particularly Tech, this is best illustrated by the ARK Funds and Semi-Conductor SMH ET’s (see below). From here we have another massive $1.9 Trillion stimulus. Is that enough to keep asset prices elevated, hard to fight the Fed and that kind of cash floating around. Watch the argument from analysts that higher yields mean the economy is growing, stocks are value versus hyperinflation is on its way.

Raise your eyes and look at the stopped car in front of you you may want to hit the brakes.The pandemic is not close to our greatest worry, nor is energy it seems. The  runaway credit bubble in the era of delusion and entitlement has multiple unintended consequences or are they intended? The stockmarket has lost rationality  the danger is should the bubble pop the consequences of a historic debt crisis in a deeply divided nation and unprepared social and geopolitical backdrops could be earth shattering as the Fed disregards asset inflation and bubble dynamics.

Investment-grade bond funds saw inflows of $3.0 billion, while junk bond funds posted outflows of $499 million (from Lipper).

  • Three-month Treasury bill rates ended the week at 0.03%.
  • Two-year government yields added a basis point to 0.22% (up 10bps y-t-d).
  • Five-year T-note yields jumped five bps to 0.86% (up 50bps).
  • Ten-year Treasury yields gained two bps to 1.36% (up 45bps).
  • Long bond yields fell three bps to 1.90% (up 26bps).
  • Benchmark Fannie Mae MBS yields gained five bps to 1.85% (up 51bps).

 

 TNX W 9 17 2021

 

All good while markets hold up but take note that the loosest financial conditions in history have supported a record $1.4 trillion of 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 rose 14.6% in the 12 months through April, according to the latest available numbers, marking the fastest pace of increase on record in data from 1988.

  • Freddie Mac 30-year fixed mortgage rates declined two bps to 2.86% (down 1bp y-o-y).
  • Fifteen-year rates fell seven bps to 2.12% (down 23bps).
  • Five-year hybrid ARM rates jumped nine bps to a two-month high 2.51% (down 45bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down two bps to 3.03% (down 1bp).

Highlights – Federal Reserve

  • Federal Reserve Credit last week jumped $35.1bn to $8.352 TN. Over the past 105 weeks, Fed Credit expanded $4.625 TN, or 124%. Fed Credit inflated $5.541 Trillion, or 197%, over the past 462 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week declined $0.2bn to an almost 10-month low $3.471 TN.
  • “Custody holdings” were up $764bn, or 1.9%, y-o-y.
  • Total money market fund assets dropped $39.7bn to $4.465 TN. Total money funds increased $48bn y-o-y, or 1.1%.

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 rose four bps to 0.81% (up 19bps y-t-d).
  • Ten-year Portuguese yields gained three bps to 0.26% (up 23bps).
  • Italian 10-year yields added two bps to 0.72% (up 18bps).
  • Spain’s 10-year yields rose two bps to 0.36% (up 31bps).
  • German bund yields jumped five bps to negative 0.28% (up 29bps).
  • French yields rose five bps to 0.05% (up 33bps).
  • The French to German 10-year bond spread was unchanged at 33 bps.
  • U.K. 10-year gilt yields surged nine bps to 0.85% (up 65bps).

Highlights – Asian Bonds

Japanese 10-year “JGB” yields increased one basis point to 0.05% (up 3bps y-t-d).

 

Part C: Commodities

Highights

  • The Bloomberg Commodities Index added 0.5% (up 25.0% y-t-d).
  • WTI crude rallied $2.25 to $71.97 (up 48%).
  • Gasoline gained 0.8% (up 54%),
  • Natural Gas jumped 3.4% (up 101%).
  • Copper sank 4.6% (up 21%).
  • Wheat rose 2.9% (up 11%).
  • Corn advanced 1.9% (up 9%).
  • Bitcoin rallied $1,849 this week to $47,281 (up 62.6%).

Risk markets continue to respond to a Conronvirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.

U.S. producers production still under pre Laura levels.

Higher crude prices prompt some U.S. producers start drilling again with rigs up for the ninth week in a row.

BDI Freight Index

  • The Baltic Exchange Dry Index rose 1.4% to 4,275 on Friday, its highest since November of 2009, underpinned by gains across all vessel segments and ongoing shipping constraints. The Baltic Dry Index climbed 10.6% in the third week of September, its first weekly gain in three.
  • The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, advanced 1.8% to 6,420, not far from a 12-year peak scaled on September 14th;
  • The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, rose for a seventh straight session, adding 1.4% to 3,904, its highest in three weeks.
  • Among smaller vessels, the supramax index increased 24 points to 3,307.

