April 24- 30, 2022
FEAR NOT Brave Investors
Where have we been and where are we going? Join our weekly market thread on Traders Community…
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
With tech wrecked these past few weeks we get perhaps the most formative week ahead in some time. Tech giants including Apple Inc., Amazon. and Microsoft are among the companies headlining a busy earnings week. The trifecta of rising interest rates, the Russian invasion of Ukraine and surging costs continues to weigh on the markets.
Election Day in France starts off the week, polls show Macron’s lead doubled from round 1, giving him projected 54.6% v 45.4% for Le Pen. In 2017, he won by 66% to 34%. Up for grabs is the 8million voters who backed far-left leader Jean-Luc Mélenchon in round 1. Notably absentee votes are the largest since 1965.
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. Natural gas also joined in on the downside again. Natural gas prices reversed sharply after touching a high not seen since November 2008 of $8.065 Monday, the May contract settled Friday at $6.534 in the benchmark Henry Hub contract.
Overall, about a third of the S&P 500 and nearly half of the Dow Jones Industrial Average are expected to provide their quarterly updates during the week starting Monday. Further to the big 3 we get Facebook parent Meta Platforms, Google owner Alphabet and Twitter (won’t that bea fun conference call!). Industrial conglomerates General Electric and 3M; food heavyweights Mondelez International and McDonalds are on the docket.
We saw most of the major banks getting cracked after reports last week, including Goldman Sachs Morgan Stanley and four of the largest U.S. lenders Wells Fargo, Citigroup and PNC reporting double-digit drops in first quarter profit. From an 11% decline at Morgan Stanley to a 46% drop at Citigroup.
A fun fact is April is historically the best month for stocks from a seasonality perspective, can the ongoing market volatility and headwinds fall into place again?
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)
Inflation, Oh inflation
U.S. consumer prices rose in March by the most since late 1981. The consumer price index increased 8.5% from a year earlier following a 7.9% annual gain in February. CPI rose 1.2% from a month earlier, the biggest gain since 2005. Increases in the cost of food, electricity and shelter were the largest contributors again to the monthly rise, the Labor Department said, Energy prices increased 32%, namely gasoline (48%) and fuel oil (70.1%) in the wake of Russia’s invasion of Ukraine. Food prices jumped 8.8%, the most since May 1981.
The prices that goods and services producers receive rose in March at the fastest pace since records have been kept. The PPI increased 11.2% from a year ago, the most in a data series going back to November 2010. On a monthly basis, the gauge climbed 1.4%, above the 1.1% Dow Jones estimate and also a record.
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.
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.
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 dropped 2.8% (down 10.4% y-t-d)
- Dow fell 1.9% (down 7.0%).
- Nasdaq100 sank 3.9% (down 18.2%).
- S&P 400 Midcaps fell 1.7% (down 9.1%)
- Small cap Russell 2000 dropped 3.2% (down 13.6%).
- Transports rallied 1.5% (down 8.6%).
- Utilities slumped 2.7% (up 2.5%).
- Banks dipped 0.6% (down 12.2%)
- Broker/Dealers sank 4.1% (down 12.4%).
- Semiconductors declined 1.3% (down 24.2%).
- Biotechs were hammered 6.4% (down 11.4%).
- With bullion dropping $47, the HUI gold index sank 9.3% (up 15.9%).
US Markets YTD
- Dow Jones Industrial Average -4.1% YTD
- S&P 500 -4.7% YTD
- Russell 2000 -7.5% YTD
- Nasdaq Composite -9.4% YTD
Highlights – Europe Stocks
- U.K.’s FTSE equities index declined 1.2% (up 1.9% y-t-d).
- France’s CAC40 was about unchanged (down 8.0%).
- German DAX equities index slipped 0.2% (down 11.0%).
- Spain’s IBEX 35 equities index declined 0.5% (down 0.7%).
- Italy’s FTSE MIB index dropped 2.3% (down 11.2%).
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 Nikkei -1.6% (Friday) (UNCH for week)
- Hong Kong HangSeng -0.2% (-4.1%)
- China Shanghai Comp+0.2% (-3.9%)
- India Sensex -1.2% (-2.0%)
- South Korea Kospi -0.9% (+0.3%)
Highlights – Australian Stocks
- Australia’s ASX All Ordinaries: -0.7% for the week.
- ASX200 closed at 7,473.3 a loss of 0.08 per cent for the week.
