August 27 – Sept 3, 2023

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.

• Part A: Stock markets
• Part B: Bonds
• Fed and Banks
• Part C: Commodities
• Energy – Oil and Gas
• Gold and Silver
• Part D: Foreign Exchange
• Geopolitics and Economics
• Economy Week ahead

Editorial

With the annual Jackson Hole Symposium and BRICS Summit bond and currency markets continue to dominate. The stock market’s main event was NVidia earnings which smashed forecasts sending the stock to an all-time high over $515 in after hours with market hype. Analysts upgraded the stock to $700-900. Remember analysts are not realists, not traders and are fueled by the desire not to miss out of a move with what has been described as the “complexities of nerd ego” No surprise the stock fell back to $480, and the market reversed hard. Flavor Flav says it best “Don’t believe the hype” price matters, look at the NVDA chart from KnovaWave in equity and note the peak where it is. Unpredictability is predictable.

Retailers reported earnings this week in a mixed fashion with big moves in stock prices, up and down. Macy’s (M) commented on weakening consumer credit trends. Dick’s Sporting Goods (DKS), Dollar Tree Stores (DLTR) and Foot Locker (FL) all had disappointing reports that were attributed in part to inventory shrink (i.e., shoplifting).

The pattern of a mostly good week for the mega-cap names and a relatively lackluster week for the broader market played out. The S&P 500 and Nasdaq Composite broke a three-week losing streak. The market-cap weighted S&P 500 rose 0.8% this week while the Invesco S&P 500 Equal-Weight ETF (RSP) posted a small loss. The Russell 2000 was down 0.3% for the week and the S&P Midcap 400 Index was flat. The Nasdaq Composite gained 2.3% and the Dow Jones Industrial Average fell 0.4%.

Housing reports highlights affordability and mortgage rates matter.

US home affordability lowest level in nearly 40 years

Financial conditions are tightening tighten. “Risk on” has begun the transition to “risk off”. That emerging markets and U.S. markets succumbed to the greed fueled, FOMO intensified “melt-up” dynamics in the face of festering Chinese issues only exacerbated vulnerabilities.

• Existing home sales were slightly weaker than expected, impeded yet again by limited supply and affordability pressures from high mortgage rates.
• New home sales were slightly stronger than expected 7-month high) driven by sales of more moderately priced homes as higher building costs hurt the supply of lower-priced homes while higher mortgage rates contributed to affordability pressures across the spectrum.
• The data suggest construction will for now support economic expansion. Who would have thought the homebuilders would have been ‘strong as bull’ (Homebuilder ETF up 32% y-t-d!) after more than 500 bps of Fed rate hikes?
• Thirty-year mortgage rates rose eight bps this week to 7.30%, the high back to December 2000.
• MBS yields traded up to 6.27% in Tuesday trading, the peak since July 2007, before ending the week down seven bps at 6.08%.
• Ten-year Treasury yields rose to 4.36% intraday Tuesday, the high since November 2007.
• Two-year Treasury yields traded as high as 5.09% in Friday trading, surpassing the March 8th (pre-SVB) peak to the high back to June 2007.

“A recent surge in US mortgage rates has pushed affordability to the lowest level in nearly four decades. For house hunters, waiting for any relief is a risky gamble. It’s been a hard lesson. Last year’s slowdown brought a brief respite from the price gains of the pandemic boom but that’s now vanished, with home values recovering the nearly $3 trillion they’d lost. Now, one measure of borrowing costs has climbed back up to a level last seen in 2001, and the Federal Reserve has indicated it may hike rates further, raising the risk that mortgage rates may push toward 8%.” – August 17 – Bloomberg (Jennifer Epstein and Prashant Gopal)

Markets reacted with volatility on Fed Chair Powell’s speech at Jackson Hole, in reality though there was nothing new. He reiterated the Fed’s 2.0% inflation target and that the process of getting inflation back down to 2.0% still has a long way to go. He also acknowledged that the Fed would raise rates again if it is appropriate. The U.S. Dollar Index was up 0.8% for the week to 104.19, with yields and short covering after the BRICs Summit delivered the same old dogma.

It was more “Balanced Powell” Friday at Jackson Hole, and he did address the neutral rate:

Powell: “There are some challenges that are common to all tightening cycles. For example, real interest rates are now positive and well above mainstream estimates of the neutral policy rate. We see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring, and inflation. But we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint.”

That left us with the question, what policy rate would be “neutral” for a major Bubble? Given there is no neutral, no equilibrium for Bubbles. Bubbles either inflate or deflate. For three decades, the Fed (and global central bank community) has responded to Bubble deflation and collapse with ever more powerful reflationary stimulus measures, feeding the greatest Speculative Cycle in history.

September Mornings or Warnings?

Now that we heard from Fed Chair Powell at the Kansas City Fed’s Jackson Hole Symposium, the focus shifts back to the data and how bankers interpret it.

August Services PMI data point to some cooling, the preliminary Manufacturing and Services PMI readings showed a deceleration in activity from July and an ongoing contraction in the manufacturing sector.

The September effect on risk appetite is a real thing, history suggests. That said we live in such manufactured times market wise, socially wise and sentiment wise we won’t put it all on that affect but is in the back of our minds.

Monthly returns on the S&P500 since 1928 lean towards September being the worst month for stocks on average at least for passive investing. In Septembers since 1945, the S&P 500 has declined an average of 0.7%, the worst performance of any month, according to CFRA.

