Traders Market Weekly: Stock and Bond Bear Markets Hover

May 8- 14, 2022

FEAR NOT Brave Investors

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The Week That Was – What Lies Ahead?

Contents

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Editorial

The train wreck continued to gather steam this week. Markets were wrecked and Central Banks were busy raising rates, Australia, US, Brazil and the UK all raised rates and moved to tighten liquidity. The BLS reported robust job data, which in today’s markets means higher rates and lower stocks with inflation fear in a leveraged risk cesspool. The 10-yr note yield rose to 3.12%, its highest level since late 2018. The 30-yr bond yield did the same, jumping to 3.22%. The 2s10s spread widened by 10 bps to 45 basis points.

US April nonfarm payrolls rose by 428,000 (consensus 391,000) with March’s also a revised 428K new jobs. April unemployment rate was 3.6% (consensus 3.5%), versus 3.6% in March. In the face of surging inflation April average hourly earnings rose 0.3% (consensus 0.4%) The change in private payrolls +406K, more than the +380K expected.

When Risk Explodes:

The fed funds futures market, according to the CME’s FedWatch Tool, has placed a 78.6% probability to a 75-basis point rate hike at the June FOMC meeting versus 82.9% yesterday. Stocks continued to languish with the Nasdaq (-1.4%) leading down and the S&P 500 fell 0.6% on Friday. The two indices lost a respective 1.5% and 0.2% for the week after Thursday destruction where the Nasdaq fell -647.15 points or -4.99% at 12317.70. Small caps were hit worse, the Russell fell 1.7%, giving up 1.3% for the week.

Oil prices have continued to push higher since US continues to drain it’s SPR which have not alleviated product shortages and the headline risk around the EU phasing out Russian oil by year end. The EIA reported distillates stocks are at 14yr low as demand for jet fuel and diesel take off. Padd 1 diesel inventories are at 25-year lows.

Natural gas futures shrugged off a storage build and surged to near a 14-year high. Europe is moving aggressively to wean itself off Russian natural gas supplies with U.S. exports of liquefied natural gas expected to remain strong for some time. With the global energy crisis LNG exports continue to grow LNG feed gas volumes over 12Bcf hang near record levels despite maintenance projects. However, futures saw a sharp burst of profit taking Friday and the HH futures lost around $1 or 13% from the morning highs underscoring the instability of the financial markets.

The rubber is meeting the road as the trifecta of rising interest rates, the Russian invasion of Ukraine and surging costs continues to weigh on the markets, this has been no surprise to us here and shouldn’t have been to the market and PTB. You can only play with fire for so long before you get scorched!

April saw the technology heavy Nasdaq Composite crashed to its worst monthly performance in more than a decade Friday. Trillions of dollars in market value have been wiped off. The Nasdaq fell 4.2% Friday, its losses for the month over 13%, its worst effort since October 2008. The index is down 22.2% in 2022, its worst start to a year on record and is now down 24.2% from its high and trading at levels not seen since 2020.

You were forewarned:

For markets the big question is selling intensity, the selling continued to heat up as key levels were busted Friday. The S&P 500 broke and closed under the Weekly Kijun falling -2.8% down 136 points to 4254 and down -2.8% for the week. The Nasdaq fell -2.6% and on the week Nasdaq -3.8%. The small cap Russell 2000 fell -2.8%, -3.1% for the week.

This down move has been like a slow train coming. We saw most of the major banks getting cracked after reports three weeks ago, including Goldman Sachs Morgan Stanley and four of the largest U.S. lenders Wells FargoCitigroup and PNC reporting double-digit drops in first quarter profit. From an 11% decline at Morgan Stanley to a 46% drop at Citigroup.

Oops: A fun fact is April was historically the best month for stocks from a seasonality perspective, can the ongoing market volatility and headwinds fall into place again?

