April 13-29, 2023

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?

Contents

Click on the links below to navigate to the relevant section.

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

Editorial

The S&P 500 closed at 4,137 last Friday, at 4,133 this Friday. The winner has been the option vol sellers. Earnings season has seen some swift moves, despite this volatility has come in sharply, some of this is the sheer size of ODTE options creating roadblocks, part of it the shrinking number of active participants and there is also the uncertainty from leadership from banks to corporates to politicians.

We are seeing tight and failing ranges elsewhere as liquidity is low in most places. Oil prices ran out of steam and declined this week, reflecting recession concerns. WTI crude oil futures fell 5.5% to $77.86/bbl. Natural gas futures rose 5.0% to $2.22/mmbtu on the vagaries of weather models. The 2-yr Treasury note yield rose six basis points this week to 4.16% and the 10-yr note yield rose five basis points to 3.57%.

Volatility (or lack of)

The ranges this week are the tightest since late 2021.

• S&P 55.62 points lowest range since November 2021
• NASDAQ 258 points lowest range since December 2021.
• Dow Jones industrial average 340.88 points lowest since August 2021

ODTE Losses Tell Much of the Story

This tightness is not insignificant given the punter element dominating options trading. 0DTE, options with zero-days to expiration have increased to account for over 80% of option volume in some cases. However small investors have been bleeding. A University of Muenster in Germany study shows $358,000 a day has been lost since May 2022 by price takers in ODTE options.

The researchers estimate the retail crowd’s market share in 0DTE trading volume has expanded to over 6% in 2022 versus 4% in the prior year. S&P 500 options make up more than 75% of the total. 

Day traders lost $20 million as a result of poor positioning in about two years through February 2023 the study shows. This rose to more than $70 million when the market makers cost was factored in. 

The low volatility is also seen in short term or dead cat bounces and sell offs. An extreme in this is the less than 6-hour manic FOMO ramp and collapse of Chinese EV option UCAR this week. We also this the divergence between bounces and investor accumulation in banks for example. For example, bank stocks saw weakness this week following earnings reports from some regional banks, including Zions Bancorporation (ZION), Truist Financial (TFC), and Western Alliance Bancorp (WAL). Despite regional bank weakness, the S&P 500 financial sector was among the top performers with a 1.0% gain.

Where is the fear?

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

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

Ahead is Earnings, Growth and Inflation

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

A big Week for Inflation & Central Banks

The market continues to contend with the notion that the Fed will keep rates higher for longer. FOMC voters, Philadelphia Fed President Harker, Fed President Williams and Cleveland Fed President Mester all said Fed needs to do more to get inflation back down to target. In contrast the fed funds futures market, which is pricing in two rate cuts before the end of the year, according to the CME FedWatch Tool. Next week we get PCE and ECI together to help the market price the Fed’s path.

With such a tight range in markets we are aware of built-up energy ahead of key central bank decisions from this week and potential fundamentals to set-up rate hikes or not. There is discontent globally with central Banks. The release of an independent review on the Reserve Bank of Australia, An RBA fit for the future is the biggest clean up, if not revolutionary change for the RBA since inflation targeting and formal independence was established in the 1990s. The review gave 51 recommendations, which the Government gave in-principal support to all of them.

Multiple central Bankers are out to test their resolve, and the markets resolve.

In Japan this week BOJ Governor Ueda’s makes first decision and ahead of the following week’s decisions by the FOMC, ECB and RBA. Ahead of those Central Banks decisions they will get key releases for growth and inflation.

U.S. – PCE and ECI

In the US we will receive core PCE for March on Friday. The Fed’s preferred measure of inflation, the core price deflator for total consumer spending. It is seen as the Fed’s preferred inflation measure to reinforce hike expectations. Core CPI remained hot in March at 0.4% m/m, annualized to 4.7% m/m at a seasonally adjusted and annualized rate (SAAR).

Core PCE, however, does not always follow core CPI due to various methodological differences in the measures. Friday will also see the Employment Cost Index during Q1 that captures wages and salaries and benefits.