Looking ahead for September there are a number of catalysts. The big ones this week are the jobs report and PCE. The week ahead is filled with Fed speak. On Monday and Tuesday, Barr speaks about banking services. On Thursday, we hear from both Bostic and Collins, while Friday contains appearances by Bostic before the NFP report, and Mester on inflation after.

After that consumer price data due on Sep. 13 then the Fed’s monetary policy meeting on Sep. 20. Friday’s speech from Fed Chairman Powell fueled expectations of another rate increase this year, though a move in September was seen as less likely.

We have seen volatility in the recent weeks. The S&P 500 from up nearly 15% has retreated more than 4% from its July 31 high. Weakness in China’s economy and a surge in Treasury yields weigh.

On Friday the final reading of the University of Michigan Consumer Sentiment Index for August came in at 69.5 (consensus 71.2) versus the preliminary reading of 71.2. The final reading for July was 71.6, which marked the highest level since October 2021. In the same period a year ago, the index was at 58.2.
The reports show consumers think the rapid improvements seen in the economy in the past three months have moderated if not illusory.

It is also globally that we look and a heavy macro data week could materially inform the subsequent round of policy decisions by the RBA on the 5th, the BoC on the 6th, the ECB on the 14th, the Federal Reserve on the 20th, the BoE on the 21st and the Bank of Japan on the 22nd.

In the US we have payrolls and wages but also Eurozone inflation, Canadian GDP, Chinese PMIs and inflation reports from Australia are some of the fundamentals this week. Fed Chair Powell’s and ECB President Lagarde’s speeches at Jackson Hole reinforced decisions are data dependent.

We look at Tesla as it mirrors part of the FOMO crowd and part of the passive crowd, we can see from the chart it ran up ahead of earnings, dropped after it and sideways since. much like the belly of active stocks. From there we have created a potential bull flag which is in line with bond and sentiment. The bear side is it all falls what it is trying to correct. Clearly visible in the chart pattern below.

Outside the U.S. we had heightened financial stress and weak markets in China as we had been the pattern all year despite the constant dribbler and talking heads calling for a China turn around.

Risks Being Ignored or Opportunity Being Repriced?

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

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

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

Where is the fear?

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

With optionality dominating markets along with quant funds, algorithms, systematic trading and automated trading volatility has collapsed as has been focused on at KnovaWave. The S&P 500 moved less than 1% in either direction for 36 of the 46 sessions heading into June, according to Dow Jones Market Data, the quietest 46-day stretch since December 2021. This was all in a period of a regional bank crisis and debt ceiling crisis. These systems have no emotion and trade accordingly. The weeks since then continued the pattern for the most part.

Driving quant funds is a self-reinforcing dynamic, when market volatility drops, they add which causes those funds that have paid higher volatility to cover and hence we get the churn. At the end of March, quant-focused hedge funds held about $1.13 trillion in assets, according to research firm HFR, hovering just below last year’s record high. That represents about 29% of all hedge-fund assets.

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

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

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

Caitlin McCabe WSJ

Cboe Daily Market Statistics

Talking about manic behavior it is not hard to argue the punter is overwhelming and influencing markets like no other time, well until the next time. Swirling greed and know it all came home to roost. FOMO (fear of missing out) and TINA (there is no alternative) ended how they always do.

When the VIX is highly reactive, VIX related products can serve as potentially effective hedging tools, when the VIX is not very reactive, traditional hedging techniques may be a better choice.

The VOLX`s underlying instrument is the Mini VIX™ Future. The CBOE Volatility Index (VIX) is an up-to-the-minute market estimate of expected volatility. The VIX is calculated using a formula to derive expected volatility by averaging the weighted prices of out-of-the-money puts and calls (options) on the S&P 500.

Worth repeating again in the low VIX environment.

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

The doomsayers may be right, but we are seeing constant surprises to that theory. For example, early signs that the US housing market slump is finding a base are emerging, pending home sales having risen for a third month and to a 6-month high. we will keep an eye on consumer sentiment and business activity. We are far from being out of the woods, remember the market is not the economy. Saying that we got quite the distorted job picture per our main job stories which we reprise below. Are we simply taking some air out or is the beginning of the great meltdown?

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

What non-traders are failing to grasp is this market with so many variables is not trading as they expect and they are constantly wrong. S&P 500 earnings for the first quarter are estimated to have fallen 5% from 2022, followed by an expected 3.9% drop in the second quarter, Refinitiv data shows. During recessions, however, earnings tumble at a 24% annual rate on average, according to Ned Davis Research. However how important is that in such a chaotic market? There is the answer structure your thinking around game theory or even chaos theory.

Week Ahead: Global PMI, BHP, NVidia, Jackson Hole, BRICS

Eyes will be on top macroeconomic reports that will emphasize the health of the US and global economies. Eyes and ears will be on central bankers given the market turmoil and the hiking of rates.

How Hot is the American Economy?

More Macro and Micro data points, some highlights include.