Source: Baltic Exchange

 BDI W 9 17 2021

Copper

Copper continued to rise after testing the lower weekly channel +2.7% on the week & is up 27% YTD. #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.

 Copper W 9 17 2021

 Corn

 CORN W 9 17 2021

 Lumber

 Lumber D 9 17 2021

Soybeans

SOY W 9 17 2021

US Crude Oil (WTI)

4 Hour:: WTI chopped all week in a continuation pattern since regaining the 240 cloud after it bounced from -1/8 to rebalance the Chikou at +2/8 to close the week. Continue to watch Kijun reactions and Murrey Math confluence.

WTI 240 9 17 2021
 

Daily:  Price action continued from last week’s WTI completing its correction of the May breakup in 3 waves (or X) & rebounded from daily cloud base to close back at it just above the 50dma. Support is Tenkan and Kijun as the market rebalances at the Chikou. We got a repeat as fractals continue with oil.

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 D 9 17 2021
 

Weekly: The weekly Tenkan gives us a clearer view of the rally off the clear ABC off 50wma and the acceleration and recapture of Tenkan and Kijun. Key is the rebalanced Chikou indicative of crowd behavior and 50% fib failure at 70.29 over 7/8. Reflect on series of fractals at last Dec wave 1 turn after we had completed 5 waves as marked, from here we watched 3 and 5 waves develop. Support below at Kijun and 50 wma. It must retain this energy to take out new highs

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 

 WTI W 9 17 2021
 

Oil 2020 2021

Oil 2014 2021

Oil 2020 2021

US Natural Gas (Henry Hub)

Daily: US Natural Gas tested the Daily +2/8 after natgas exploded out of the corrective ABC pennant of a (IV) off the 50dma to new highs as expected with impulse the Tenkan crossed Kijun depicting power. Notice the fractals of the move after completing the ( C of 4 bullish scenario has played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. Tenkan, Kijun and 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.

 NG D 9 17 2021

Weekly: Natural gas smoothly continued to it’s first target, it’s now a question of degree, 3 or 5? its move in a series of 3’s spitting the Weekly Tenkan for Chikou to rebalance. Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan. Breaking recent highs on its 3rd attempt. 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.

 NG W 9 17 2021

  Key Energy Reports

Into The Vortex – EIA Reports Build of 49 Bcf in Natural Gas Inventories

Around The Barrel – Crude Stocks at Cushing Lowest Since Jan 2020

Halliburton Earnings Rise as Multi Year Upcycle Unfolds

UAE and Saudi Arabia Reach Compromise For OPEC+ To Boost Oil Production

OPEC Monthly Oil Market Report June 2021

 

Precious Metals

Highlights

Spot Gold fell $33 to $1,754 (down 7.6%). Silver sank 5.7% to $22.39 (down 15.2%)

Gold

Gold vulnerability remains, hanging on at base of weekly cloud after another rejection of the tenkan, Kihun and 50wma after wave (ii) alt gains favor. Still listless 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.

 Gold W 9 17 2021

 Gold 2 26 21 Fail

Silver

Silver is back at the cloud spitting 50wma providing support after reversed with a double top. The weekly Tenkan crossing the Kijun signaled downside and is now resistance. Major support is the 50wma
 Silver W 9 17 2021

 

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 0.7% to 93.20 (up 3.6% y-t-d).
  • Majors for the week on the downside, the Swiss franc 1.6%, the Australian dollar 1.1%, the euro 0.8%, the British pound 0.7%, the Canadian dollar 0.6%
  • Minors for the week on the downside, the South African rand declined 3.5%, the New Zealand dollar 1.0%, the Brazilian real 0.8%, the Mexican peso 0.6%, the Swedish krona 0.6%, the South Korean won 0.5%, the Singapore dollar 0.5%, the Norwegian krone 0.4%. The Chinese renminbi declined 0.34% versus the dollar (up 0.94% y-t-d).e

Australian Dollar – AUDUSD

The Aussie dollar has corrected in 3 waves since completing a 5 at the pysch 80 level and it back break retest of wave 1 and the weekly cloud as one would expect after it completed 5 waves in emotive fashion. The Australian dollar fell to its lowest value since December under 73 US cents. Resistance the Tenkan and Kijun like many commodities. The AUDUSD old three year high of 0.7820 from January 6 is a key option energy point playing out.

AUD W 9 17 2021

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.

NZD W 9 17 2021

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.

 CAD W 9 17 2021

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.