- Australia’s materials and energy sectors both saw heavy falls Friday, led by BHP -4.4% to $48.49. Santos -2.6% to $8.15 & Rio Tinto-2.4% to $113.60.
- The ASX rose 6.4% for the month of March, the market’s best performance since November 2020.
Highlights – Emerging Markets Stocks
- EM equities were dumped
- Turkey’s Borsa Istanbul National 100 index declined 0.9% (up 33.1%).
- Russia’s MICEX equities index sank 7.9% (down 41.1%).
Biggest SPX Stock Winners and Losers Last Week
Technical Analysis of key markets via KnovaWave
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.
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
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.
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
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.
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.
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
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)
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.
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.
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.
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
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
- Coca-Cola (NYSE:KO) and Activision Blizzard (ATVI).
- Pre-Market: ATVI BOH KO CBU DORM LKFN LII OTIS PHG
- After-Hours: ARE ACC AMP AXTA BRO CADE CDNS CALX CATY CR CCK HSTM HTLF HXL IBTX LXFR MEDP OI PKG PEP PCH ROIC SBAC SSD TBI UHS WRB WHR ZION
- Centene (CNC), Alphabet (GOOG), General Motors (GM), Chipotle (CMG), Microsoft (MSFT), UPS (UPS), PepsiCo (NASDAQ:PEP), General Electric (GE) and Visa (V).
- Pre-Market: MMM ALLE ARCH ADM ARCC AWI AVY CNC GLW DHI ECL ENTG FCF FELE GE GPK HUBB NSP IVZ JBLU MSCI NTRS NVS NVR ONB PCAR PPBI PII BPOP RTX ROP ST SHW SSTK SITC SBSI AAN TRU UBS UPS VLO WBD WM
- After-Hours: ACCO GOOG ABCB APAM ASH AGR BHE BYD CNI COF CHX CHE CMG CB CSGP EGP EW ENPH EQR ESS EXAS FFIV FCPT GM GSHD HA HIW IEX JBT JNPR MANH MTDR MSFT MKSI MDLZ NAVI NCR PEB QS RRC RNST RHI SKX TENB TER TX TXN TNET TRMK UDR UMBF VBTX V WSBC WH
- Boeing (NYSE:BA), Humana (NYSE:HUM), T-Mobile US (TMUS), Ford Motor (F), Meta Platforms (FB), Kraft Heinz (NASDAQ:KHC), and Amgen (AMGN).
- Pre-Market: ALKS AMT APH ADP BXMT BA BOKF BSX BG CVE GIB CHKP CHEF CME CSTM DAN DRVN ETR EEFT EVR EXTR FISV GRMN GD GPI HEES HOG HELE HES HUM IART IQV KHC MAS NEO NYCB NSC ODFL OC PAG PRG PB RGEN ROL RES R STX SLGN SLAB SPOT SHOO SF STM TMUS TMHC TEL TECK TDY TRN TPB UMC VRT WNC WAB
- After-Hours: AFL AGI ALGN ALSN AMED AWK AMGN NLY AM AR ACGL ASGN AZPN AVB AVT AXS BMRN BCOV CHRW CACI CP CG CLS CCS CAKE CHDN FIX CYH CLB COUR DFS DRE ESI EIG EHC EQT EQIX RE FICO FARO F FORM FWRD GGG HP HTZ HOLX HPP ICLR PI INVH KRC LVS LC MAT MXL MMSI MTH FB MEOH MAA MC MOH MSA MYRG NTGR NEX NDLS ORLY OII PGRE PYPL PDM PPC PINS PLXS PTC QGEN QCOM RJF RRX SLM NOW SAVE FTI TDOC TROX TYL UCTT UIS URI UPWK WRE WSC AUY
- Twitter (TWTR), Comcast (CMCSA), Merck (MRK), Caterpillar (CAT), Northrop Grumman (NOC), Amazon (NASDAQ:AMZN), Apple (AAPL), Intel (INTC), Altria (MO), Domino’s Pizza (NYSE:DPZ) and PayPal (PYPL).