• Monday: Nothing of note
• Tuesday: June FHFA Housing Price Index and June S&P Case-Shiller Home Price Index; July job openings and August Consumer Confidence (prior 117.0)
• Wednesday: Weekly MBA Mortgage, August ADP Employment Change; Q2 GDP — second estimate (prior 2.4%), July advance goods trade balance; Weekly oil inventories.
• Thursday: July Personal Income, Personal Spending, PCE Prices, Core PCE Prices; August Chicago PMI Weekly Initial and Continuing jobless claims, Weekly natural gas inventories,
• Friday: August Nonfarm Payrolls, Nonfarm Private Payrolls, Unemployment Rate, Average Hourly Earnings; final August S&P Global U.S. Manufacturing PM; July Construction Spending and August ISM Manufacturing Index

A heavy line-up of other US releases will include the following (Via Scotia):

• Consumer confidence (Tuesday): August’s reading might have softened. July’s somewhat softer payrolls report, higher gas prices, and volatile markets that pushed the 30-year fixed mortgage rate to about a 23-year high are among the motivating considerations.
• Q2 GDP-r (Wednesday): The second attempt at estimating Q2 GDP growth is not expected to result in material revisions to the first estimate of 2.4% q/q SAAR. The greater focus is upon momentum into Q3 that appears to be yet again driving upward forecast revisions.
• Income and spending (Thursday): August’s release is expected to post strong growth in consumption as services get added to the earlier release that showed a 1% m/m SA gain in the retail sales control group. When coupled with income growth that is expected to be around the recent 0.3–0.4% trend pace, the result will probably push the personal saving rate lower than the prior month’s 4.3%.
• PCE inflation (Thursday): August’s release is forecast to largely follow the prior CPI figures with a mild headline PCE increase of 0.2% that could push the year-over-year rate back up above 3% and the core PCE inflation measure up by a similar amount that could halt the deceleration since late last year.
• Vehicle sales (Friday): August’s tally is forecast to pull back to about 15.3 million units at a seasonally adjusted and annualized pace for a nearly 3% m/m SA decline. That could knock about ½% m/m SA off of retail sales growth in isolation of all other effects. Industry guidance that serves as input to the BLS’s CPI figures also indicates that new vehicle prices were up by about 1% m/m SA and used vehicle prices were up by 1.5% m/m SA. If true, then the combined weighted contribution to August CPI from vehicle prices could be on the order of about 0.1% m/m SA.
• ISM-manufacturing (Friday): August’s reading is expected to continue to indicate that the manufacturing sector is in contraction for a 10^th consecutive month. Hard data has been much more mixed. Manufacturing output has risen in three out of seven months so far this year, been little changed in two others, and fell in May and June before it jumped higher in July. Watch supply chain signals and both price and hiring signals. The more important (because of its weight) ISM-services reading won’t be out until the following week.

Construction readings: Here we’ll get a trio of releases. Repeat sale home prices during June are expected to rise another 1% m/m SA or so (Tuesday). Pending home sales during July could soften as mortgage rates climbed (Wednesday). Construction spending during July is forecast to post another solid gain (Friday).

How is the Consumer Hanging?

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

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

Earnings season continues with earnings from JOANN (JOAN) Best Buy (BBY), J.M. Smucker (SJM), Salesforce (CRM), Five Below (FIVE), Victoria’s Secret (VSCO) Chewy (CHWY) Campbell Soup (CPB), Dell Technologies (DELL), Lululemon (LULU). Lands’ End (LE)

Click here to see the Full Week Ahead List Below

Some things never change, when you think Greed is Good

So how Screwed are We?

• The banking system is on much greater Credit risk than mortgage risks were offloaded during the 2008 mortgage finance Bubble. At $25.6 TN, Banking System Assets ended 2022 almost double the 2007 level.
• Financial Sector debt growth jumped to a 9.66% rate last year, the strongest since 2007’s 13.50% Z.1 data showed. Now we are looking at this given the quick demise of regional banks and the concerns of the commercial structure. Why? we simple note a jump in Financial Sector borrowings signals a surge in risk intermediation. Is this fateful late-cycle intermediation gong to haunt the financial sector and economy when the Bubble bursts.
• If it doesn’t burst well, we circle back to the popular view that Financial Sector debt included in analysis would be “double counting” borrowings already included elsewhere (i.e. mortgage and business). The swift end to backs, the shocking management out there and geopolitical cold war out there has us ready to expect the unexpected and aware of moves to mitigate by Central banks as we saw a few weeks ago.
• GSE Assets expanded an unprecedented $2.094 TN, or 29.4%, over the past three years to a record $9.224 TN. FHLB Assets surged $524 billion, or 72%, in 2022, with indications for Q1 growth upwards of (yes) $400 billion.
• FHLB plays a pivotal role, last year prolonging the lending boom and last month stabilizing bank liquidity.

The Credit cycle downturn is coming to the surface.

We have the reflective destabilizing Monetary Disorder. Take a peek at China and the markets collective cognitive dissonance to the property market there, the shadow banking as just one example. Have a look around the world. The hope is the collective mass continues to evolve and survive, while each time the destruction is evident in massive disproportion shifts of wealth and attempts of mind, if not physical control of the masses. Dial that back and try and get in the minds of those trying to right the ship and the market components that matter, not what the dribblers think matter.

Here’s a thought, knowing about the power of cognitive dissonance does not necessarily protect you from its effects. Traders are only too aware of this eureka moment when you grasp it. Why some of the best trades you ever do, are the ones you don’t. In option parlance, being delta neutral sometimes is the best trade.

Key this coming week will be the commencement of the next round of such indicators that will test whether these gains were one-offs or something that is sustainable. The key will be the extent to which downside risks to the US economy have been reduced enough to influence global central banks, and how markets react.

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

Where to from here? It’s also okay to acknowledge and process any difficult emotions or experiences that you may have had during the past year. Looking back on the past year with perspective can help you to gain a greater understanding of what you have been through and how you have coped. I hope that you are able to find ways to manage any challenges that come your way and that you continue to feel fine moving forward. Embrace the chaos that is headed your way in 2023!