Europe – Germany, Spain, and France CPI

We get Germany, Spain, and France will release their inflation readings for April. I Italy that will release theirs the following week. The aggregate Eurozone CPI estimate will drop on May 2nd, with the ECB decisions two days later. Expectations are for slightly higher gasoline prices in April over March.

Australia – Q1 CPI

Australia’s Q1 CPI is expected to show a gain of over 1% q/q non-annualized. Most estimates range from 1.2–1.5% after the larger 1.9% gain in Q4. The trimmed mean and weighted median figures have been hot for an extended period. The ABS monthly CPI for March will be significant.

Japan – Tokyo CPI

Japanese core CPI inflation suggests maybe the time is ripe for scaling back stimulus. It last accelerated to 3.8% y/y (3.5% prior, 3.6% consensus). The effects drove yen appreciation. The next catalyst may be the Tokyo CPI reading for April this week. BOJ Governor Ueda’s makes first interest rate decision this week.

Canada – BoC Summary of Deliberations

The BoC drops its Summary of Deliberations. Governor Macklem recently intimated that there would be a further discussion revealed within the deliberations around the rate path. He has leaned against market pricing of rate cuts by saying “The implied market pricing for rate cuts does not look like the most likely scenario to us.”

Earnings Season Deepens

Some 180 S&P 500 companies, including 14 Dow 30 components, are scheduled to report results for the first quarter this week. Eighteen per cent of the companies in the S&P 500 have reported actual results for the March quarter to date. 76 per cent have reported actual EPS above estimates, which is below the five-year average of 77 per cent but above the 10-year average of 73 per cent.

Earnings season continues with Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL) and Meta Platforms (META) will headline the week. Coca-Cola (KO), PepsiCo (PEP), Caterpillar (CAT), Boeing (BA), Visa (V), Mastercard (MA), Exxon Mobil (XOM) and Chevron (CVX)

Click here to see the Full Week Ahead List Below

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

Worth repeating again in the low VIX environment.

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

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

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

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

So how Screwed are We?

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

The Credit cycle downturn is coming to the surface.

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

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

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

Some things never change, when you think Greed is Good

Annualizing the New York Fed’s Q4 household borrowing data, Credit card debt expanded at a 26% pace and total debt at a 9.5% rate during the quarter. The Fed’s aggressive tightening cycle has had little affect on loose financial conditions.

“The United States is on track to add nearly $19 trillion to its national debt over the next decade, $3 trillion more than previously forecast, as a result of rising costs for interest payments, veterans’ health care, retiree benefits and the military, the Congressional Budget Office said“

We saw the debt ceiling reached on January 19, prompting the Treasury to begin employing extraordinary measures that should prevent a technical default until early June. The expectation this is all political showboating, but what if it more than that?

Swirling greed and know it all came home to roost. FOMO (fear of missing out) and TINA (there is no alternative) ended how they always do.

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

China; Behind the Iron Curtain

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

• “China’s economy grew at the fastest pace in a year in the first quarter, putting Beijing on track to meet its growth goal for the year without adding major stimulus… Gross domestic product expanded 4.5% last quarter from a year earlier… In March, retail sales soared 10.6% from a year earlier, the biggest monthly gain since June 2021. The upbeat data provide a foundation for China’s government to meet or exceed its GDP growth target of about 5% for the year.” April 18 – Bloomberg
• “Violet Zhu, a Shanghai-based electronic components exporter, has been attending jewelry auctions and chatting on social media forums on the subject this year, looking to invest in rubies and diamonds. ‘I don’t have the brain for stock investments, and I am waiting to redeem mutual fund products once they break even. But in the meantime, I have been continuously buying gems,’ says Zhu. Zhu says she is searching for oddly-shaped rubies of higher grades… She is not alone. Jewlery and precious metals consumption in China soared 37.4% in March from a year earlier underpinning a 13.6% jump for the quarter…” April 18 – Reuters (Winni Zhou and Tom Westbrook)

The Market Tripod of Destruction.

