December 19 – 25 2021
FEAR NOT Brave Investors
Where have we been and where are we going? Join our weekly market thread on Traders Community…
Christmas, Volatility and Growth
The Week That Was – What Lies Ahead?
Click on the links below to navigate to the relevant section.
- Part A: Stock markets
- Part B: Bonds
- Fed and Banks
- Part C: Commodities
- Energy – Oil and Gas
- Gold and Silver
- Part D: Foreign Exchange
- Geopolitics and Economics
- Economy Week ahead
Volatility was at the forefront this week as FOMO chased and unwound while a market obsesses with a Santa rally and Apple hitting $3 trillion market cap in a quad witching week. Inflation is front and center with US Producer prices elevated a long way from the Central Bank transitory mantra. Annual PPI rose to 9.6% in November. Despite this and the Federal Reserve keeping rates unchanged at their December meeting,
The QE Taper doubled in pace of Treasuries $20B per month as expected, and MBS $10B per month as expected. If uninterrupted, will wind down QE by the FOMC’s March 17th meeting. Dot plot shows three hikes in 2022 vs two hikes expected Federal Reserve FOMC Statement. From here the stock markets exploded, led by the Tech Big caps like Apple only to give it all back by Friday.
A key part of the KnovaWave trading system is crowd psychology and this week was a classic example of the madness of crowds. Buying begets buying and selling begets selling. Fractal recognition of patterns are a very powerful indicator as we saw this past week.
This week’s hot PPI followed a red hot Consumer Price Index report. US November CPI came in at +6.8% y/y the highest since 1982, m/m CPI rose 0.8%. It was indeed a deluge of central bankers this week. We had the Fed, BoJ, and ECB all either speed up or forewarn tapering QE. We had the BoE, Mexico and the Norges Bank raise rates. Meanwhile the SNB kept everything as is. Over the past few weeks, we had New Zealand, Canada, Brazil and Australia. We also get global December flash PMIs for an insight about the state of the global economy showing that we are largely rolling along.
We need to grasp all the risks to be wary off and received plenty of flak from it. It’s not rocket science 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. The discount of risk continues. We always talk here about expect the unexpected and now that is front and center, gage the market’s reaction, the market is always right and that’s why we focused on the crowd psychology aspect over the past few weeks.
We are in an openly hawkish phase. Recall the New York Fed president John Williams, who is a voting member continued with his hawkish tilt of late. He said we are seeing broader based increases in inflation. Fed Governor Bullard told US Core PCE Is “Quite High” and added that the Fed should take towards a more hawkish policy in the next couple of meetings. Then we had Fed Governor Christopher Waller say the rapid improving job market market and deteriorating inflation data have pushed him towards favoring a faster pace of tapering and more rapid removal of accommodation.
“We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise.”– MoneyNeverSleeps
Around the globe markets appear acutely vulnerable. Over in Turkey the lira sank another 15.4% this week, the currency’s November/December decline is 41.5% (down 54.7% y-t-d). Turkey’s $125 billion of short-term foreign-denominated debt overhangs. Turkish lira bond yields surged 79 bps Friday to a record 21.4%. Turkey’s sovereign CDS spiked 78 higher this week to an 18-year high 578 bps. Whilst this is a special case, as is Erdogan the risks are real out there.
Our weekly reminder for risk, timely given the V shape to ATH in just a week. The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off this continuous dip feed? At this point the Central Banks have kicked that answer down the road.
PART A – Stock Markets
Highlights – USA
- S&P500 dropped 1.9% (up 23.0% y-t-d),
- Dow fell 1.7% (up 15.5%).
- Nasdaq100 dropped 3.2% (up 22.6%).
- S&P 400 Midcaps fell 1.9% (up 18.3%)
- Small cap Russell 2000 lost 1.7% (up 10.1%).
- Transports slumped 3.5% (up 26.6%).
- Utilities declined 1.1% (up 11.5%).
- Banks sank 2.9% (up 32.3%),
- Broker/Dealers were little changed (up 26.8%)
- Semiconductors sank 3.9% (up 34.5%).
- Biotechs surged 6.0% (down 2.9%).