China; Behind the Iron Curtain

A big shift in 2022, China’s population is now falling and below that of India. China’s population fell for the first time since 1961 as births have steadily fallen in recent years despite the removal of the “one child policy”. The stalling working age population and its likely decline ahead means that potential growth in China is down from around 10% or so in the 2000s to around 4-5% now.

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

“China is warning domestic brokerages not to spread information that compromises national security, reinforcing a campaign that has roiled consulting firms and providers of financial data.”

• August 17 – Bloomberg (Bruce Grant): “A debt crisis in the Chinese property market is escalating following Country Garden’s missed bond payments last week. About 60% or $116 billion of the outstanding Chinese offshore real estate bonds are labeled as distressed. Dollar bonds extended their slump over the past week, while a measure of liquidity indicates more pain is in store for poorly-capitalized private developers.”
• August 17 – Associated Press (Joe McDonald): “Chinese leader Xi Jinping has called for patience in a speech released as the ruling Communist Party tries to reverse a deepening economic slump and said Western countries are ‘increasingly in trouble’ because of their materialism and ‘spiritual poverty’… Xi, the country’s most powerful leader in decades, called for China to ‘build a socialist ideology with strong cohesion’ and to focus on long-term goals of improving education, health care and food supplies for China’s 1.4 billion people instead of only pursuing short-term material wealth.”

The Market Tripod of Destruction.

• Firstly, financial asset overvaluation has swung way past any sound underlying economic wealth structure.
• Secondly over-leverage in crowded bets.
• Thirdly we have greed enthused, as always in these cycles, risk engineering, transfer and management that ignores or understands bifurcation and contagion outcomes.

Leverage has become toxic, a development that if not addressed will have deep and with far-reaching sequels. It’s not too farfetched to suggest that the markets are on the verge of a rupture that would be difficult to contain. Should the crisis of confidence dynamics that hit Britain feed into other markets a powerful global contagion could be unleashed. The markets are dislocated, and financial stability is at risk. A sobering thought is the UK is just the initial first world pension system in this cycle facing the harsh reality of a steep devaluation of assets and the prospect of widespread insolvencies and debilitating negative sentiment.

Inflation Matters

• US Producer Price Disinflationary Trend Continues in June, Reprieve for Profit Margins
• Consumer Inflation in June Eases, Evidence of Disinflation Encouraging Markets
• Key Fed Inflation Guage Falls in May, Core PCE 4.6% from 4.7%

Inflation with Henry Kaufman

Kaufman is the legendary chief economist and head of bond market research at Salomon Brothers is someone who knows Inflation.  Henry Kaufman in an interview with Bloomberg’s Erik Schatzker Jan 14, 2022:

 “I don’t think this Federal Reserve and this leadership has the stamina to act decisively. They’ll act incrementally. In order to turn the market around to a more non-inflationary attitude, you have to shock the market. You can’t raise interest rates bit-by-bit.”

“The longer the Fed takes to tackle a high rate of inflation, the more inflationary psychology is embedded in the private sector — and the more it will have to shock the system.”

“‘It’s dangerous to use the word transitory,’ Kaufman said. ‘The minute you say transitory, it means you’re willing to tolerate some inflation.’ That, he said, undermines the Fed’s role of maintaining economic and financial stability to achieve ‘reasonable non-inflationary growth.’”

Independence – Never Take It for Granted Traders

“In aggregate, the market goes from order to disorder, and on that journey little pockets of order can form, including in commodities, bonds, stocks, currencies that circle back and reorder disorder. Then there is us the market player that reflects through order and disorder in an ever-evolving loop towards independence. It all starts with gravity and ends with equilibrium and back we go.” KnovaWave “The rules of market flux”

The Fed has kicked off its first real tightening campaign since 1994, with securities markets already at the brink of illiquidity and dislocation. Markets could soon be screaming for assurances of the Fed’s “buyer of last resort” liquidity backstop, while the Fed is prepared to begin withdrawing liquidity by selling Treasuries and MBS.

Another important aspect is the Fed doesn’t Control corporate pricing or wage decisions. Let us be clear geopolitical, climate change developments and what an out of depth, politically motivated administration are outside the Fed’s sphere of influence. There has been over $5.1 Trillion new “money” in 126 weeks, it’s a reasonable conclusion the Fed has lost control of Inflation.

We need to grasp all the risks to be wary off and received plenty of flak from it. We always talk here about expect the unexpected and now that is front and center, gage the market’s reaction, the market is always right and that’s why we focused on the crowd psychology aspect over the past few weeks.

“We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise.”

– MoneyNeverSleeps

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

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

Part A – Stock Markets

Weekly Highlights – USA

Indices

• S&P500 added 0.8% (up 14.7% y-t-d),
• Dow slipped 0.4% (up 3.6%).
• Utilities increased 0.2% (down 11.4%).
• S&P 400 Midcaps were unchanged (up 6.1%),
• Small cap Russell 2000 declined 0.3% (up 5.2%).
• Nasdaq100 advanced 1.7% (up 36.6%).

YTD Report Card for the S&P Sectors

Sectors

The best-performing sectors this week were information technology (+2.6%), consumer discretionary (+1.1%), and communication services (+1.0%). All these sectors have mega-cap stocks in their index. The energy sector (-1.4%) was the biggest decliner this week with oil and natural gas prices fading some on continued concerns about China’s weakening economy.

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

• Utilities increased 0.2% (down 11.4%).
• Banks fell 2.1% (down 20.6%),
• Broker/Dealers gained 1.1% (up 11.1%).
• Transports dipped 0.5% (up 16.6%).
• Semiconductors rose 1.0% (up 38.1%).
• Biotechs gained 1.7% (down 0.6%).
• With bullion rallying $26, the HUI gold equities index recovered 3.1% (down 3.8%).