 EUR W 9 17 2021

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.

GBP W 9 17 2021 

EuroPound – EURGBP

Back testing tenkan in a C or 3 after inconclusive X – symbolic of BREXIT? Kijun, 50wma and clouds resistance.

 EURGBP W 9 172021

Japanese Yen – USDJPY

USDJPY continues to test wave i after the recent weakness with Treasury yields. 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

JPY W 9 17 2021

 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.

MXN W 9 17 2021

Turkish Lire USDTRY

The Turkish Lire after falling in 5 waves closed under the Tenkan with the weekly cloud Kijun and 50wma below. The cloud and gap below offer targets with resistance tankan and USDTRY highs.

 TRY W 9 17 2021

Bitcoin

Bitcoin has corrected impulsively since 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 saw extreme volatility to the top of the cloud which is now key as to what the recent bottom marked. Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking . (Recall what happened after the CME and CBOE futures starts)

We have seen what you would expect from a 5 wave impulse peak, a violent correction or completion. Use Murrey Math levels for corrections and targets as algos control the herd here, support is the cloud and sharp ABC, 1-2 moves.

BTC W 9 17 2021
 

 

 

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 

Geopolitical Tinderbox Radar

Trade Imbalances IMF

Italy CDS
Turkey Geopolitical

Economic and Geopolitical Watch

Job Losses

United States Unemployment Rate

Each Thursday the Labor Department reports high numbers of Americans that applied for unemployment benefits.  With the Covid shutdown we lost over 22 million jobs in March and April. Still a huge shortfall in jobs, and the big question is will they come back?

US Politics

  • September 15 – Reuters (Jarrett Renshaw and David Lawder): “Democrats are crafting a massive spending package as big as $3.5 trillion that would transform the U.S. economy by investing in free community college, childcare and green energy, funded by tax hikes on the wealthy and larger companies. The bill’s authors must balance the Biden White House’s campaign pledges and the party’s progressives and moderates, all while catering to lawmakers empowered by Democrats’ razor-thin majorities in Congress to demand pet concessions. Facing unified Republican opposition, Democrats will need to pass the bill on strict party lines using a legislative tool called budget reconciliation. They cannot afford to lose even one vote in the Senate and more than three votes in the House of Representatives.”
  • September 16 – Bloomberg (Erik Wasson): “Senate Minority Leader Mitch McConnell rejected an appeal by Treasury Secretary Janet Yellen…, for Republicans to join with Democrats in raising the federal debt ceiling, leaving the two sides at odds with potentially weeks to go until the limit is breached. ‘The leader repeated to Secretary Yellen what he has said publicly since July: This is a unified Democrat government, engaging in a partisan reckless tax and spending spree,’ McConnell spokesman… said… ‘They will have to raise the debt ceiling on their own and they have the tools to do it.’”

The virus and psychological affect on domestic and trade relationships have impacted growth strategies with unexpected consequences   In a  fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.

 

Drought Watch

September 1 – Reuters (Gabriel Stargardter and Lisandra Paraguassu): “Brazilian Vice President Hamilton Mourao said… a severe drought could lead to energy rationing in Brazil, contradicting other officials who have said that such a step would not be necessary. Brazil, one of the world’s agricultural superpowers, is suffering from one of its worst droughts in a century. The lack of rainfall has emptied hydroelectric reservoirs, fanned inflation and hurt farmers. The government has given incentives to use less energy but says rationing is not expected. ‘There may have to be some rationing,’ Mourao told reporters in Brasilia, although he said the government had taken necessary measures to prevent blackouts.”

August 24 – Wall Street Journal (Kirk Maltais): “Drought is blistering key U.S. cash crops, further elevating prices for staples including corn and wheat. The punishing dynamics of a torrid summer were evident this month on the Pro Farmer Crop Tour… Driving along state Route 14 outside of Verdigre, Neb., Randy Wiese turned to see a farmer harvesting hay. The piles were small. ‘That farmer is sick to his stomach,’ said Mr. Wiese, who farms 800 acres of soybeans and corn… Extreme heat is baking most of the U.S. North Dakota, South Dakota, Minnesota, Iowa and Nebraska all contain areas of extreme drought… North Dakota and Minnesota, in particular, are experiencing near-record lows in soil moisture… As a result, many crops planted this spring are wilting. Some 63% of the U.S. spring wheat crop is in poor or very poor condition, versus 6% at this time last year…”

August 23 – Bloomberg (Lauren Coleman-Lochner): “The extreme drought that has gripped much of the western United States has shriveled crops, stoked wildfires, and drained reservoirs across several states. According the U.S. Drought Monitor, more than 60 million people are currently living under drought conditions in the region. For some cities, lack of water could be a fiscal as well as an environmental disaster: Prolonged droughts are threatening the creditworthiness of local governments, utilities and irrigation districts. According to a new report from S&P Global Ratings…, drought-struck municipalities may generate less income from their water systems because there’s less to sell or they may have higher costs to provide adequate supplies.”