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

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

Inflation Matters

• US Producer Price Inflation Fell Again in March, -0.5% m/m vs 0.0% Expected
• Consumer Inflation in March Eases, Higher Shelter Prices Offsetting Fall in Energy Costs
• FAO World Food Price Index Fell in March for Twelfth Consecutive Month
• US Core PCE Inflation Comes in Lighter Than Expected in February

Inflation with Henry Kaufman

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

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

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

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

Independence – Never Take It for Granted Traders

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

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

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

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

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

– MoneyNeverSleeps

Cboe Daily Market Statistics

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

Part A – Stock Markets

Weekly Highlights – USA

Indices

• S&P500 little changed (up 7.7% y-t-d),
• Dow slipped 0.2% (up 2.0%).
• S&P 400 Midcaps increased 0.4% (up 2.8%),
• Small cap Russell 2000 added 0.6% (up 1.7%).
• Nasdaq100 declined 0.6% (up 18.8%).

Sectors

• Utilities gained 1.0% (down 1.9%).
• Banks were about unchanged (down 17.8%),
• Broker/Dealers rose 1.5% (up 2.9%).
• Transports advanced 1.2% (up 7.6%).
• Semiconductors dropped 1.6% (up 19.3%).
• Biotechs increased 0.2% (up 2.3%).
• With bullion down $21, the HUI gold equities index dropped 4.9% (up 13.3%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index increased 0.5% (up 6.2% y-t-d).
• France’s CAC40 increased 0.8% (up 17.0%).
• German DAX equities index added 0.5% (up 14.1%).
• Spain’s IBEX 35 equities index increased 0.6% (up 14.4%).
• Italy’s FTSE MIB index declined 0.5% (up 17.0%). 

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

 Highlights – Asia Stocks

• Japan’s Nikkei Equities Index added 0.2% (up 9.5% y-t-d).
• South Korea’s Kospi index fell 1.1% (up 13.8%).
• India’s Sensex equities index lost 1.3% (down 1.9%).
• China’s Shanghai Exchange Index fell 1.1% (up 6.9%). 

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: 0.4% Friday (0.4% for the week)
• Led by iron ore futures plunging for a third straight day. Rio Tinto fell 2.8% Fortescue Metals fell 4.2% Champion Iron fell 2.7%. BHP cut production targets for its Australian nickel and Chilean copper mines fell 2.3%

Highlights – Emerging Markets Stocks 

EM equities lower mostly

• Brazil’s Bovespa index fell 1.8% (down 4.9%),
• Mexico’s Bolsa index dipped 0.5% (up 11.8%).
• Turkey’s Borsa Istanbul National 100 index dropped 1.6% (down 9.0%).
• Russia’s MICEX equities index jumped 3.3% (up 22.6%).

Technical Analysis

S&P 500

Daily: The daily SPX on Friday closed out the year right in the sphere of interest at the cloud twist. The market after spitting the 4100 and 38.2% retracement broke through all near support., though managing to capture the Tenkan on the last day of the year. This underscores the power from the SPX spat of June & October lows with impulse through the tenkan and Kijun energized by the daily cloud twist that fueled this rally. The completive wave came off extreme fear and bear that ended with relief. Now we have sated much of the greed phase and short fear phase. We have completed that cycle and from here we measure the alternatives.

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

On the downside the Kijun and those June lows now critical and is our trading Bear/Bull pivot in a high vol scenario. Watch each measured 3 wave move on the 240 & Murrey Math highlighted in the podcast. The prices pulled through the downward cloud pulled by the twist ‘helium contusion’ on the completive.

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

Weekly: In the last week of 2022 we again closed under the Tenkan and 8/8 after the failed rally was rejected at the 50wma and +1/8. Key support is the 38% correction and the previous low. Power came from rejecting the cloud as one would expect in a 3 or C. We have Kijun. the Tenkan and 50wma all above i.e impulse right to the weekly cloud is needed for cycle switching. For that you would have to break the Kijun and 50wma.