Next up more inflation numbers:

Food prices are surging, with that expect to see even higher grocery store and energy bills as elevated commodity prices send the fallout from Ukraine’s humanitarian crisis rippling across the world in the coming weeks. With all the redirection of blame at the Fed about inflation one has to understand it is a global phenomenon outside the Fed’s Control. With the war drums louder than ever the supply chain issues are out of control. The Federal Reserve is not in control of global energy and commodities prices.

In the US, CPI report is expected to show the annual inflation rate eased to 8.1% from a 41-year high of 8.5% in March while the core rate is seen falling to 6% from 6.5%. Still well above the Fed’s 2% target as supply disruptions persist and energy prices remain elevated. We will get another rash of speeches from Fed officials. Other releases are producer prices, consumer inflation expectations and the NFIB Business Optimism Index.

Globally we get a Mexico CPI reading with a monetary policy decision, and the Brazil inflation rate. Elsewhere in Europe, Germany final inflation figures and Russian consumer price index. Russia annual inflation accelerated to 17.73% as of April 29th, the highest since 2002 and up from 17.70% a week earlier. On a weekly basis, consumer prices increased 0.21%, easing from 0.25% a week earlier after the central bank cut interest rates.

In China, an inflation rate is seen hitting 1.9% in April, a rate much below other major economies as persistent lockdown and social distancing measures hurt demand. In India, there will also be inflation data with consumer prices are seen rising a much faster 7.5% in April.

Everything points to powerful inflationary dynamics and a Federal Reserve so far “behind the curve.”

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. This when Federal Reserve Credit last week added $2.0bn to a record $8.918 TN. Over the past 137 weeks, Fed Credit expanded $5.192 TN, or 139%.

 Here is a dose of reality. or was it all just money laundering?

“The nonfungible token of Jack Dorsey’s first tweet, which sold for $2.9 million last year to Sina Estavi, failed to garner much in the way of interest when it was recently put up for resale, Coindesk reports. The auction for the NFT closed with only seven offers ranging from just 0.0019 Ether to 0.09 ETH, or about $6 to about $280. A far cry from the $48 million sought by the owner.”

April 13 – Bloomberg (Patrick McHale)

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

Volatility

Rate markets are sending an exhaustive message to the Fed that it should commence aggressive tightening measures. On the flip side is a sputtering overly extended equities bubbles they must handle with kid’s gloves.

Monetary inflation is running wild. In 2021 Federal Reserve Credit expanded $1.391 TN or 19% to a record $8.742 TN. The Fed’s balance sheet inflated a mindboggling $5.015 TN, or 135%, in the 120 weeks since QE was restarted in September 2019. Federal Reserve Assets have now inflated 10 times since the mortgage finance Bubble collapse.

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

We are in an openly hawkish phase since late last year when 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 and deteriorating inflation data have pushed him towards favoring a faster pace of tapering and more rapid removal of accommodation.

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

– MoneyNeverSleeps

Our weekly reminder for risk, timely given the V shape surge in commodities 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.

We apologize members of the team were away at a conference this weekend, so we have not been able to update the charts and week that was and ahead. The long-term charts hold largely the same. We will update and walk through during the Market Wrap Podcast through the week.

Note charts and Data Below from Last Week’s weekly Bulletin.


PART A – Stock Markets

Highlights – USA

  • S&P500 0.2% decline (down 13.5% y-t-d),
  • Dow dipped 0.2% (down 9.5%).
  • Nasdaq100 lost 1.3% (down 22.2%).
  • S&P 400 Midcaps declined 0.8% (down 12.7%),
  • Small cap Russell 2000 fell 1.3% (down 18.1%).
  • Utilities rallied 1.1% (down 0.5%).
  • Transports increased 0.2% (down 9.6%).
  • Banks recovered 2.2% (down 14.9%)
  • Broker/Dealers slipped 0.3% (down 16.8%).
  • Semiconductors rallied 2.1% (down 24.4%).
  • Biotechs fell 2.1% (down 17.9%).
  • With bullion slipping $13, the HUI gold index dropped 3.0% (up 5.9%).
Major US Stock Indices
Cboe Daily Market Statistics