August 8 – Axios (Rebecca Falconer): “More than 100 large wildfires are burning across nearly 2.3 million acres of the U.S. West, as forecasters warn Americans to brace for another extreme heat wave this week. Driving the news: ‘Widespread air quality alerts and scattered Red Flag Warnings stretch from the Northwest and Northern Rockies to the High Plains, as well as throughout parts of central California,’ the National Weather Service said…”

August 11 – Associated Press (Nicholas K. Geranios): “The wheat harvest on Marci Green’s farm doesn’t usually begin until late August, but a severe drought stunted this year’s crop and her crews finished harvesting last week because she didn’t want what had grown so far to shrivel and die in the heat. It’s the same story across the wheat country of eastern Washington state, a vast expanse of seemingly endless stretches of flatlands with rolling hills along its edges that produces the nation’s fourth largest wheat crop. It’s been devastated by a drought the National Weather Service has classified as ‘exceptional’ and the worst since 1977. ‘This is definitely the worst crop year we have had since we started farming 35 years ago,’ said Green, whose family is the sixth generation on the same farming land just south of the city of Spokane.”

July 24 – Bloomberg: “Extreme weather is slamming crops across the globe, bringing with it the threat of further food inflation at a time costs are already hovering near the highest in a decade and hunger is on the rise. Brazil’s worst frost in two decades brought a deadly blow to young coffee trees in the world’s biggest grower. Flooding in China’s key pork region inundated farms and raised the threat of animal disease. Scorching heat and drought crushed crops on both sides of the U.S.-Canada border. And in Europe, torrential rains sparked the risk of fungal diseases for grains and stalled tractors in soaked fields.”

June 4 – CNBC (Emma Newburger): “Nearly three-fourths of the U.S. West is grappling with the most severe drought in the recorded history of the U.S. Drought Monitor, as hot and arid conditions are set to exacerbate the threat of wildfires and water supply shortages this summer. Parts of California, Nevada and Washington experienced sweltering triple-digit temperatures over the past week amid the drought… Conditions this spring are much worse than a year ago. In fact, nearly half of the continental U.S. is in a moderate to exceptional drought, marking the most significant spring drought in the country since 2013, according to… the National Oceanic and Atmospheric Administration.”

June 10 – Reuters (Andrea Januta and Daniel Trotta): “The reservoir created by Hoover Dam… has sunk to its lowest level ever, underscoring the gravity of the extreme drought across the U.S. West. Lake Mead, formed in the 1930s from the damming of the Colorado River at the Nevada-Arizona border about 30 miles (50 km) east of Las Vegas, is the largest reservoir in the United States. It is crucial to the water supply of 25 million people including in the cities of Los Angeles, San Diego, Phoenix, Tucson and Las Vegas. As of 11 p.m. PDT Wednesday, the lake surface fell to 1,071.56 feet above sea level, dipping below the previous record low set on July 1, 2016.”

June 18 – Wall Street Journal (Katherine Blunt and Jim Carlton): “States across the West are at risk of electricity shortages this summer as a crippling drought reduces the amount of water available to generate hydroelectric power. Some of the region’s largest reservoirs are at historically low levels after a dry winter and spring reduced the amount of snowpack and precipitation feeding rivers and streams. The conditions are especially dire in drought-stricken California, where officials say the reservoir system has seen an unprecedented loss of runoff this spring—800,000 acre-feet, or enough to supply more than a million households for a year.”

June 16 – CNBC (Emma Newburger): “An extreme heat wave gripping the western United States will intensify and spread this week, creating dangerous conditions amid the worst drought in the last two decades and raising concerns about severe wildfires and electrical grid failures. More than 40 million people in the country are forecast to experience triple-digit temperatures this week, and roughly 200 million people are projected to see temperatures over 90 degrees Fahrenheit. More than three-fourths of the West is in severe drought… Temperatures in some areas could surpass 120 degrees, and excessive-heat warnings are in place for several states. Nevada and Arizona are forecast to see record temperatures of 125 and 128 degrees, respectively.”