- With bullion gaining $15, the HUI gold index rallied 2.3% (down 17.4%).
Highlights – Europe Stocks
- U.K.’s FTSE slipped 0.3% (up 12.5% y-t-d)
- France’s CAC40 declined 0.9% (up 24.8%).
- German DAX equities index dipped 0.6% (up 13.2%).
- Spain’s IBEX 35 equities index declined 0.6% (up 2.9%).
- Italy’s FTSE MIB index lost 0.4% (up 19.7%)
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 gained 0.4% (up 4.0% y-t-d)
- South Korea’s Kospi index added 0.2% (up 5.0%).
- India’s Sensex equities index dropped 3.0% (up 19.4%).
- China’s Shanghai Exchange fell 0.9% (up 4.6%).
Highlights – Australian Stocks
- Australia’s S&P/ASX200 -0.67% for the week. The index is up 10% for the year.
- Afterpay -7.63% Friday after US regulators announced a probe into it and other payment players.
- Iron ore +4.6% to $US114.70 a tonne Friday
Highlights – Emerging Markets Stocks
- EM equities were mixed
- Brazil’s Bovespa index declined 0.5% (down 9.9%),
- Mexico’s Bolsa jumped 2.3% (up 18.9%)
- Turkey’s Borsa Istanbul National 100 index gained 2.4% (up 41.2%).
- Russia’s MICEX equities index slumped 1.0% (up 13.2%).
IPO and SPAC mania remains in full force.
Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.
Biggest SPX Stock Winners and Losers Last Week
Technical Analysis of key markets via KnovaWave
Daily: We saw a violent ABC for the 5 waves up for SPX continue right into bottom of the median line to give us an (a) or C of a 4. with impulse after completing 5. Reversed hard with energy fueled from the power impulse down from near +1/8 ATH. On the way up (just like down) It accelerated after it broke the Tenkan through the rejected Kijun and then the Kijun to close back over the median and 8/8. Bulls this was a (ii) of a 5. Bears this is a a-b of a C off a completive V of degree. We watch if this low was a (iii), (a) or C. Will determine if sharp ABC completed off all time highs around +1/8. We have to respect the number of alternatives of degree of 5. With such trends keep it simple support is Tenkan and Kijun and watch for ABC. No fear is the driving element.
The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the Tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in
Weekly: The weekly shows us the reenergized SPX tripped in 3 to test recent break up at Tenkan from there we had had a powerful rally to ATH. Again notice what happened “Each new high has evolved after testing Tenkan key support which is the next line after Friday’s dump & minor bounce.” We watch for a spit of a spit Extensions are difficult to time, keep it simple.
Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan. To repeat “We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.” Keep an eye on the put/call ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as Chikou rebalances
A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets.
Nasdaq move to ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. From there we sold off right to Tenkan (as did SPX) and bounced hard Support Tenkan to Kijun. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.
The small cap Russell RUT has been developing a large flag which it did a false break to fuel the selling from there we replicated to the down (Adam’s theory). Unlike SPX and NDX we could not get through Tenkan and Kijun which rejected the bounce. This is the index showing more of the fast money crowd and is trading like it. Closed right at the top of the cloud and at the channel. the flag. Needs to get traction in here for bulls. Support +1/8 through 7/8 (cloud base)
Semiconductors SMH clean with reaction from above reverted with the retest & break of the triple top patterning in a pennant. Pull from Chip Shortage players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX saw Semiconductors rise 2.9% (up 40.0% YTD)
Following the announcement of NVDA 4/1 split some levels off the energy break NVidia hasn’t looked back with many gaps below. We saw another power move off the $200 retest (old $800) & earnings off $300 which are retesting. It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.
Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level. These levels will be key energy levels. Support from previous highs, resistance now Fibs and Murrey Math levels. Remember the impact $AAPL has, at least short term on all the major indices.
Amazon double top that filled the gap in 3 waves held at the 50wma but little impulse – compare to $AAPL for example.. From from there failing near the previous high. Watch action around support is 200wma and previous breaks. Resistance previous flag.
The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Support previous lows, needs to clear 130 to build C or iii for bulls. We saw ATH in NASDAQ & SPX yet this couldn’t raise a bid – very telling negative divergence. $ARKK circa 80 & 90 reversals and 200ma.