US Markets YTD

  • Nasdaq Composite -22.4% YTD
  • Russell 2000 -18.1% YTD
  • S&P 500 -13.5% YTD
  • Dow Jones Industrial Average -9.5% YTD

Highlights – Europe Stocks

  • U.K.’s FTSE equities index dropped 2.1% (unchanged y-t-d).
  • France’s CAC40 sank 4.2% (down 12.5%).
  • German DAX equities index fell 3.0% (down 13.9%).
  • Spain’s IBEX 35 equities index lost 3.1% (down 4.5%).
  • Italy’s FTSE MIB index slumped 3.2% (down 14.2%).

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

 Highlights – Asia Stocks

  • Japan’s Nikkei Equities Index increased 0.6% (down 6.2% y-t-d).
  • South Korea’s Kospi index declined 1.9% (down 11.2%).
  • India’s Sensex equities index sank 3.9% (down 5.9%).
  • China’s Shanghai Exchange Index declined 1.5% (down 17.5%).

 Highlights – Australian Stocks

  • Australia’s ASX200 closed down 2.2 per cent, or 159.1 points, to 7205.6 on Friday, dragging the weekly loss to 3.1 per cent.
  • Shares in Macquarie dived 7.8% after expressed caution on the economic outlook and declined to issue guidance, despite a 56% increase in net profit in its financial year ended March 31.

The Australian ASX 200 Stock Market Closed Up 13% in 2021 With Lithium Plays Starring

 Highlights – Emerging Markets Stocks 

  • EM equities were mixed
  • Turkey’s Borsa Istanbul National 100 index added 1.2% (up 32.4%).
  • Russia’s MICEX equities index fell 2.1% (down 36.8%).

Biggest SPX Stock Winners and Losers Last Week

Major US Indices

Technical Analysis 

Technical Analysis of key markets via KnovaWave

S&P 500

Daily: SPX500 performed a perfect double bottom this week’s and by week’s end had completed a perfect measured 3 wave move on the 240 Murrey Math highlighted in the podcast. We bounced through the downward channel pulled by the twist ‘helium contusion’ on the completive. Recall the fuel from the top of the channel after completing 3 waves off ATH, accelerated after broke the Tenkan through to the 4600 OI where it reversed with impulse back to Tenkan Bulls this a (ii) of a 5. Bears this is 1-2 of (i) completive V of degree. We watch if this low was a (iii), (a) or C. We have to respect the number of alternatives of degree of 5. With such trends keep it simple support is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

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

Daily S&P 500 3 waves

The 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 S&P closed right on the weekly Kijun after blasting through the downtrend on quad witching. We corrected the reversal of the breakup at Tenkan from there we had had a powerful rally to ATH. Each new high evolved after testing Tenkan key support, we are now getting a retest as resistance, making it support on this move. We reiterate this needs to be recovered for a resumption of the uptrend. We broke the Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

S&P500 Weekly Outlook

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

Dow Jones

The Dow tested its weekly up channel after bouncing back to test the Tenkan and Kijun we watch for the reaction here. Resistance is the channel, support the cloud and previous breakups.

DJIA Weekly

NASDAQ 100

Nasdaq spat the weekly cloud to the MM 6/8 and Tenkan confluence where it closed with the cloud top and Kijun above. Immediate resistance is this confluence. 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. From there we sold off right to Tenkan (as did SPX) and here we are. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue. Support Channel and cloud.

NASDAQ Record Highs

Russell 2000

The small cap Russell RUT had 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).

Russell 2000 low-price tested the 38.2% retracement of the move up from the March 2020 low before bouncing higher.