- Pre-Market: FLWS AOS ABMD ALNY AIMC MO AEP AIT ARES ABG BAX BFH BC CRS CARR CAT CBZ CHD CNX CMCSA CTS CFR DPZ DTE LLY ERJ EME EXLS FAF FBP FCFS FTV FCN GWW GFF HAYW HSY HNI HUN IP ITGR IPG IRM JKS KBR KDP KIM KEX LH LAZ LLNW LECO LIN LKQ MTSI MA MTRN MCD MDC MPW MD MRK NLSN NOK NOC NVCR OPCH OSTK PATK PTEN PBF BTU PRFT PCG PBI PNM POR PDS PHM RLGY RS SNY SNDR STNG SFNC SIRI SAH SO LUV SWK SRCL STRA TROW TFX TPX TNC TXT SHYF TMO TW TNL TRS TWTR VLY VNE VIRT VC WBS WST WEX WTW XEL
- After-Hours: ACCD AEM LNT ATUS AMZN AAPL ATR ACA AJG AMK TEAM AVTR AX BZH BIO CAMP CPT CSL CWST CE CINF COHU COLM OFC CUZ CUBE DXCM DLR DRQ EMN EBS WIRE ETD EVTC EXPO FHI FIBK FSLR FIVN FTAI FBHS ULCC GLPI GILD HIG HUBG IMAX INTC KNSL KLAC KN LMAT LYLT LPLA LTC MGRC MERC CASH MTX MITK MHK COOP NATI NWE NOV OIS OLN OMCL OMF OSIS PEGA POWI PFG RMAX RMD HOOD ROKU SGEN SKYW SM SSB SWN SPSC SSNC SYK TEX TRUP X VRSN WDC WU ZEN
- AbbVie (NYSE:ABBV), Bristol-Myers Squibb Company (BMY), Exxon Mobil (XOM), Chevron (NYSE:CVX), Phillips 66 (PSX) and AbbVie (ABBV).
- Pre-Market: ABBV AB AON ARCB AZN B BLMN BMY CBOE GTLS CHTR CVX CL XOM HON IMO LNTH LYB MGA MOG.A NWL NMRK NVT PSX PIPR PFS SXT SYNH TRP SLCA WPC WY WETF
- After-Hours: None
“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:
IPOs expected to price in the week ahead include Tenon Medical (TNON) and SaverOne (SVRE) on April 27.
Key IPO lockup period expirations to watch include: Rent the Runway (RENT), Arteris (AIP), Marpai (MRAI), GlobalFoundries (GFS), Fluence Energy (FLNC), Solo Brands (DTC), Udemy (UDMY), HireRight Holdings (HRT), Aura Biosciences (AURA), and Entrada Therapeutics (TRDA).
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 $3.585 billion, and junk bond funds posted negative flows of $886 million (from Lipper).
U.S. Treasuries finished with the fed-funds-sensitive 2-yr yield up three basis points to 2.72% while the growth-sensitive 10-yr yield decreased one basis point to 2.91% after hitting 2.97% Thursday evening.
- 2-yr: +3 bps to 2.72% (+27 bps for the week)
- 3-yr: UNCH at 2.89% (+21 bps for the week)
- 5-yr: -3 bps to 2.95% (+16 bps for the week)
- 10-yr: -1 bp to 2.91% (+8 bps for the week)
- 30-yr: +1 bp to 2.94% (+2 bps for the week)
Rates on the 10-year note traded over 1.900% on Friday, for the first time since July 2019. Yields broke out of the small symmetrical triangle highlighted the past weeks, after forming a much larger symmetrical triangle.
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 marked the fastest pace of increase on record in data from 1988.
- Freddie Mac 30-year fixed mortgage rates rose another 11 bps to 5.11%, the high back to December 2009 (up 214bps y-o-y).
- Fifteen-year rates surged 21 bps to 4.38% – the high since April 2010 (up 209bps).
- Five-year hybrid ARM rates gained six bps to 3.75% (up 92bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 22 bps to a more than decade-high 5.23% (up 216bps).
Highlights – Federal Reserve
- Federal Reserve Credit last week expanded $10.1bn to a record $8.916 TN. Over the past 136 weeks, Fed Credit expanded $5.190 TN, or 139%.
- Fed Credit inflated $6.105 Trillion, or 217%, over the past 493 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt last week dropped $15.4bn to $3.446 TN. “Custody holdings” were down $114bn, or 3.2%, y-o-y.
- Total money market fund assets sank $61.3bn to a seven-month low $4.468 TN. Total money funds increased $2bn y-o-y.
- Total Commercial Paper jumped $16.4bn to $1.087 TN. CP was down $132bn, or 10.9%, over the past year.
Highlights – European Bonds
- Greek 10-year yields gained seven bps to 2.98% (up 166bps y-t-d).