Biggest SPX Stock Winners and Losers Last Week

When Markets Get Short Behind the Curve

Worth reading again what fueled the recent rally… and then the sell off after ….

We analyzed the short component of this year’s rally back in May and it an important component of the market’s structure. Global stocks have continued to climb the wall of worry in 2023, with what has become a series of saves from the brink of economic disaster in a political episode worthy of the best Monty Python minds. The end result has left many investors over insured at times as we have been focusing on with option saturation, short bets and long only investors out of the market. The latter in a rising market essentially makes them short.

This background is not new we have seen it many times over the last 20 to 30 years. The difference here is the sheer weight of money in the system and the introduction of shorter dated options and so many playing it.

Speculators and hedge funds had put on the largest short positions in the S&P 500 since 2007 according to Bespoke Investment Group using CFTC data measured as a percentage of open futures-market interest.

At the same time, they have bet long on the Nasdaq-100, with net bullish plays nearing the highest levels since late last year, remember that. Markets go where the most pain is. The move, in a world where averaging your position is seen as trading has fueled larger positions. Anyone understand the martingale principle?

Fed Assets expanded $364 billion over three weeks in March in banking crisis liquidity operations (the market has a short memory that was only 8 weeks ago and helped create bigger shorts out there). Assets remain about $45 billion above the March 1st level. FHLB assets expanded an unprecedented $317 billion during Q1 ($802bn over 4 quarters). Indicative of the liquidity surge, money market fund assets inflated $384 billion in the five weeks beginning March 8th. In affect we got a massive boost a surge in financial sector Credit with those FHLB money market borrowings to finance its massive banking liquidity support operations.

That’s all well and good the trouble it is up, and substantially and the cost of carry is around 6-12% not 0-2% from last year. Trading from the short side is about timing, recognition and as they say strike like a cobra. The demise of the Californian and New York Regional Banks was a prime example, they were on the radar and once the cracks appeared, go hard, go fast.

Where are the Shorts Trapped at? (Becomes the Longs After Wave C’s or 3’s)

There is two ways of looking at this the bears and the dribblers out there argue it all has to come down. The rationale being the S&P 500 was up 12% this year, however it would be negative without the contribution of seven big tech companies. The argument is should any of those plunges then we are back to bringing it all down. The problem is it has gone up, we look at the AAPL and NVDA for just two names that dominate structure.

Global Stock Market Highlights

Highlights – Europe Stocks

Week/YTD

• U.K.’s FTSE equities index rallied 1.0% (down 1.5% y-t-d).
• France’s CAC40 recovered 0.9% (up 11.7%).
• German DAX equities index added 0.4% (up 12.3%).
• Spain’s IBEX 35 equities index gained 0.8% (up 13.5%).
• Italy’s FTSE MIB index rallied 1.6% (up 19.0%).

Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September 2021 adding 10 new members to the German stock index from the MDAX which will be reduced from 60 to 50 members.

Highlights – Asia Stocks

Week/YTD

• Japan’s Nikkei Equities Index increased 0.6% (up 21.2% y-t-d).
• South Korea’s Kospi index added 0.6% (up 12.6%).
• India’s Sensex equities index was little changed (up 6.6%).
• China’s Shanghai Exchange Index dropped 2.2% (down 0.8%).

Highlights – Australian Stocks

• Australia’s S&P/ASX 200: 0.9% to 7115.2. Friday (-0.4% for the week)
• Top Stocks: Altium +29.5% Premier +16.09% IDP +15.06%
• Worse Stocks: Iress −32.13% Iluminia −15.79% Iluka −14.78%
• Energy sector worst hit, down 2.2% for week, tracking second straight week of declines in oil price.
• Tech stocks ended week just 1.2% higher after dropping 2% Friday

Highlights – Emerging Markets Stocks

Week/YTD 

• Brazil’s Bovespa index increased 0.4% (up 5.6%),
• Mexico’s Bolsa index was unchanged (up 9.8%).
• Turkey’s Borsa Istanbul National 100 index rallied 2.7% (up 40.1%).
• Russia’s MICEX equities index gained 1.5% (up 46.6%).

Technical Analysis

S&P 500

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

When we talk about crowd psychology this is a great example. The market after spitting the 4100 and 38.2% retracement broke to capture the Tenkan. This underscores the power from the SPX spat of June & October lows with impulse through the tenkan and Kijun energized by the daily cloud twist that fueled this rally. The completive wave came off extreme fear and bear that ended with relief. Now we have sated much of the greed phase and short fear phase. We have completed that cycle and from here we measure the alternatives.

It is worth looking back at the completive highs (all-time highs) and how we played out so far. Tracing back from highs the fuel from the top of the channel after completing 3 waves off ATH, accelerated after broke the Tenkan through to the 4600 OI where it reversed with impulse back to Tenkan. Bulls, this is likely a (ii) of a 5. Bears this is 1-2 of (i) completive V of degree. We watch if this low was a (iii), (a) or C. We have to respect the number of alternatives of degree of 5. With such trends keep it simple. From no fear to panic is the driving element.

On the downside the Kijun and those June lows now critical and is our trading Bear/Bull pivot in a high vol scenario. Watch each measured 3 wave move on the 240 & Murrey Math highlighted in the podcast. The prices pulled through the downward cloud pulled by the twist ‘helium contusion’ on the completive. For fractal purposes, SPX completed 5 waves up where it reversed with impulse. Energy fueled from the power impulse down from +1/8 ATH spit of a spit fail. On the way down (just like up) it accelerated after it broke the Tenkan through the rejected Kijun and then through the median after tapping 8/8.