Unlike SPX we could not get through Tenkan and Kijun which rejected the bounce highlighting its weakness. However, like the NASDAQ we broke above the tenkan. This is the index showing more of the fast money crowd and is trading like it. Closed right in the middle of the cloud. Needs to get traction in here for bulls. 8/8 Support now and then cloud base

Russell Index Negative Divergence to NASDAQ

Semiconductors SMH

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)

VanEck Vectors Semiconductors ETF

NVidia $NVDA

In the bull swing following the announcement of NVDA 4/1 split some levels off the energy break NVidia didn’t look back with many gaps below. We saw another power move off the $200 retest (old $800) & earnings off $300 which failed on the retesting. It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes. Held the base channel ahead of earnings this week.

Nvidia NVDA stock chart

Apple $AAPL

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. Support held at the previous break near 50wma to close over Tenkan and Kijun as it rebalanced Chikou. Resistance now Fibs and Murrey Math levels. Remember the impact $AAPL has, at least short term on all the major indices.

Apple AAPL Stock Chart

Amazon $AMZN

Amazon double top that filled the gap in 3 waves then reversed through 50wma then gained impulse. We got a KOD to accelerate through cloud to close the week at a 3/8 spit. Earnings ahead.

ARKK ETF

The ARK Innovation ETF (ARKK), which is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, is down over 26% so far this year.

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

Ark ARKK ETF Stock Chart

US Stocks Watch

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

Earnings Highlights This Week:

TICKER COMPANY EPS FORECAST

Monday includes

  • 3D Systems, Duke Energy (DUK), Lordstown Motors (RIDE), AMC Entertainment (AMC, Tyson Foods (TSN), Blue Apron (APRN), Coty (NYSE:COTY).

Tuesday includes

  • Occidental Petroleum (OXY), Coinbase Global (COIN), Hyatt Hotels (H), Electronic Arts (EA), Peloton Interactive (NASDAQ:PTON),

Wednesday includes

  • Disney, Rivian Automotive, Coupang (NYSE:CPNG), Wendy’s (WEN), Yeti Holdings (YETI)

Thursday includes

  • Brookfield Asset Management (BAM), US Foods (USFD), Aurora Cannabis (NASDAQ:ACB), and Six Flags Entertainment (SIX).

Friday includes Honda Motor (HMC).

“U.S. companies are rushing to cash in on soaring stock prices. It isn’t just the white-hot market for initial public offerings. Companies are returning to the public markets to issue shares and raise cash from investors at the same time that existing shareholders are tapping the public market to unload their stockholdings at a record clip. Companies including Zoom Video Communications Inc. and Norwegian Cruise Line Holdings Ltd. have sold billions of dollars of shares this year… There have been 556 follow-on offerings, or stock sales by companies or existing shareholders, among U.S. companies this year, the most since 1996, according to Dealogic… They have raised a total of $133 billion. Behind the boom in share issuance? An ascendant stock market.”  August 25 – Wall Street Journal (Gunjan Banerji):

IPO Wrap

US IPO Week Ahead:

IPO lockup period expires on Rivian Automotive (RIVN). Close to 800M shares will be freed up to be sold by investors if they desire. That tally includes 100M shares of Rivian held by Ford (F) and 160M shares by Amazon (AMZN). The two companies own more than 28% of Rivian together and the fair market value of the electric vehicle maker is reported quarterly as part of their total profit or loss.

In some cases, stocks rolling off a big IPO lockup rally over the following week with a major overhang removed. Other IPO lockup expirations of note cover certain blocks of shares of Hertz Global (NASDAQ:HTZ), Expensify (EXFY), CI&T Inc (CINT), Third Coast (TCBX), Society Pass (SOPA), Weave (WEAV), Backblaze (NASDAQ:BLZE), Lulu’s Fashion (NASDAQ:LVLU), Vaxxinity (NASDAQ:VAXX), Winc (WBEV), Kidpik (PIK) and Tivic Health Systems (TIVC). Meanwhile, analyst quiet periods expire on Excelerate Energy (EE), Applied Blockchain (APLD), and Genius Group (GNS).