- Ten-year Portuguese yields jumped 15 bps to 1.99% (up 152bps).
- Italian 10-year yields surged 19 bps to 2.67% (up 150bps).
- Spain’s 10-year yields jumped 16 bps to 1.94% (up 137bps).
- German bund yields gained 13 bps to 0.97% (up 115bps).
- French yields rose nine bps to 1.42% (up 123bps).
- The French to German 10-year bond spread narrowed four to 45 bps.
- U.K. 10-year gilt yields increased seven bps to 1.96% (up 99bps).
Highlights – Asian Bonds
- Japanese 10-year “JGB” yields rose four bps to 0.25% (up 18bps y-t-d).
Part C: Commodities
- Bloomberg Commodities Index dropped 2.6% (up 30.1% y-t-d).
- Spot Gold fell 2.4% to $1,932 (up 5.6%).
- Silver sank 5.5% to $24.14 (up 3.6%).
- WTI crude dropped $4.88 to $102.07 (up 36%).
- Gasoline declined 2.3% (up 48%),
- Natural Gas sank 10.5% (up 75%).
- Copper fell 2.9% (up 3%). Wheat declined 2.6% (up 40%)
- Corn added 0.7% (up 33%).
- Bitcoin lost $878, or 2.1%, this week to $39,658 (down 14.5%).
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 for a third straight session Friday with a jump in rates across vessel segments. The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, rose about 3% to 2,307 on Friday, the highest since April 4th.
- The capesize index jumped 12.8% to 1,845 points, a peak since April 1st. Capesize typically transport 150,000 tonne cargoes such as iron ore and coal gained 24.6% from last week. Average daily earnings for capesizes were up $1,728 at $15,299.
- The panamax index fell 1.4% to 3,004 points. Panamaxes usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes fell 1.2% this week. Average daily earnings for panamaxes decreased $380 to $27,039.
- The supramax index for smaller vessels gained 32 points to 2,678 points
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.
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.
It has been an ominous quarter for the global food supply and its pricing. Wheat, Corn and Soybeans are all significantly higher.
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.
Corn fell 2.5% this week (up 24% YTD) after is has been consolidating and retesting the April 21 highs after it accelerated higher after breaking the cloud. This week’s low is key for ABC measurement 2/8 measured move.
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.
US Crude Oil (WTI)
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 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)
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)
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.
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.
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.
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 – Crude Oil Outlook with A Desperate United States Turning to Iran with Prices Vertical
- Into The Vortex – Natural Gas Outlook with Threats of Russian Ukraine Conflict Hitting Global Supply
- ExxonMobil Delivers Big Earnings, Continues to Pay Down Debt as Oil and Gas Prices Surge
- The Energy Crisis and Volatility See Natural Gas and VIX the Best Performing Futures in January
- Chevron Earnings Miss on Weaker Production Outweighing Gains from Soaring Oil and Natural Gas Prices
- Natural Gas Squeezes in Largest One Day Percentage Move on Record as Traders Caught Short Molecules
- Australian Coking Coal Record High with Strong Demand in Korea and Japan
- OPEC Monthly Oil Market Report January 2022
- Lower US Producer Price Inflation Dependent on Oil Prices
- Fitch Outlook For North American Oil & Gas is Neutral in 2022
- Spot Gold rose 1.6% to $1,978 (up 8.1%).
- Silver gained 3.1% to $25.55 (up 9.6%).
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.
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
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 gained 0.7% to 101.22 (up 5.8% y-t-d)
- For the week on the upside, Nil
- On the downside, the Australian dollar 2.0%, the British pound 1.7%, the Japanese yen 1.6%, the Swiss franc 1.5%, the Canadian dollar 0.8%
- For the week on the upside, the Swedish krona increased 0.2%
- On the downside, the South African rand declined 6.3%, the Brazilian real 2.0%, the New Zealand dollar 1.9%, the Norwegian krone 1.6%, the Mexican peso 1.3%, the Singapore dollar 1.0%, the South Korean won 0.7%, Chinese renminbi dropped 2.00% versus the dollar (down 2.23% 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 – 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.
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. $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.
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
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.
- Morgan Stanley Advisory Revenue Nearly Doubled Offsetting Weakness in Underwriting
- PNC Bank Revenue Grew 11% Boosted by the BBVA USA Acquisition.