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

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

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

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

NASDAQ 100

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

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

Dow Jones

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

Russell 2000

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

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with retest & break of the triple top patterning in a pennant. From there been a fractal on each exhaustion. The Philadelphia Semiconductor (SOX) Index returned 27.6% for Q1 2023. Pull from Chip players’ Nvidia surged 90% and AMD 51%.

NVidia $NVDA

NVidia surged 90% in Q! 2023. The Philadelphia Semiconductor (SOX) Index returned 27.6% for the quarter, with the Nasdaq Computer Index up 25.7% and the NYSE Arca Technology Index gaining 26.1%. The Nasdaq100 (NDX) jumped 20.5%. NVDA took off after the breakup retest from May 2021. NVidia is a clear leader of SOX & SMH look for cues there and ABC failures for changes. NVDA never looked back after the Key Break (mauve) and Tenkan to a flat cloud and holding support the recent low at the 61.8% extension.

Apple $AAPL

Heading into another Earnings Apple held the sphere of influence after retesting 7/8 & break up. Kijun and Tenkan are about to touch, with earnings we watch for a kiss of death at the cloud as the story. Apple & other mega-cap names dominant the major indices, and a plethora of funds that hold it as a core position. The Vanguard Mega-Cap Growth ETF (MGK) delta is important to watch.

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

ARKK ETF

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

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

ExxonMobil XOM

Part B: Bond Markets

Bond Watch

Treasuries

U.S. Treasuries ended the week mostly lower, the 2-yr Treasury note yield rose six basis points this week to 4.16% and the 10-yr note yield rose five basis points to 3.57%. The 2s10s spread compressed by a basis point to -59 bps. The market continues to contend with the notion that the Fed will keep rates higher for longer. FOMC voters, Philadelphia Fed President Harker, Fed President Williams and Cleveland Fed President Mester all said Fed needs to do more to get inflation back down to target. Next week we get PCE and ECI together to help the market price the Fed’s path.

Treasury Yield Watch

Friday/Week

• 2-yr: -1 bp to 4.16% (+6 bps for the week)
• 3-yr: +3 bps to 3.90% (+6 bps for the week)
• 5-yr: +2 bps to 3.66% (+5 bps for the week)
• 10-yr: +3 bps to 3.57% (+5 bps for the week)
• 30-yr: +3 bps to 3.78% (+4 bps for the week)

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

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates increased five bps to 6.39% (up 128bps y-o-y).
• Fifteen-year rates rose 11 bps to 5.72% (up 134bps).
• Five-year hybrid ARM rates jumped 12 bps to 5.83% (up 208bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up seven bps to 6.93% (up 170bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index dropped 2.1% (down 6.4% y-t-d).
• Spot Gold declined 1.1% to $1,983 (up 8.7%).
• Silver fell 1.0% to $25.08 (up 4.7%).
• WTI crude dropped $4.65, or 5.6%, to $77.87 (down 3%).
• Gasoline sank 8.3% (up 6%),
• Natural Gas rose 5.6% to $2.23 (down 50%).
• Copper dropped 2.9% (up 5%).
• Wheat fell 2.8% (down 15%),
• Corn dropped 3.2% (down 9.3%).
• Bitcoin sank $3,300, or 10.9%, this week to $27,170 (up 64%).

Key Long Term Commodity Charts

Copper

Gold

“Gold prices hit their highest level of the year on Thursday, driven by bets that inflation will remain sticky despite recent declines. The most actively traded gold-futures contract rose to $2,055.30 a troy ounce, up 13% year to date. That also put it within striking distance of its record high, reached in the summer of 2020. Some investors value gold as a hedge against inflation, expecting the precious metal to hold up in value if other assets fall.”