Part B: Bond Markets

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.’”

Highlights – Treasuries

Investment-grade bond funds saw outflows of $5.977 billion, and junk bond funds posted negative flows of $1.102 billion (from Lipper).

U.S. Treasuries were mixed, the 10-yr note yield climbed to 3.12%, hitting its highest level since late 2018. The same was true for the 30-yr bond yield, which jumped to 3.22%. The 2s10s spread widened by 10 bps to 45 basis points. The fed funds futures market, according to the CME’s FedWatch Tool, is assigning a 78.6% probability to a 75 basis point rate hike at the June FOMC meeting versus 82.9% yesterday.

  • 2-yr: -5 bps to 2.67% (-3 bps for the week)
  • 3-yr: -1 bp to 2.90% (+4 bps for the week)
  • 5-yr: +4 bps to 3.04% (+12 bps for the week)
  • 10-yr: +5 bps to 3.12% (+24 bps for the week)
  • 30-yr: +6 bps to 3.22% (+28 bps for the week)

All good until 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 fueled a booming MBS market and record low mortgage rates pushed 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 marked the fastest pace of increase on record in data from 1988.

  • Freddie Mac 30-year fixed mortgage rates jumped 17 bps to 5.27% (up 231bps y-o-y) – the high since August 2009.
  • Fifteen-year rates rose 12 bps to 4.52% – the high since December 2009 (up 222bps).
  • Five-year hybrid ARM rates jumped 18 bps to 3.96% (up 126bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates unchanged at a more than decade-high 5.38% (up 229bps).

Highlights – Federal Reserve

  • Federal Reserve Credit last week declined $14.5bn to $8.904 TN. Over the past 138 weeks, Fed Credit expanded $5.177 TN, or 139%.
  • Fed Credit inflated $6.092 Trillion, or 217%, over the past 495 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week sank $36.1bn to a four-month low $3.425 TN.
  • “Custody holdings” were down $118bn, or 3.3%, y-o-y.
  • Total money market fund assets added $2.2bn to $4.512 TN. Total money funds were little changed y-o-y.
  • Total Commercial Paper slipped $1.0bn to $1.103 TN. CP was down $103bn, or 8.5%, over the past year.

Highlights – European Bonds

  • Greek 10-year yields jumped 23 bps to 3.56% (up 224bps y-t-d).
  • Ten-year Portuguese yields surged 25 bps to 2.27% (up 167bps).
  • Italian 10-year yields surged 36 bps to 3.14% (up 196bps).
  • Spain’s 10-year yields jumped 26 bps to 2.24% (up 167bps).
  • German bund yields gained 19 bps to 1.13% (up 131bps).
  • French yields rose 20 bps to 1.66% (up 146bps).
  • The French to German 10-year bond spread widened one to 53 bps.
  • U.K. 10-year gilt yields increased nine bps to 2.00% (up 102bps).

Highlights – Asian Bonds

  • Japanese 10-year “JGB” yields added a basis point to 0.24% (up 17bps y-t-d).

Part C: Commodities

Highlights

  • Bloomberg Commodities Index increased 0.7% (up 31.4% y-t-d).
  • Spot Gold dipped 0.7% to $1,884 (up 3.0%).
  • Silver fell 1.8% to $22.36 (down 4.1%).
  • WTI crude jumped $5.08 to $109.77 (up 46%).
  • Gasoline surged 8.3% (up 69%),
  • Natural Gas jumped another 11.0% (up 116%).
  • Copper dropped 3.2% (down 4%). Wheat surged 5.0% (up 44%),
  • Corn declined 3.5% (up 32%).
  • Bitcoin sank $2,693, or 7.0%, this week to $35,905 (down 22.6%).

Risk markets continue to respond to the war in Ukraine and the supply crisis from the Coronavirus outbreak and lockdowns.