US Stocks Watch
This three-month period is the second to be compared to year earlier profits that were affected by the pandemic. According to Refinitiv, earnings for the second quarter are looking to be up 78.1%. With the US stock markets at record highs the downside to increasing profit expectations is the potential for some disappointments and that could cause adverse or stalled markets potentially.
Investors (and algos) will focus on the conference calls and outlooks. Last quarter everyone expected the worse, we saw critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals.
Regeneron investor day Campbell Soup investor day, Lennar earnings, Eli Lilly analyst meeting, Accenture, Adobe, Jabil FedEx and Darden Restaurants
Monday starts us off with Micron and Nike
Tuesday includes General Mills and BlackBerry earnings
Wednesday Includes earnings from CarMax, Cintas and Paychex
Thursday Christmas Eve
Friday Christmas Day
These are the highlighted earnings for the US this week. Please check daily schedules for more reports.
“U.S. companies are rushing to cash in on soaring stock prices. It isn’t just the white-hot market for initial public offerings. Companies are returning to the public markets to issue shares and raise cash from investors at the same time that existing shareholders are tapping the public market to unload their stockholdings at a record clip. Companies including Zoom Video Communications Inc. and Norwegian Cruise Line Holdings Ltd. have sold billions of dollars of shares this year… There have been 556 follow-on offerings, or stock sales by companies or existing shareholders, among U.S. companies this year, the most since 1996, according to Dealogic… They have raised a total of $133 billion. Behind the boom in share issuance? An ascendant stock market.” August 25 – Wall Street Journal (Gunjan Banerji):
US IPO Week Ahead:
Part B : Bond Markets
Highlights – Treasuries
Investment-grade bond funds saw outflows of $2.262. billion, while junk bond funds posted negative flows of $200 million (from Lipper).
- Three-month Treasury bill rates ended the week at 0.03%.
- Two-year government yields declined two bps to 0.64% (up 52bps y-t-d).
- Five-year T-note yields dropped eight bps to 1.18% (up 81bps).
- Ten-year Treasury yields fell eight bps to 1.40% (up 49bps).
- Long bond yields dropped seven bps to 1.81% (up 16bps).
- Benchmark Fannie Mae MBS yields declined four bps to 2.03% (up 69bps).
All good while markets hold up but take note that the loosest financial conditions in history have supported record corporate debt issuance. While easy credit availability has supported economic activity, funding new investment whilst keeping vulnerable companies afloat. The combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.
Highlights – Mortgage Market
Unprecedented cash payments by the U.S. government to households, changing consumer preferences and lowest mortgage rates in history have fueled a pandemic boom in housing, the fastest pace of increase on record in data from 1988 and prices surpassing the peak from the last property boom in 2005. The S&P CoreLogic Case-Shiller U.S. National Home Price Index has mark the fastest pace of increase on record in data from 1988 in 2.
- Freddie Mac 30-year fixed mortgage rates gained two bps to 3.12% (up 45bps y-o-y).
- Fifteen-year rates fell four bps to 2.34% (up 13bps).
- Five-year hybrid ARM rates were unchanged at 2.45% (down 34bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down one basis point to 3.24% (up 35bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week jumped $53.4bn to a record $8.675 TN. Over the past 118 weeks, Fed Credit expanded $4.948 TN, or 133%. Fed Credit inflated $5.864 Trillion, or 209%, over the past 475 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week declined $7.8bn to a one-year low $3.438 TN. “Custody holdings” were down $63.7bn, or 1.8%, y-o-y.
- Total money market fund assets were unchanged at $4.636 TN. Total money funds increased $347bn y-o-y, or 8.1%.
- Total Commercial Paper slipped $2.4bn to $1.087 TN. CP was up $89bn, or 9.0%, year-over-year.
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 sank 17 bps to 1.19% (up 57bps y-t-d).
- Ten-year Portuguese yields fell five bps to 0.26% (up 23bps).
- Italian 10-year yields dropped seven bps to 0.90% (up 35bps).