- Wells Fargo Revenue Falls in Consumer, Corporate and Investment Banking
- Citigroup Earnings Affected by Higher Credit and Russian Exit Costs
- Goldman Sachs Beats Earnings Expectations on Strong Currencies and Commodities Trading Results
- JPMorgan Sets Aside $900 million To Prepare for Economic Turmoil
- BlackRock Profits Rise 20% Despite Lower AUM With Lower Investor Confidence in Markets
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
- German Ifo (Apr),
- US National Activity Index (Mar).
- NBH Policy Announcement; UK PSNB (Mar),
- Japanese Unemployment (Mar),
- US March Durable Orders (Briefing.com consensus 1.1%; prior -2.2%), Durable Orders ex-transportation (Briefing.com consensus 0.5%; prior -0.6%) at 8:30 ET; February FHFA Housing Price Index (prior 1.6%) and February S&P Case-Shiller Home Price Index (Briefing.com consensus 18.9%; prior 19.1%) at 9:00 ET; March New Home Sales (Briefing.com consensus 770,000; prior 772,000) and April Consumer Confidence (Briefing.com consensus 106.0; prior 107.2) at 10:00 ET; and $48 bln 2-yr Treasury note auction results at 13:00 ET
- Chinese Industrial Profits (Mar),
- Australian CPI (Q1),
- German GfK (May),
- New Zealand Trade Balance (Mar).
- US Weekly MBA Mortgage Index (prior -5.0%) at 7:00 ET; March advance goods trade deficit (prior -$106.60 bln), March advance Retail Inventories (prior 1.1%), and March advance Wholesale Inventories (prior 2.1%) at 8:30 ET; March Pending Home Sales (Briefing.com consensus -1.5%; prior -4.1%) at 10:00 ET; weekly crude oil inventories (prior -8.02 mln) at 10:30 ET; and $49 bln 5-yr Treasury note auction results at 13:00 ET
- BoJ Policy Announcement, Japanese Retail Sales (Mar),
- Riksbank Policy Announcement,
- CBRT Inflation Report
- EZ Consumer Confidence Final (Apr), German Prelim. CPI (Apr),
- US: Advance Q1 GDP (Briefing.com consensus 1.1%; prior 6.9%), advance Q1 GDP Deflator (Briefing.com consensus 7.3%; prior 7.1%), weekly Initial Claims (Briefing.com consensus 182,000; prior 184,000), and Continuing Claims (prior 1.417 mln) at 8:30 ET; weekly natural gas inventories (prior +53 bcf) at 10:30 ET; and $44 bln 7-yr Treasury note auction results at 13:00 ET
- CBR Policy Announcement,
- Chinese Caixin Manufacturing PMI Final (Apr),
- German Import Prices (Mar), German GDP Flash (Q1), EZ Flash CPI (Apr), Flash Prelim. GDP (Q1) & M3 (Mar),
- Swiss KOF (Apr),
- Canadian GDP (Feb).
- US: March Personal Income (Briefing.com consensus 0.4%; prior 0.5%), Personal Spending (Briefing.com consensus 0.6%; prior 0.2%), PCE Prices (prior 0.6%), core PCE Prices (Briefing.com consensus 0.3%; prior 0.4%), and Q1 Employment Cost Index (Briefing.com consensus 1.1%; prior 1.0%) at 8:30 ET; April Chicago PMI (Briefing.com consensus 62.0; prior 62.9) at 9:45 ET; and final April University of Michigan Consumer Sentiment Survey (Briefing.com consensus 65.7; prior 65.7) at 10:00 ET
Watch Central Banker and Geopolitics Watch speeches, reports and rate moves.
Friday, May 6
ATLANTA – Federal Reserve Bank of Atlanta President Raphael Bostic speaks before the Georgia Tech 2022 Master’s Ceremony Commencement, 1520 EDT/1920 GMT. No Q&A. Embargoed text available. Bobby Dodd Stadium, 177 North Avenue NW. Livestream at https://commencement.gatech.edu/live. To cover in person: media Karen Mracek, email@example.com
OREM, Utah – Federal Reserve Bank of San Francisco President Mary Daly gives commencement speech before the spring Class of 2022 at Utah Valley University, 1800 MDT/2000 EDT/0000 GMT. Livestream available. No embargoed text. Remarks (and video) will be made available following the speech. UCCU Center on UVU Orem Campus. Contact: Marshall Eckblad, 415 271 7307 or marshall.eckblad https://www.unlv.edu/news/release/endemic-economy-spring-outlook-address-post-pandemic-inflation-housing-and-jobs
Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2022.
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