BDI Freight Index

  • The Baltic Exchange’s dry bulk sea freight index rose rose 74 points, or 2.8%, to 2,718 points on Friday. The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, rose to a seven-week high on Friday to notch up its fourth straight weekly gain.
  • The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, gained 65 points, or 2.1%, to 3,175 points. It rose for the first time in three weeks, gaining 8.1% so far this week. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, rose $586 to $28,572.
  • The capesize index rose 173 points, or 6.4%, to 2,894 points. The index hit a more than four-month peak and added 35.5% this week. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, increased $1,433 to $24,002.
  • The supramax index for smaller vessels shed 3 points at 2,729 points, while it was up 2.1% this week.

Source: Demand For Larger Ships Pushes Baltic Sea Freight Index Higher for Fourth Straight Week – TRADERS COMMUNITY

Baltic Dry Index Weekly

Aluminum (Alcoa)

We analyze Alcoa as a surrogate to Aluminum given its high beta relationship and more liquid aspect as an investment vehicle.

We have seen $AA retest the previous high after the +3 Spit as the Chikou rebalanced. We have the Gap below at +1/8 confluence. We move to 240 for this pennant resolution.

Alcoa

Copper

Copper rebounded sharply off the 50wma but again has failed on the cloud spit and channel break. The flattening Weekly Tenkan and Kijun acted as a magnet to close right there. #HG power spits have quickly rebalanced back into the wide channel. Copper had been a leader in the risk on movement for commodities.

Weekly Copper Outlook
Copper Supply Crunch

Lumber

Lumber Futures

Grains

It has been an ominous quarter for the global food supply and its pricing. Wheat, Corn and Soybeans are all significantly higher.

Wheat

We analyze the WEAT ETF as a surrogate to Wheat given its high beta relationship and more liquid aspect as an investment vehicle.

Wheat futures sank 10.7% (still up 27.7% YTD) this past week. WEAT still resides in the large pennant since it spat 8/8, and the minimum target. We have completed a measured 4/8 correction off highs meaning key support as that base, the 50dma and the pennant confluence.

Wheat ETF WEAT

Corn

Corn extended its rally to the highest since 2012 in Chicago. Major grower and shipper Brazil, the center-west region has had a dry April, hampering corn in its final development stages before harvest. U.S crops are just being sown, wet and chilly soils has left the plantings pace at its slowest start since 2013.

Corn Futures Outlook

Soybeans

Soybeans for the first time in the past month futures have drifted below the $16/bushel benchmark. Futures spat the Weekly +4/8 over $17.50/bushel. Prices accelerated lower finding no bids falling under tenkan and closing near weekly lows. The flattening Kijun the magnet just under the 8/8. The weekly cloud and 50wma mingle around the $146/bushel benchmark.

Soybeans Weekly Outlook

Energy

US Crude Oil (WTI)

Daily:

Another big week for oil, April WTI crude oil (CLJ22) futures settled at $115.68 per barrel. That’s the highest close since September 2008. The high price$115.94, low price today $107.29. For the week, the price is up over 25%. The power was this move was built after hitting our initial 8/8 target completing a iii of (5) or (iii) of 5 as marked. From there we saw a sharp ABC higher and MM recalculation higher. We are in a completive mode with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs.

Recall prior to this move the completion in 5 waves (iii or i) 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 IV? Support wasn’t found until 0-8. From there we have accelerated higher through the cloud twist. Support Kijun and Tenkan. Closed above 50dma with grid above.

The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit – hence the fractal energies reverberations. Support is previous lows, Murrey Math levels and Fib cluster. Support is the 50dma, kijun, tenkan and prev high confluence.