- Spain’s 10-year yields declined two bps to 0.34% (up 29bps).
- German bund yields fell three bps to negative 0.38% (up 19bps).
- French yields declined three bps to negative 0.03% (up 31bps).
- The French to German 10-year bond spread was unchanged at 35 bps.
- U.K. 10-year gilt yields increased two bps to 0.76% (up 56bps).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields slipped a basis point to 0.05% (up 3bps y-t-d).
Part C: Commodities
- The Bloomberg Commodities Index dipped 0.5% (up 23.5% y-t-d).
- Spot Gold gained 0.9% to $1,798 (down 5.3%).
- Silver rose 0.8% to $22.37 (down 15.3%).
- WTI crude declined 81 cents to $70.86 (up 46%).
- Gasoline dipped 0.7% (up 51%), and Natural Gas sank 6.0% (up 45%).
- Copper added 0.2% (up 22%). Wheat fell 1.3% (up 21%),
- Corn increased 0.6% (up 23%).
- Bitcoin dropped $1,095, or 2.3%, this week to $46,402 (up 60%).
Risk markets continue to respond to a Coronavirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
BDI Freight Index
- The Baltic Exchange Dry Index fell 4.8% to 2,379 on Friday, its lowest since mid-April, extending losses for a seventh straight session, amid lower seasonal demand across all its vessel segments. For the week, the Baltic Dry Index lost 27.3%, its biggest weekly decline since early February 2019.
- The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, declined 5.8% to an over six-month low of 2,727
- The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, slumped 6.9% to its lowest in over three weeks at 2,444.
- Among smaller vessels, the supramax index shed 45 points to 2,469, its lowest since December 6th.
Copper rebounded sharply off the 50wma pulled up by the flattening Tenkan and Kijun to close right at the channel break – a key juncture. #HG shrugged off demand concerns from resurgence in Covid-19 supply disruptions. The power spits of +8/8 and +2/8 were rebalanced by the Tenkan breaking the Kijun with 50wma and cloud below. Copper had been a leader in the risk on movement for commodities.
Soybeans finally found bids after hitting weekly lows well under weekly cloud and well under 50wma to close right at the weekly Tenkan. – Watch for impulse
US Crude Oil (WTI)
4 Hour: WTI oil stayed around the top of the 240m cloud spinning the 50 ma (green). This is a market that is reflective of fear and greed and in a holding pattern for which ‘wins’. Sell off capitulated to -4/8
On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs. The completion in 5 waves saw heavy selling with eventual confluence kiss of death with 50dma at the top of the cloud. From there down in 3 waves, completing a C or a? Support wasn’t found until 0-8. Resistance Kijun, 50dma, Cloud. Tenkan below
The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit – hence the fractal energies reverberations. Support is previous lows, Murrey Math levels and Fib cluster. Support is the 50dma, kijun, tenkan and prev high confluence.
WTI crude Oil futures continues to correct the sell off after it’s measured move reversed from 7-year highs. Long term 61.8% target fueled by ABC bull flag after rebalanced Chikou sated the 5 waves. Weekly Tenkan & Kijun closed touching to give next impulse clue after closing above 50wma. It must regain energy to resume higher.
These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications.” Support is previous channels, tenkan and Kijun. Above we have Murrey Math time and price
US Natural Gas (Henry Hub)
4 Hour: The 240 shows the waves are clear in the Murrey Math grid. We have been held to the upside at +1/8 after filling the gap on 12/13. On the downside a triple bottom beckons with +2/8 below. Note impulses off Kijun/Tenkan crosses Recall natural gas spitting to +8/8 than +1/8 240 before retreating in 3 waves to spit violently the 50 4hr ma stayed above the cloud until the completive 5. That means a saturated bull pen and we are still in a developing 3 or C down. Continue to watch Kijun reactions and Murrey Math confluence.
US Natural Gas completed 3 waves correcting the daily 8/8 spit after a classic euphoria wave 5. However, it was rejected hard at the Kijun and cloud top at 6/8. Meaning that 3 was either an a of a C or a iii – impulse in a nutshell. The adjunct failure of the 50dma and Tenkan opened up the retest of 3.80-3.60.