Global Watch

Hot Spots

  • September 16 – Bloomberg: “China slammed a move by the U.S. and U.K. to help Australia build nuclear submarines, saying the new partnership will stoke an ‘arms race’ as tensions heat up in Asia-Pacific waters. Prime Minister Scott Morrison joined with U.S. President Joe Biden and the U.K.’s Boris Johnson… to announce a new security partnership that will see Australia acquire nuclear-powered submarines. While it could take more than a decade for Australia to build one, the agreement shows the U.S. joining with key English-speaking allies to form a more cohesive defense arrangement to offset China’s rising military prowess. The partnership ‘greatly undermines regional peace and stability, aggravates the arms race and hurts the international non-proliferation efforts,’ Chinese Foreign Ministry spokesman Zhao Lijian told reporters… He also questioned Australia’s commitment to forgoing nuclear weapons, and said the U.S. and U.K. were ‘using nuclear exports as geopolitical gaming tool and applying double standards.’”
  • September 16 – Reuters (Ben Blanchard and Yimou Lee): “Taiwan proposed… extra defense spending of T$240 billion ($8.69bn) over the next five years, including on new missiles, as it warned of an urgent need to upgrade weapons in the face of a ‘severe threat’ from giant neighbor China. Taiwan President Tsai Ing-wen has made modernizing the armed forces – well-armed but dwarfed by China’s – and increasing defense spending a priority, especially as Beijing ramps up military and diplomatic pressure against the island it claims as ‘sacred’ Chinese territory.”
  • September 12 – Financial Times (Henry Foy and Richard Milne): “Russia plans to use war games this week with Belarus to deepen its control over its neighbour’s armed forces and increase its military capabilities on the borders of Nato member states, western defence officials have warned. The seven-day Zapad-2021 exercise, which began on Friday, involves tens of thousands of troops from both countries and conventional and strategic weapons tests to simulate conflict with a western enemy, and comes amid increased pressure from the Kremlin for deeper integration with Minsk. ‘Zapad fits into a broader pattern: a more assertive Russia, significantly increasing its military capabilities and its military presence near our borders,’ said Jens Stoltenberg, Nato secretary-general.”
  • September 15 – Reuters (Hyonhee Shin and Josh Smith): “North Korea and South Korea test fired ballistic missiles on Wednesday, the latest volley in an arms race in which both nations have developed increasingly sophisticated weapons while efforts prove fruitless to get talks going on defusing tensions… North Korea fired a pair of ballistic missiles that landed in the sea off its east coast…, just days after it tested a cruise missile that analysts said could have nuclear capabilities. Japan’s defence ministry said the missiles landed inside Japan’s exclusive economic zone (EEZ)…”

 

Trade Wars

  • Trade wars persist between Australia and China. The largest exporter of commodities and the worlds largest importer of commodities. China is experiencing record cold weather and it’s beligerance is hurting shooting itself in the foot. Regional partners such as Japan and India have supported Australia’s standing up to Chinese bullying.
  • September 3 – Bloomberg (Jonathan Tirone): “U.S. and European efforts to coax Iran back into nuclear negotiations as soon as this month are being blunted by support the Islamic Republic’s already emboldened leaders are receiving from China and Russia. The result is that three years after former President Donald Trump imposed his ‘maximum pressure’ policy, Iran has enriched uranium close to weapons grade while its economy is showing some signs of stabilizing with the help of Beijing and Moscow, even as crucial oil exports remain heavily sanctioned.”

 

Coronavirus Fat Tail Virus Risk

  • September 16 – CNBC (Berkeley Lovelace Jr.): “The fast-spreading delta variant is so contagious, it’s exposed weaknesses in vaccine protection and changed the outlook for ending the pandemic, Moderna President Stephen Hoge said… Delta is ‘just so good at infecting people and replicating that it raises the bar on how good vaccines have to be,’ he said… ‘It’s actually shown some of the weaknesses that [vaccines] have earlier than you might expect…’ ‘The breakthrough cases are not all delta’s fault,’ Hoge said. He said he suspects the Covid cases in vaccinated people are a result of both vaccine protection waning over time and the highly transmissible variant.’”
  • September 12 – Bloomberg (James Paton): “Variants that can eventually evade Covid vaccines are increasingly likely with vast parts of the world unprotected, and rich countries should hold back on booster doses until others catch up, according to a special envoy to the World Health Organization. ‘Variants that can beat the protection offered by vaccines are bound to emerge all over the world in the coming months and years,’ David Nabarro, the WHO envoy, said… ‘This is an ongoing battle, and we need to work together.’”
  • Fauci believes 70%-85% of the population must be vaccinated to reach herd immunity.