April 13 – Wall Street Journal (Hardika Singh)

Energy

WTI Oil

Natural Gas

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

BDI Freight Index

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

Charts and commentary via KnovaWave on:

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

Part D: Forex Markets

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

Highlights

• For the week, the U.S. Dollar Index increased 0.3% to 101.82 (down 1.6% y-t-d). 2022 gains were 8.2%
• For the week on the upside, the Swedish krona increased 0.3%, the Swiss franc 0.2%, the Mexican peso 0.2%, and the British pound 0.2%.
• On the downside,  the Brazilian real declined 2.8%, the South Korean won 2.2%, the Norwegian krone 1.9%, the Canadian dollar 1.2%, the New Zealand dollar 1.1%, the Singapore dollar 0.3%, the Japanese yen 0.3%, the Australian dollar 0.2%, the South African rand 0.1%, and the euro 0.1%. The Chinese (onshore) renminbi declined 0.32% versus the dollar (up 0.10%).

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

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

Cryptocurrencies

Bitcoin

Bitcoin continues to be plaything of levered speculators, this week we saw the markets turn against those short. An incredibly intense squeeze engulfed the Treasury market which flowed through to crypto. Intense squeeze dynamics also spurred a huge rally in crypto, with bitcoin surging a crazy 34%.

Where did this come from? Forced coverage from yield curve punts blowing up. Yen shorts and levered “carry trades” were at risk. JGB and European yields sank. Corporate spreads were blowing out, inflicting losses on levered corporate bond portfolios. Energy prices tanked. The favored (so called safe) financial stocks were collapsing, while the heavily shorted technology stocks rallied. For the week, the KBW Bank Index sank 14.6%, while the Nasdaq100 (NDX) jumped 5.8%.

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

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

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

Ethereum

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

Major US Banks Deliver Mixed Results in Q1, 2023

America’s big money center banks kick of first quarter earnings next week. There will be extra attention on them with the recent banking turmoil. Guidance will be keenly watched for from the money center banks. Concerns are rising over the banking sector’s exposure to commercial real estate. JPMorgan Chase (JPM), Citigroup (C), PNC Financial Services Group, Inc. (PNC) and Wells Fargo (WFC) reporting Q1 results on Friday. We got a preview from JPMorgan CEO Dimon saying that banking system is strong and sound despite the banking crisis raising the odds of a recession, and that the crisis is not over yet.

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

• Morgan Stanley Wealth Management Revenue Rose 11% While Investment Banking Revenue Fell 24%
• Goldman Sachs Revenues Miss, Discloses Losses in Marcus and Real Estate
• Bank of America Earnings Benefiting from Higher Interest Rates and Solid Loan Growth
• Wells Fargo Earnings Higher with Net Interest Income Up 45% on Higher Rates
• PNC Bank Earnings Beat Expectations but Lowered 2023 Revenue Guidance
• What Banking Crisis? JPMorgan Shrugs, Record Lending Income and Revenue
• Citigroup Personal Banking Revenue and Indian Exit Boost Earnings

The California and New York Regional Bank Collapse of 2023

So that went quick….. its all about the crisis that just kept holding off until it didn’t

“The Federal Reserve on Sunday unveiled a new program to ensure banks can meet the needs of all their depositors amid escalating chances of bank runs following the abrupt collapse of two major banks in the space of 72 hours. The Bank Term Funding Program (BTFP) will offer loans with maturities of up to a year to banks, savings associations, credit unions and other eligible depository institutions. Here are some key elements of the Fed’s program: A key element of the program is acceptable loan collateral – including U.S. Treasuries and mortgage-backed securities among others – will be valued at ‘par’… Loans of up to a year in length will be available under the new facility… Interest rates will be the one-year overnight index swap (OIS) rate plus 10 bps and will be fixed for the term of the advance on the day the advance is made… The loan commitments made by the Fed’s 12 regional banks will be backstopped with $25 billion from the U.S. Treasury’s Exchange Stabilization Fund.”