Notice the fractals of the move after completing the C of 4 bullish scenario played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. For the bulls all this needs to hold for the highs to be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.
Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term.
Weekly: The classic double top playing out after a spit of the weekly Kijun was sent back off Tenkan only to reverse all the way to and through the 50wma. Natural gas continued to retrace with impulse after reaching it’s major target, the double top potential from 2014 which equated nicely to over 8/8 Weekly and showed true impulse off that to rebalance Chikou. It’s now a question of degree, 3 or 5? Impulse just shy of the 8/8 and Tenkan confluence.
Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan. This was energized with a series of fractals between old 38 and 50% channel, as you would expect in a seasonal commodity with weather a prime mover. Resistance is Fib/Murrey confluence, support Tenkan, Kijun – as always count your ABC’s
Key Energy Reports
- Around The Barrel – US Crude Oil Builds +6088Kbbl But WTI Cushing Around 2018 Lows
- Into The Vortex – EIA Reports Build of 81 Bcf in Natural Gas Inventories
- EIA Forecasts U.S. Natural Gas Inventories To Enter Winter Heating Season Below Average
- U.S. Natural Gas Consumption Down With Switch to Coal Due To Higher Gas Prices
- Desperate China Orders Inner Mongolia Coal Mines To Boost Production by 55%
- Natural Gas Flowing on Nord Stream 2 From Russia to Germany
- Natural Gas Volatilty a Lesson in The Reversal of Fortunes
- Record High Chinese Coal Futures Prices After Biggest Coal Producing Region Floods
- East China Manufacturing Hub Zhejiang Orders Production Suspensions to Meet Energy Targets
- ConocoPhillips Buys Shell’s Delaware Basin Assets for $9.5 bln in Cash.
- Europe Energy Crisis Years in the Making With Reactionary Environmental policy
- Oil Supply is Tighter Than Industry Estimates Morgan Stanley Says
- Spot Gold gained 0.9% to $1,798 (down 5.3%).
- Silver rose 0.8% to $22.37 (down 15.3%).
Gold continued to rally after it broke back over base of weekly cloud closing above the Tenkan, Kijun and 50wma after wave (ii) alt gains favor to top of cloud, can it sustain it?. Still rebalancing after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.
Silver, like Gold bounced off the cloud base. Back over 50wma after spitting Tenkan providing support after reversed. Closing at weekly Kijun which is now resistance. Major support is the 50wma
Part D: Forex Markets
John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
- For the week the U.S. Dollar Index advanced 96.57 (up 7.4% y-t-d)
- Majors for the week on the upside, nil. For the week on the downside, the Canadian dollar 1.3%, the Australian dollar 0.7%, the euro 0.7%, the Swiss franc 0.2%, the British pound 0.2% and the Japanese yen 0.2%.
- Minors for the week For the week on the upside, South African rand increased 0.6%, and the Mexican peso rose 0.3%. For the week on the downside, the Brazilian real declined 1.4%, the Norwegian krone 1.0%, the Swedish krona 0.8%, the New Zealand dollar 0.7%, the Singapore dollar 0.2%. The Chinese renminbi declined 0.08% versus the dollar (up 2.38% y-t-d).
Australian Dollar – AUDUSD
The Aussie dollar is still correcting since completing a 5 at the pysch 80 level to fall under the weekly cloud in emotive fashion. The Australian dollar fell to test of the August lows of 0.7106 with Omicron fears. Should that double bottom go support ia the Murrey Math Levels. Resistance the Cloud, Tenkan and Kijun like many commodities.
New Zealand Dollar – NZDUSD
The Kiwi mirrored the AUD in its wave (iii) spit and has corrected at the cloud much of the FOMO muster wave and retested the 50% Fib & 4/8 confluence. Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.
Canadian Dollar – USDCAD
The Loonie is holding the Tenkan after a 3 year high in June and corrected that in 3 waves led by the AUD and NZD. #oil price impacting direction. Watch flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.
Euro – EURUSD
Euro continues to correct in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as #EURUSD consolidates in the cloud. Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.
British Pound – USDGBP
British pound classic retest of daily cloud break with magnet pull of cloud twist after ABC correction – will need Tenkan to break through Kijun for more strength. The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.