Weekly: The SPX has a clear channel off the lows on the weekly timeframe off the sphere of influence and has ground higher since it closed over the cloud above the Tenkan. Key support is the Tenkan, channel and +1/8. Power initially came from launching out of the sphere of influence as one would expect in a 3 or C. We had the Kijun spit also. Above is the channel and +3/8.

In the bigger picture we are playing out S&P 500 energy after it held the sphere of influence from Nov 2020 reversed higher after spitting the 38% and key lows. At the time we opined “We do have a weekly cloud twist; however, the energy is waning without sharp impulse.” We got the sharp impulse right to weekly Kijun. For major cycles we watch the S&P 500 over 4,231, the 50% retracement of losses from the Jan. 3 & June 16 close. Since 1950 there has never been a bear market rally that exceeded the 50% retracement then gone on to make new cycle lows. Is this time different, as we tested and spat those June lows?

On the way up each new high evolved after testing Tenkan key support on the way and we are now getting a retest as resistance. We reiterate this needs to be recovered for a resumption of the uptrend meanwhile the bear market plays out. Watch Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

THE KEY: Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan.  To repeat “We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.”  Keep an eye on the put/call ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as Chikou rebalances.

A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets

NASDAQ 100

The down move saw Nasdaq spit the weekly Kijun and a 1-2 off tenkan we spat MM 5/8 after holding the key 61.8% Fib. We watch the Tenkan & Kijun confluence above, the breakup level and between the 38/50 Fibs. The Nasdaq is well behind the S&P pace with the weekly cloud and 50wma well above. Support the 61.8% retest.

Recall ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

Dow Jones

The Dow led the indices and closed above the weekly Tenkan after closing and testing last week. Prior test after the reaction off the June lows and sphere of influence. Support is the channel and Fibs. Tenkan and Kijun after the reaction empowered. Support is the channel and Fibs.

Russell 2000

The small cap Russell RUT bounced in double bottom off 1600 5/8 confluence which was the Nov 2020 breakup. Russell 2000 Resistance Tenkan and Kijun, note previous rejections. This is the index showing more of the fast money crowd and is trading like it. Needs to get traction in here for bulls. 7/8 & 8/8 support collapsed on the way down and is now major resistance.

Semiconductors

NVidia $NVDA

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

NVDA took off after the breakup retest from May 2021. NVidia is a clear leader of SOX & SMH look for cues there and ABC failures for changes. NVDA never looked back after the Key Break (mauve) and Tenkan to a flat cloud and holding support the recent low at the 61.8% extension.

Apple $AAPL

Apple has consistently driven upwards after it held the sphere of influence after retesting 6/8 & break up. Kijun and Tenkan crossing and then the 50wma with the cloud twist have been magnetic. Apple & other mega-cap names dominant the major indices, and a plethora of funds that hold it as a core position. The Vanguard Mega-Cap Growth ETF (MGK) delta is important to watch.

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

ARKK ETF

The ARK Innovation ETF (ARKK) finally found some support at -1/8, 78% off highs and the 423.6% extension! The ARK Innovation ETF returned 29% for Q1 2023. The fund is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, it has not been a pretty slide. For the quarter, Nasdaq Computer Index up 25.7% and the NYSE Arca Technology Index gaining 26.1%. The Nasdaq100 (NDX) jumped 20.5%.

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

ExxonMobil XOM

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

Part B: Bond Markets

Bond Watch

Treasuries

More financial conditions tightening this week as “risk on” has begun the transition to “risk off,” with the system now vulnerable to an abrupt change in the liquidity backdrop. The Treasury market gyrated all week. The 2-yr note yield trading range was 4.92% to 5.09% and settled the week at 5.05%, up 14 basis points for the week. 5.09% in Friday trading surpassing the March 8th (pre-SVB) peak to the high back to June 2007. The 10-yr note yield trading range was 4.18% to 4.36%, the high since November 2007 and settled the week at 4.24%, down one basis point for the week.

This week’s action put renewed pressure on the slope of the yield curve, compressing the 2s10s spread by 15 bps to -81 bps. Crude oil narrowed this week’s loss to about $0.80, or 1.0%, while the U.S. Dollar Index rose 0.1% to 104.08 Friday, extending this week’s gain to 0.6%.

Treasury Yield Watch

Friday/Week

• 2-yr: +4 bps to 5.05% (+14 bps for the week)
• 3-yr: +3 bps to 4.74% (+10 bps for the week)
• 5-yr: +3 bps to 4.43% (+5 bps for the week)
• 10-yr: UNCH at 4.24% (-1 bp for the week)
• 30-yr: -1 bp to 4.29% (-9 bps for the week)

Higher for longer is a serious threat.

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

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

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

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

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates rose eight bps to 7.30% (up 175bps y-o-y) – the high back to 2002.
• Fifteen-year rates gained eight bps to 6.73% (up 188bps).
• Five-year hybrid ARM rates surged 40 bps to 7.11% (up 275bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates unchanged at 7.58% (up 171bps).

Thirty-year mortgage rates rose eight bps this week to 7.30%, the high back to December 2000. MBS yields traded up to 6.27% in Tuesday trading, the peak since July 2007, before ending the week down seven bps at 6.08%.