WTI Daily KnovaWave

Weekly:

WTI crude Oil futures continued higher with aggression after corrected the sell off after it’s measured move reversed from 7-year highs and regained them right to the top of the weekly channel with the downside open. Support is the median and Tenkan/Kijun. Long term 61.8% target fueled the spit of a spit by ABC bull flag after rebalanced Chikou sated the 5 waves. Resistance the Murrey Math levels and previous breaks (off monthly)

WTI Weekly KnovaWave Shape

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 

Oil Price Recovery

US Natural Gas (Henry Hub)

Daily:

US Natural Gas has continued higher after it completed 3 waves correcting the daily 8/8 spit correction to -2/8. Two clear alternatives, we are correcting the highs 5 or that was a 3 and we go higher. We closed over the 2 most recent highs and +1/8 right. Support is Tenkan, Kijun below.

The Cloud top broke Kijun and Tenkan with a kiss of life. Meaning that 3 was either an a i or iv– impulse in a nutshell. Prior to this move the adjunct failure of the 50dma and Tenkan opened up the retest of 3.80-3.60 last time which fueled this week’s move higher. From there we fell sharply to the Kijun, A completion of 4 (bear) or (i) of 5 (bull) which gave this move sustenance

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.

US Natural Gas KnovaWave Daily Grid

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

Notably no sharp reversal, like the previous impulsive spikes. We saw a clean break of the Kijun to close back over near highs. This move was fueled by a fractal of 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 spit the 50wma for the energy needed. Resistance is Previous highs and Murrey Grid.

The Natural gas rebalanced after continued to fail and retrace with impulse after reaching its major target, the double top potential from 2014 which equated nicely to over 8/8 Weekly and showed true impulse off that to rebalance Chikou. It’s now a question of degree, 3 or 5? Impulse just shy of the 8/8 and Tenkan confluence. A question of continuation with the 50wma as resistance and cloud as support.

US Natural Gas KnovaWave Weekly Grid

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

US Natural Gas 2014 and 2021 cycle Double Top

Key Energy Reports

Precious Metals

  • Spot Gold dipped 0.7% to $1,884 (up 3.0%).
  • Silver fell 1.8% to $22.36 (down 4.1%).

Gold

Gold futures settled $8.00 Friday lower (-0.4%) to $1,954.20/oz, up more than +1% on the week. The yellow metal is consolidating after it accelerated after breaking the weekly triangle higher. Gold has bounced after support at it’s uptrend line since the August 2021 bottom and Kijun. It garnered strength after rebalancing after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we need to stay above the triangle. Murrey Math resistance, watch Fibs & Chikou.

Gold Weekly
Gold in Perspective

Silver

Silver, like Gold bounced under the cloud base. Back underr 50wma after spitting Tenkan providing support after reversed. Closing under weekly Kijun which is now resistance. Major support is previous lows

Silver Weekly Outlook

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 jumped 0.7% to 103.66 (up 8.4% y-t-d), trading this week to a nine-year high

Majors:

  • For the week on the upside, the Australian dollar 0.2% and the euro 0.1%.
  • On the downside, the British pound 1.8%, the Swiss franc 1.7%, the Japanese yen 0.7%, the Canadian dollar 0.2%

Minors

  • For the week on the upside, the Mexican peso increased 1.5%
  • On the downside, the Brazilian real declined 2.1%, the South Korean won 1.4%, the South African rand 1.3%, the Swedish krona 1.3%, the Norwegian krone 1.1%, the New Zealand dollar 0.7%, the Singapore dollar 0.1%. The Chinese (onshore) renminbi declined 0.87% versus the dollar (down 4.66% 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.

Australian Dollar KnovaWave Weekly Outlook

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.

New Zealand Dollar KnovaWave Weekly Outlook

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.  

Euro KnovaWave Weekly Outlook

British Pound – GBPUSD

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.

British Pound KnovaWave Weekly Outlook

Euro Pound – EURGBP

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

Euro v British Pound KnovaWave Weekly Outlook

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

Japanese Yen v Dollar KnovaWave Weekly Outlook

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.