Euro Pound – EURGBP
Back testing Tenkan in a C or 3 after inconclusive X – symbolic of BREXIT? Kijun, 50wma and clouds resistance.
Japanese Yen – USDJPY
USDJPY broke above i after weakness with Treasury yields to rush to +2/8 and channel convergence at 115.00. With that resistance the weekly chart is showing a bearish engulfing bar taking in over a month of price to close right above the Tankan should that go a re-test of 112 is alive The 108.00 level should remain massive support for dollar-yen. Any change will come from the weekly Kijun as it breaks through the old channel. Use your USDJPY Murrey 4/8 8/8 grid for now. EURJPY AUDJPY will determine risk on/off
Mexican Peso USDMXN
The Peso continues in the long triangle and consolidated despite outside uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.
Turkish Lire USDTRY
The Turkish Lira reversed after falling in 3 waves to explode over the Tenkan with the weekly cloud Kijun and 50wma below to see Turkish lira close the week at a record low 11.29 TRY/USD. The Murrey Math and Fib targets offer targets with the Lire at all time lows resistance in a hyper inflating collapse
Bitcoin performing technically to perfection. Impulse begets impulse. To understand panic, understand greed. Bitcoin exploded higher following it’s correction impulsively upon completing 5 waves up at +2/8. Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we have seen extreme volatility.
Looking back Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking. The recent high over $68,000 came after the launch over the Bitcoin ETF, Bitco. From that high we have 2 main alternatives a V of a 1 of a V. For bears it a completive five with impulse right to the 50wma – an incredible 26% fall in a Friday night session. That’s impulse! We watch for an ABC to develop here support is the 50wma and bottom of the weekend cloud.
We have seen what you would expect from a 5 wave impulse peak and ABC correction, a violent correction and completion. Use Murrey Math levels for corrections and targets as algorithms control the herd here, support is the cloud and sharp ABC, 1-2 moves. From there prices agitated towards those ATHs as news of a Bitcoin ETF fueled the rally, sound familiar? But this time it wasn’t signaling we are in a 3 high probability but a 5.
On the Risk Radar
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
Post 2008 it has been about easy money from Central Banks to the bank center, loan forgiveness and the like which has pumped assets at a speed and level never seen before. Given that we keep an eyes on the banking sector, it’s moves and earnings
Major US Banks Deliver Stoic Results in Q3, 2021
The major money cents banks released earnings with many record results for Q3. Mainly from trading and loss reserve releases from the pandemic kitty. Rising interest rates also help the bottom line.
- Goldman Sachs Advice on Mergers and Acquisitions Brought in a Record $1.65 billion Last Quarter
- Wells Fargo Earnings Suffer From Less Interest Income on Lower Loans
- JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
- Blackrock Earnings Beat Expectations With Record $ 9.5 Trillion Assets and ETFs Under Management
- PNC Bank Revenue Rises, Expects $900 million in Cost Savings From BBVA
- Citigroup Earnings Rise on Equity Trading and Loss Reserve Release
- Bank of America Earnings Lift With Higher Long Term Interest Rates And Steady Costs
- Morgan Stanley Acquisitions of E-Trade and Eaton Vance Boosted Wealth and Asset Management
Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don’t exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.
Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.
Banks are also benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 2020 to a record $60.113 trillion.
Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008.
“Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch”
The Week Ahead – Have a Trading Plan
Key focus this week will be third-quarter GDP updates from the US, UK, Netherlands and Spain. We also get durable goods orders and personal income and outlays from the US. With Covid rampant we get consumer morale numbers from the EU and UK;. After a week of Central Bank hyperbole, we see and inflation rates from Japan and Malaysia. Central banks in China and Thailand will be deciding on monetary policy. This is a light week ahead of Christmas.
Stock markets in the US and Germany will be closed on December 24th, while in the UK and Canada, trading ends early on Christmas Eve
Third-quarter earnings season is nearing an end. Earnings and updates include Micron, Nike, General Mills, BlackBerry, CarMax, Cintas and Paychex
Watch Central Banker and Geopolitics Watch speeches, reports and rate moves.
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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