Global Debt Monitor

Highlights Unprecedented and Ongoing Surge in Global Debt

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

GDM Highlights:

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

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

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

Part C: Commodities

Highlights

Key Long Term Commodity Charts

Copper

Gold

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

Energy

For complete Oil and Natural Gas Coverage please visit our dedicated publications ‘Around the Barrel’ and ‘Into the Vortex.’ – Weekly Analysis and Outlook for Energy Traders and Investors

WTI Oil

Natural Gas

BDI Freight Index

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

Charts and commentary via KnovaWave on:

• Grains: Wheat, Corn, Soybeans
• Metals: Copper, Aluminum
• Precious Metals: Gold Silver
• Lumber
• Oil and Natural gas are covered separately (see below)

Part D: Forex Markets

John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which not one man in a million is able to diagnose.”

Highlights

• For the week, the U.S. Dollar Index rallied 0.8% to 104.19 (up 0.7% y-t-d). 2022 gains were 8.2%
• For the week on the upside, the South African rand increased 2.0%, the Brazilian real 2.0%, the Mexican peso 1.8%, the South Korean won 1.0%, and the Singapore dollar 0.1%.
• On the downside, the British pound declined 1.2%, the Japanese yen 0.7%, the euro 0.7%, the Swedish krona 0.7%, the Norwegian krone 0.5%, the Canadian dollar 0.4%, the Swiss franc 0.3%, and the New Zealand dollar 0.3%. The Chinese (onshore) renminbi declined 0.04% versus the dollar (down 5.33%).

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

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

Cryptocurrencies

Bitcoin

Bitcoin continues to be plaything of levered speculators, this week we saw the markets turn against those short. Where did this come from? Forced coverage from yield curve punts blowing up. Yen shorts and levered “carry trades” at risk.

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

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

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

Ethereum

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

Major US Banks for Q2, 2023

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

Q223 Reports

• Big Banks Kick Off Second Quarter Earnings Season with Citigroup, JPMorgan, State Street and Wells Fargo
• Wells Fargo Earnings Stabilizing with Higher Net Interest Income on Higher Rates
• JPMorgan Profit Soars with First Republic & Record Net Interest Income
• Citigroup Earnings Hampered by Slump in Trading and Investment Banking
• US Bancorp Earnings Top Expectations, Net Interest Income Guidance Tightens
• The Giant Squids Horror Stretch Continues, Goldman Sachs Profit Drops 58%
• Bank of America Earnings Boosted by Global Banking, Debt Securities Portfolio Losses at $105.8
• Morgan Stanley Profit Hit by Lower Trading Revenue
• PNC Bank Lowers 2023 Guidance Again after Revenue Lower Than Expected

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

• Uh oh it’s September in the markets!
• Setting the stage for September’s central bank decisions
• Nonfarm payrolls and wages to inform the FOMC’s next move
• China’s PMIs: Is bad news already priced in?
• Eurozone core CPI may up ECB hike pricing
• Challenging the common BoC narrative
• Canadian GDP weighed down by transitory shocks
• Canadian bank earnings season continues
• Australian CPI unlikely to impact RBA’s coming decision
• A heavy week for US macro reports

Central Bank Watch

In the week ahead the greatest risk is the speeches at Jackson Hole, this year’s theme is “Structural Shifts in the Global Economy”. Chair Powell kicks off the event with an economic outlook speech on Friday at 10:05amET. They will follow likely increases in China’s 1- and 5-year Loan Prime Rates following through on the PBOC’s 15bps decreased in the 1-Year Medium-Term Lending Facility Rate on August 14th from 2.65% to 2.50. Bank Indonesia, Iceland and Bank of Korea are expected to keep rates on hold. Turkey’s central bank is expected to deliver another large hike this week. We also have the annual BRIC’s summit of interest.

Eyes and ears will be on central bankers. We have the backdrop of a more hawkish Fed Chair in the face of escalating systemic risk. How will this affect Fed policy given the massive treasury positions out there and the risk of uninsured funds? In this environment we get pivots daily. How much damage is the Federal Reserve willing to do in the guise of controlling inflation?

This Week’s Interest Rate Announcements (Time E.T.)

In the week ahead we get 1 central banks delivering policy decision.

Tuesday, August 29, 2023

• 08:00 Hungary Interest Rate Decision

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

U.S. Economic Data Watch

US Data Focus

• Monday: $45 bln 2-yr Treasury note auction results at 11:30 ET and $46 bln 5-yr Treasury note auction results at 13:00 ET
• Tuesday: June FHFA Housing Price Index (prior 0.7%) and June S&P Case-Shiller Home Price Index (prior -1.7%) at 9:00 ET; July job openings (prior 9.824 mln) and August Consumer Confidence (prior 117.0) at 10:00 ET; and $36 bln 7-yr Treasury note auction results at 13:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior -4.2%) at 7:00 ET; August ADP Employment Change (prior 324,000) at 8:15 ET; Q2 GDP — second estimate (prior 2.4%), Q2 GDP Deflator — second estimate (prior 2.2%), July advance goods trade balance (prior -$87.8 bln), advance Retail Inventories (prior 0.3%), and advance Wholesale Inventories (prior -0.5%) at 8:30 ET; July Pending Home Sales (prior 0.3%) at 10:00 ET; and weekly crude oil inventories (prior -6.14 mln) at 10:30 ET
• Thursday: Weekly Initial Claims (prior 230,000), Continuing Claims (prior 1.702 mln), July Personal Income (prior 0.3%), Personal Spending (prior 0.5%), PCE Prices (prior 0.2%), and Core PCE Prices (prior 0.2%) at 8:30 ET; August Chicago PMI (prior 42.8) at 9:45 ET; and weekly natural gas inventories (prior +18 bcf) at 10:30 ET
• Friday: August Nonfarm Payrolls (prior 187,000), Nonfarm Private Payrolls (prior 172,000), Unemployment Rate (prior 3.5%), Average Hourly Earnings (prior 0.4%), and Average Workweek (prior 34.3) at 8:30 ET; final August S&P Global U.S. Manufacturing PMI (prior 47.0) at 9:45 ET; July Construction Spending (prior 0.5%) and August ISM Manufacturing Index (prior 46.4%) at 10:00 ET