 

Banks

The major money cents banks released earnings with many record results for Q1. Mainly from trading and fees from IPO’s and SPAC’s. Rising interest rates also help the bottom line.

Goldman Sachs Trading and SPACs Investment Banking Fees Pull in Record Revenue

Wells Fargo Beat Earnings With $1.05 Billion Reserve Release

JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves

Blackrock Earnings Soar As Assets Under Management Rose to Record $9 Trillion

PNC Bank Earnings Beat Ahead of Completing BBVA USA Bancshares Acquisition

Citigroup Beats Earnings on Reserve Release, Exiting Most Consumer Banking in Asia, Europe, and Middle East

Bank of America Earnings Rise With Net Interest Yield and Release of Loan loss Reserves

Morgan Stanley Dealmaking and Trading Drive Record Profits

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 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 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”

Akio Morita mistakes

The Week Ahead – Have a Trading Plan

Central banks grab center stage this week, and not all for good reasons. We have the Federal Reserve, Bank of England and Bank of Japan policy meetings. Officials in the US are widely expected to give an update on the timing of the bank’s asset purchase tapering. Canadians are voting for a new parliament on September 20th and the DAX goes from DAX30 to DAX40 the same day in Germany. Flash PMI surveys for the US, UK, Eurozone, Japan and Australia will provide an insight about the state of the global economic recovery.

The expectation is that the Fed will announce in September or later in the fall that it will taper back its $120 billion a month bond program, starting at the end of the year or early next year. The tapering is expected to be gradual and continue for 10 months or more. The Fed’s own forecasts show its first rate hikes happening in 2023. No new information came from the Fed when officials gathered virtually for their annual symposium in Jackson Hole, Wyoming. But action was not expected to be taken until the September meeting or later.

Central Banker and Geopolitics Watch speeches, reports and rate moves

Monday: September 20 2021

  • Tentative EUR German Buba Monthly Report
  • 21:30 AUD RBA Meeting Minutes

Tuesday September 21 2021

  • 02:05 ECB’s De Guindos Speaks
  • 10:00 FOMC begins 2-day meeting
  • 12:15 ECB’s Enria Speak
  • s 21:30 PBoC Loan Prime Rate
  • 22:00 RBA Assist Gov Bullock Speaks
  • 22:00 BoJ Monetary Policy Statement
  • 23:00 BoJ Press Conference
  • 23:04 BoJ Interest Rate Decision

Wednesday September 22 2021

  • 03:30 German Buba Wuermeling Speaks
  • 06:30 ECB’s Enria Speaks
  • 09:00 SNB Quarterly Bulletin
  • 10:00 German Buba Mauderer Speaks
  • 10:30 EIA Crude Oil Inventories
  • 12:00 BoE Deputy Gove
  • rnor Woods Speaks
  • 14:00 FOMC Statement
  • 14:00 Fed Interest Rate Decision
  • 14:00 FOMC Economic Projections
  • 14:00 Interest Rate Projection – 1st Yr (Q3)
  • 14:00 Interest Rate Projection – 2nd Yr (Q3)
  • 14:00 Interest Rate Projection – 3rd Yr (Q3)
  • 14:00 Interest Rate Projection – Current (Q3)
  • 14:00 Interest Rate Projection – Longer (Q3)
  • 14:30 Fed Chairman Jerome Powell briefing
  • 17:00 BRL Interest Rate Decision

Thursday September 23 2021

  • 03:30 SNB Interest Rate Decision (Q3)
  • 03:30 CHF SNB Monetary Policy Assessment
  • 04:00 EUR ECB Economic Bulletin
  • 05:30 EUR ECB LTRO
  • 05:45 EUR ECB’s Elderson Speaks
  • 06:15 EUR ECB’s Elderson Speaks
  • 07:00 GBP BoE Interest Rate Decision (Sep)
  • 07:00 GBP BoE MPC Meeting Minutes
  • 07:00 GBP BoE QE Total (Sep)
  • 07:00 EUR German Buba Wuermeling Speaks
  • 09:00 German Buba Wuermeling Speaks
  • 09:00 RUB Central Bank reserves (USD)
  • 09:00 ZAR Interest Rate Decision (Sep)

Friday September 24 2021

  • 07:50 ECB’s Elderson Speaks
  • 08:45 Cleveland Fed President Loretta Mester
  • 07:50 ECB’s Elderson Speaks
  • 09:00 MPC Member Tenreyro Speaks
  • 09:15 ECB’s Lane Speaks
  • 10:00 USD Fed Chair Powell Speaks
  • 10:00 Fed Chairman Jerome Powell, Vice Chairman Richard Clarida, Fed Governor Michelle Bowman at Fed Listens event
  • 10:00 Kansas City Fed President Esther George

Improvements in some economic indicators, such as home sales, manufacturing activity and  in employment data have bolstered investor confidence and helped extend the rally in stocks. Support in markets comes from the Fed’s balance sheet which has ballooned to $7.2 trillion, and the central bank committed to monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities.