Mexican Peso KnovaWave Weekly Outlook

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

Turkish Lire KnovaWave Daily Outlook

Bitcoin

Bitcoin performing technically to perfection. Impulse begets impulse. To understand panic, understand greed. $BTC is testing 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.

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 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.

Bitcoin KnovaWave Weekly Outlook

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.

Bitcoin Mania in Perspective

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Turkey Geopolitical
Turkey Risk Monitor

Economic and Geopolitical Watch

Banks

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

Major US Banks Deliver Mixed Results in Q1, 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.

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”

Akio Morita mistakes

The Week Ahead – Have a Trading Plan

Watch Central Banker and Geopolitics speeches, reports and rate moves. 

In the US, CPI report is expected to show the annual inflation rate eased to 8.1% from a 41-year high of 8.5% in March while the core rate is seen falling to 6% from 6.5%. Investors will also keep a close eye on a batch of speeches from Fed officials. Other releases are producer prices, trade price indexes, preliminary reading for the Michigan consumer sentiment, consumer inflation expectations and the NFIB Business Optimism Index. The earnings season continues with Tyson Foods, BioNTech, Peloton, Walt Disney, Wendy’s, AMC Entertainment due to report.

The US Data

  • Monday: March Wholesale Inventories (Briefing.com consensus 2.3%; Prior 2.5%)
  • Tuesday: April NFIB Small Business Optimism Index (Prior 93.2)
  • Wednesday: MBA Mortgage Applications Index (Prior +2.5%); April CPI (Briefing.com consensus 0.2%; Prior 1.2%) and Core CPI (Briefing.com consensus 0.4%; Prior 0.3%); April Treasury Budget (Prior -$192.7B)
  • Thursday: Weekly Initial Claims (Briefing.com consensus 191K; Prior 200K) and Continuing Claims (Prior 1384K); April PPI (Briefing.com consensus 0.5%; Prior 1.4%) and Core PPI (Briefing.com consensus 0.6%; Prior 1.0%)
  • Friday: April Import Price Index (Prior 2.6%) and Import Price Index, Ex-Fuel (Prior 1.2%); April Export Price Index (Prior 4.5%) and Export Price Index, Ex-Ag (Prior 4.5%); May Preliminary Univ. Of Michigan Index of Consumer Sentiment (Briefing.com consensus 63.5; Prior 65.2)

Federal Reserve


Europe and the UK

The United Kingdom will be publishing preliminary estimates of first-quarter GDP and business investment data, alongside foreign trade balance, industrial production and construction output for March. The British economy likely grew 1% in Q1, easing from a 1.3% expansion at the end of last year due to a decline in households’ incomes.

In the EU factory activity likely declined in March, when most of the impact of the war in Ukraine started to be reflected. German investor morale is seen falling for the third consecutive month in May, remaining at the lowest level since March 2020.

Other key data includes; Eurozone Zew economic sentiment index; Germany final inflation figures; France foreign trade; Italy industrial activity; Turkey jobless rate and industrial production; and Russia consumer price index. Russia annual inflation accelerated to 17.73% as of April 29th, the highest since 2002 and up from 17.70% a week earlier. On a weekly basis, consumer prices increased 0.21%, easing from 0.25% a week earlier after the central bank cut interest rates.

Asia

In Australia data includes consumer and business sentiment from Australia.

In China, an inflation rate is seen hitting 1.9% in April, a rate much below other major economies as persistent lockdown and social distancing measures hurt demand. Trade data will also take front stage.

In India, there will also be trade and inflation data on the calendar, however, consumer prices are seen rising a much faster 7.5% in April. Also, first-quarter GDP data from the Philippines and Indonesia will be interesting to watch, to see how two island nations performed amid large virus outbreaks in the first half of the quarter, and particularly for Indonesia, how it benefited from the rally in commodities.

An interest rate decision and job data in Malaysia, labor market data from South Korea, and Japan’s March current account.

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

-comment section below data-

Real Time Economic Calendar provided by Investing.com.

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