US Stocks Watch Earnings and Event Watch

Earnings Highlights This Week:

• Monday includes Nordic American Tankers (NAT), Baozun (BZUN), JOANN (JOAN), Noah Holdings (NOAH), Afya Limited (AFYA), FinVolution Group (FINV),
• Tuesday includes Best Buy (BBY), J.M. Smucker (SJM), Bank of Montreal (BMO), NIO (NIO), and Bank of Nova Scotia (BNS) American Woodmark (AMWD, Big Lots (BIG), Catalent (CTLT), Donaldson (DCI), Malibu Boats (MBUU), Pinduoduo (PDD), Ambarella (AMBA), Box (BOX), Hewlett Packard Enterprise (HPE), HP Inc. (HPQ), nCino (NCNO), PVH (PVH), ZTO Express (ZTO)
• Wednesday includes Salesforce (CRM), CrowdStrike (CRWD), Brown-Forman (BF.A), Five Below (FIVE), Victoria’s Secret (VSCO), Chewy (CHWY), Okta (OKTA), Conn’s (CONN), Cooper (COO), Greif (GEF), MasterCraft (MCFT), Patterson Companies (PDCO), Veeva Systems (VEEV)
• Thursday includes Campbell Soup (CPB), Broadcom (AVGO), UBS Group (UBS), VMware (VMW), Dell Technologies (DELL), Lululemon (LULU), Lands’ End (LE), 1-800-FLOWERS (FLWS), Academy Sports + Outdoors (ASO), BRP Inc. (DOOO), Caleres (CAL), CIBC (CM), Ciena (CIEN), Dollar General (DG), Genesco (GCO), GMS (GMS), Hello Group (MOMO), Hormel Foods (HRL), KE Holdings (BEKE), Ollie’s Bargain Outlet (OLLI), Signet Jewelers (SIG), Titan Machinery (TITN), Calavo Growers (CVGW), Elastic (ESTC), HashiCorp (HCP), Nutanix (NTNX), Oxford Industries (OXM), PagerDuty (PD), SentinelOne (S), Quanex Building Products (NX) and MongoDB (MDB).
• Friday includes Canadian Western Bank (OTCPK:CBWBF) and Dingdong (Cayman) Limited (DDL)

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

Weekend: US Commerce Secretary Raimondo meets with Chinese officials

Notable conferences running during the week include:

Monday

• ECB’s Nagel, de Cos, and Holzmann, as well as Danish central bank governor Signe Krogstrup, speak at the Alpbach forum in the Austrian Tyrol
• All week – The Biden administration is expected to disclose the first 10 prescription drugs selected for Medicare price negotiations sometime early in the week.
• All day – The 3-for-2 stock split for Rush Enterprises (RUSHA) will become effective.
• All day – The FDA action date will arrive for Bristol Myers Squibb’s (BMY) luspatercept-aamt (Reblozyl) for the treatment of anemia.
• All day – Workhorse Group (WKHS) will hold its annual meeting. Shareholders will vote on a measure to increase the number of authorized shares to 450M from 250M.
• All day – The U.S. Department of Agriculture’s weekly crop progress report will be issued. Traders will be watching for updates on the condition of the domestic spring wheat (W), corn (C), and soybeans (S) crops amid extremely warm weather in the Midwest.

Tuesday

• UK Foreign Secretary Cleverly to visit China and discuss war in Ukraine
• US President Biden will host Costa Rican President Chaves at White House
• Bank of Finland news conference on monetary policy
• US bank regulators expected to propose requirements for smaller banks
• Informal meeting of EU defense ministers in Spain
• All day – The two-day Jefferies Semiconductor, IT Hardware & Communications Infrastructure Summit will feature presentations by a long list of tech-related companies, including AEye (LIDR), Juniper Networks (JNPR), Ericsson (ERIC), and Amdocs (DOX).
• All day – The three-day Google Next conference will include speakers from Google (GOOG), Wayfair (W), Accenture (ACN), and Wendy’s (WEN). Analysts will be laser-focused on the use case demonstrations of Google’s Generative AI products and services.

Wednesday

• All day – The two-day Deutsche Bank Technology Conference will include participation from Micron (MU), Logitech International S.A. (LOGI), Informatica (INFA), Advanced Micro Devices (AMD), Zoom Video (ZM), and Western Digital (WDC).

Thursday

• ECB’s Schnabel speaks at inflation conference organized by ECB and the Cleveland Fed

Friday

• Singapore to hold presidential vote
• South African Reserve Bank governor Kganyago, Fed’s Bostic, and the BOE’s Huw Pill speak at the South African Reserve Bank conference
• Fed’s Collins speaks on the role of community colleges at a virtual event
• Ambrosetti Forum in Italy
• All day – Chinese electric vehicle makers Nio (NIO), XPeng (XPEV), and Li Auto (LI) will be on watch with August deliveries due to be reported.

Sovereign Rating Updates

• Belgium (Fitch)
• Hungary (Moody’s)

IPO Wrap

US IPO Week Ahead:

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2022.

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