Economic Events in the Week Ahead:

Sunday, September 19, 2021

  • 18:30 NZD BusinessNZ Performance of Services Index (PSI)
  • 19:01 GBP Rightmove house prices for September

Monday, September 20, 2021

  • All Day Holiday Japan – Public Holiday
  • All Day Holiday China – Public Holiday
  • All Day Holiday South Korea – Chuseok – Thanksgiving Day
  • 02:00 EUR German PPI (MoM) (Aug)
  • 04:00 EUR Spanish Trade Balance
  • 04:30 HKD CPI (YoY) (Aug)
  • Tentative EUR German Buba Monthly Report
  • 10:00 USD NAHB Housing Market Index (Sep)
  • 11:30 USD 3-Month Bill Auction
  • 11:30 USD 6-Month Bill Auction
  • 17:00 NZD Westpac Consumer Sentiment (Q3)
  • 21:30 AUD RBA Meeting Minutes
  • 23:00 NZD Credit Card Spending (YoY)

Tuesday, September 21, 2021

  • All Day Holiday China – Mid-Autumn Festival
  • All Day Holiday South Korea – Chuseok – Thanksgiving Day
  • 02:00 GBP Public Sector Net Borrowing (Aug)
  • 02:00 CHF Trade Balance (Aug)
  • 02:05 EUR ECB’s De Guindos Speaks
  • 06:00 GBP CBI Industrial Trends Orders (Sep)
  • 08:30 USD Building Permits (MoM) (Aug)
  • 08:30 USD Current Account (Q2)
  • 08:30 USD Housing Starts (Aug)
  • 08:30 CAD New Housing Price Index (MoM) (Aug)
  • 08:55 USD Redbook (YoY)
  • 11:30 USD 20-Year Bond Auction
  • Tentative NZD GlobalDairyTrade Price Index
  • 12:15 EUR ECB’s Enria Speaks
  • 16:30 USD API Weekly Crude Oil Stock
  • 20:30 AUD MI Leading Index (MoM)
  • 21:30 CNY PBoC Loan Prime Rate
  • 22:00 AUD RBA Assist Gov Bullock Speaks
  • 22:00 JPY BoJ Monetary Policy Statement
  • 23:00 JPY BoJ Press Conference
  • 23:04 JPY BoJ Interest Rate Decision

Wednesday, September 22, 2021

  • All Day Holiday Hong Kong – The day following the Chinese Mid-Autumn Festival
  • All Day Holiday South Korea – Chuseok – Thanksgiving Day
  • 03:30 EUR German Buba Wuermeling Speaks
  • 05:00 EUR Italian Industrial Sales (MoM) (Jul)
  • 06:30 EUR ECB’s Enria Speaks
  • 07:00 USD MBA 30-Year Mortgage Rate
  • 07:00 USD MBA Mortgage Applications (WoW)
  • 07:00 USD MBA Purchase Index
  • 07:00 USD Mortgage Market Index
  • 07:00 USD Mortgage Refinance Index
  • 09:00 CHF SNB Quarterly Bulletin
  • 10:00 EUR German Buba Mauderer Speaks
  • 10:00 EUR Consumer Confidence (Sep)
  • 10:30 USD Crude Oil Inventories
  • 12:00 GBP BoE Deputy Governor Woods Speaks
  • 13:00 USD 2-Year Note Auction
  • 14:00 USD FOMC Statement
  • 14:00 USD Fed Interest Rate Decision
  • 14:00 USD FOMC Economic Projections
  • 14:00 USD Interest Rate Projection – 1st Yr (Q3)
  • 14:00 USD Interest Rate Projection – 2nd Yr (Q3)
  • 14:00 USD Interest Rate Projection – 3rd Yr (Q3)
  • 14:00 USD Interest Rate Projection – Current (Q3)
  • 14:00 USD Interest Rate Projection – Longer (Q3)
  • 14:30 USD FOMC Press Conference
  • 17:00 BRL Interest Rate Decision
  • 19:00 AUD Manufacturing PMI
  • 19:00 AUD Services PMI
  • 19:50 JPY Foreign Bonds Buying
  • 19:50 JPY Foreign Investments in Japanese Stocks

Thursday, September 23, 2021

  • All Day Holiday Japan – Public Holiday
  • 01:00 SGD CPI (YoY) (Aug)
  • 02:45 EUR French Business Survey (Sep)
  • 03:00 EUR Spanish GDP (QoQ) (Q2)
  • 03:15 EUR French Manufacturing PMI (Sep)
  • 03:15 EUR French Markit Composite PMI (Sep)
  • 03:15 EUR French Services PMI (Sep)
  • 03:30 CHF SNB Interest Rate Decision(Q3)
  • 03:30 CHF SNB Monetary Policy Assessment
  • 03:30 EUR German Composite PMI (Sep)
  • 03:30 EUR German Manufacturing PMI (Sep)
  • 03:30 EUR German Services PMI (Sep)
  • 04:00 EUR ECB Economic Bulletin
  • 04:00 EUR Manufacturing PMI (Sep)
  • 04:00 EUR Markit Composite PMI (Sep
  • ) 04:00 EUR Services PMI (Sep)
  • 04:30 GBP Composite PMI
  • 04:30 GBP Manufacturing PMI
  • 04:30 GBP Services PMI
  • 05:30 EUR ECB LTRO
  • 05:45 EUR ECB’s Elderson Speaks
  • 06:15 EUR ECB’s Elderson Speaks
  • 07:00 GBP BoE Interest Rate Decision (Sep)
  • 07:00 GBP BoE MPC Meeting Minutes
  • 07:00 GBP BoE QE Total (Sep)
  • 07:00 EUR German Buba Wuermeling Speaks
  • 08:30 USD Chicago Fed National Activity (Aug)
  • 08:30 USD Continuing Jobless Claims
  • 08:30 USD Initial Jobless Claims
  • 08:30 USD Jobless Claims 4-Week Avg.
  • 08:30 CAD Core Retail Sales (MoM) (Jul)
  • 08:30 CAD Retail Sales (MoM) (Jul)
  • 09:00 EUR German Buba Wuermeling Speaks
  • 09:00 RUB Central Bank reserves (USD)
  • 09:00 ZAR Interest Rate Decision (Sep)
  • 09:45 USD Manufacturing PMI (Sep)
  • 09:45 USD Markit Composite PMI (Sep)
  • 09:45 USD Services PMI (Sep)
  • 10:00 USD US Leading Index (MoM) (Aug)
  • 10:30 USD Natural Gas Storage 1
  • 1:00 USD KC Fed Composite Index (Sep)
  • 11:00 USD KC Fed Manufacturing Index (Sep)
  • 11:30 USD 4-Week Bill Auction
  • 11:30 USD 8-Week Bill Auction
  • 13:00 USD 10-Year TIPS Auction
  • 17:00 KRW PPI (MoM) (Aug)
  • 18:45 NZD Trade Balance (MoM) (Aug)
  • 18:45 NZD Trade Balance (YoY) (Aug)
  • 19:01 GBP GfK Consumer Confidence (Sep)
  • 19:30 JPY CPI, n.s.a (MoM) (Aug)
  • 19:30 JPY National Core CPI (YoY) (Aug)
  • 19:30 JPY National CPI (YoY) (Aug)
  • 20:30 JPY Manufacturing PMI (Sep)
  • 20:30 JPY Services PMI (Sep)

Friday, September 24, 2021

  • All Day Holiday South Africa – Heritage Day
  • 01:00 SGD Industrial Production (MoM) (Aug)
  • 04:00 EUR Italian Business Confidence (Sep)
  • 04:00 EUR Italian Consumer Confidence (Sep)
  • 04:00 EUR German Business Expectations (Sep)
  • 04:00 EUR German Current Assessment (Sep)
  • 04:00 EUR German Ifo Business Climate Index (Sep)
  • 06:00 GBP CBI Distributive Trades Survey (Sep)
  • 07:50 EUR ECB’s Elderson Speaks
  • 09:00 GBP MPC Member Tenreyro Speaks
  • 09:15 EUR ECB’s Lane Speaks
  • 10:00 USD Fed Chair Powell Speaks
  • 10:00 USD New Home Sales (Aug)
  • 11:00 CAD Budget Balance (Jul)
  • 13:00 USD U.S. Baker Hughes Oil Rig Count
  • 15:30 USD CFTC speculative net positions

 

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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