March 13 – Reuters (Dan Burns)

“Just hours after Wall Street opened for trading on Friday morning, US regulators had seized control of Silicon Valley Bank, which had imploded under the strain of depositors pulling out their money en masse. What at first seemed like the failure of a one-of-its-kind lender with deep ties to the technology industry quickly appeared as though it might spiral out of control. Within 48 hours, regulators were preparing a package of emergency measures to quell panic among depositors and prevent contagion in the rest of the banking system. For some working on the effort, it evoked memories of the response to the coronavirus pandemic in 2020 and the great financial crisis of 2008. By Sunday evening, the US government announced it would guarantee all deposits held at SVB and crypto lender Signature Bank, which was also shut down by regulators at the weekend. The Federal Reserve, meanwhile, launched a lending facility that would be available to lots of other banks in order to ensure depositors’ demands could be met.”

March 13 – Financial Times (Colby Smith, James Politi, Ortenca Aliaj and James Fontanella-Khan)

“The biggest banks in the U.S. swooped in to rescue First Republic Bank with a flood of cash totaling $30 billion, in an effort to stop a spreading panic following a pair of recent bank failures. JPMorgan…, Citigroup Inc., Bank of America Corp. and Wells Fargo are each making a $5 billion uninsured deposit into First Republic, the banks said… Morgan Stanley and Goldman Sachs… are kicking in $2.5 billion apiece, while five other banks are contributing $1 billion each. The bank’s executives came together in recent days to formulate the plan, discussing it with Treasury Secretary Janet Yellen and other officials and regulators in Washington, D.C…”

March 16 – Wall Street Journal (David Benoit, Dana Cimilluca, Ben Eisen, Rachel Louise Ensign and AnnaMaria Andriotis):

“Credit Suisse shares rebounded sharply on Thursday after the lender revealed plans to borrow up to SFr50bn ($54bn) from the Swiss central bank and buy back about SFr3bn of its debt in an attempt to boost liquidity and calm investors. The Swiss National Bank had said on Wednesday it was willing to provide a liquidity backstop following a plunge of as much as 30% in the troubled lender’s stock… In a statement on Thursday, Credit Suisse said it had taken the decision ‘to pre-emptively strengthen its liquidity’ by borrowing the funds from the Swiss central bank under a loan facility and short-term liquidity facility.”

March 16 – Financial Times (Joshua Frankli, Owen Walker and Laura Noonan)

The Week Ahead – Have a Trading Plan

What Macro and Micro Risks and Opportunities Lie Ahead this week

Global Watch

Next Week’s Risk Dashboard via Scotiabank

• Fundamentals to set-up rate hikes
• Fed’s preferred inflation measure to reinforce hike expectations
• US ECI and revisions to inform cost-push pressures
• Eurozone CPI and the Easter Bunny
• BoJ’s Ueda unlikely to roil markets
• US GDP: serial misplaced pessimism
• Australia core inflation may tip the RBA’s balance
• Eurozone GDP may be on an upswing
• Canadian GDP: resilient, with an asterisk
• BoC may add to rate bias discussion
• BanRep’s hikes may be at an end
• Mexico going for sixth straight GDP gain
• Riksbank to hike, reset forward guidance
• A huge week for earnings

Central Bank Watch

In the week ahead we have key monetary policy meetings from Bank of Canada, Peru’s central bank and the Bank of Korea. Attention will also be on FOMC minutes that could materially inform next steps for the Federal Reserve.

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

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

Wednesday, April 26, 2023

• 03:30 Riksbank Interest Rate Decision

Thursday, April 27, 2023

• 23:00 BoJ Monetary Policy Statement

Friday, April 28, 2023

• 05:30 Russia Interest Rate Decision
• 14:00 Columbia Interest Rate Decision

For our complete Central Bank Analysis and Outlook visit our Central bank Watch:

Economic Data Watch

US Data Focus

• Monday: Chicago Fed National Activity Index MAR at 07:30 ET and Dallas Fed Manufacturing Index APR at 09:30 ET
• Tuesday: February FHFA Housing Price Index (prior 0.2%) and February S&P Case-Shiller Home Price Index (prior 2.5%) at 9:00 ET; March New Home Sales (prior 640,000) and April Consumer Confidence (prior 104.2) at 10:00 ET; and $42 bln 2-yr Treasury note auction results at 13:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior -8.8%) at 7:00 ET; March Durable Orders (prior -1.0%), Durable Orders ex-transportation (prior 0.0%), March advance goods trade deficit (prior -$91.6 bln), March advance Retail Inventories (prior 0.8%), and March advance Wholesale Inventories (prior 0.2%) at 8:30 ET; weekly crude oil inventories (prior -4.58 mln) at 10:30 ET; and $43 bln 5-yr Treasury note auction results at 13:00 ET
• Thursday: Advance Q1 GDP (prior 2.6%), advance Q1 Chain Deflator (prior 3.9%), weekly Initial Claims (prior 245,000), and Continuing Claims (prior 1.865 mln) at 8:30 ET; March Pending Home Sales (prior 0.8%) at 10:00 ET; weekly natural gas inventories (prior +75 bcf) at 10:30 ET; and $35 bln 7-yr Treasury note auction results at 13:00 ET
• Friday: Q1 Employment Cost Index (prior 1.0%), March Personal Income (prior 0.3%), Personal Spending (prior 0.2%), PCE Prices (prior 0.3%), and core PCE Prices (prior 0.3%) at 8:30 ET; April Chicago PMI (prior 43.8) at 9:45 ET; and final April University of Michigan Consumer Sentiment survey (prior 63.5) at 10:00 ET

Global Data Focus

• OPEC:
• Canada: GDP. BoC Summary of Deliberations
• Brazil:
• Mexico: GDP
• Europe: Preliminary GDP estimates Euro Area, Germany, France, Italy, and Spain for first quarter, Germany’s GfK Consumer Climate Indicator, Ifo Business Climate indicator. Eurozone’s business survey; Germany’s unemployment; Switzerland’s KOF Leading indicators, retail sales and foreign trade; Turkey’s business morale and interest rate decision. Sweden’s central bank is widely expected to deliver another 50bps hike on Wednesday
• UK: Public sector net borrowing, Nationwide house prices, and CBI gauges for factory orders, business optimism, and distributive trades.
• China: GDP for the first quarter, industrial production, retail sales, and the unemployment rate for March. PBoC Loan Prime rates.
• Japan: Bank of Japan’s first monetary policy decision under Governor Kazuo Ueda and the accompanying Quarterly Outlook Report. Japan unemployment rate, retail sales, and industrial production for March.
• India:
• South Korea: GDP anticipated to indicate economic activity remained pressured amid weak semiconductor demand. April consumer and business confidence
• Australia: Inflation print for the first quarter. March’s credit data and producer prices for the first three months of 2023.
• New Zealand: First quarter trade balance and consumer confidence figures. 

US Stocks Watch Earnings and Event Watch

Earnings Highlights This Week:

• Monday includes Coca-Cola (KO), Whirlpool (WHR), and Canadian National Railway (CNI).
• Tuesday includes Microsoft (MSFT), Alphabet (GOOG), Visa (V), PepsiCo (PEP), McDonald’s (MCD), Verizon (VZ), General Electric (GE), Chipotle (CMG), and UPS (UPS).
• Wednesday includes Meta Platforms (META), Boeing (BA), Humana (HUM), General Dynamics (GD), eBay (EBAY), and Norfolk Southern (NSC).
• Thursday includes mazon (AMZN), Mastercard (MA), Eli Lilly (LLY), Merck (MRK), Caterpillar (CAT), Abbvie (ABBV), Southwest Airlines (LUV), and Altria (MO). Options trading implies a double-digit swing in share price for Snap (SNAP) and Hertz Global (HTZ)
• Friday includes Exxon Mobil (XOM), Chevron (CVX), and Colgate-Palmolive (CL).

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

Events

Notable conferences running during the week include:

Monday

• Chardan 7th Annual Genetic Medicines and Cell Therapy Conference will feature appearances from Vor Biopharma (VOR), Passage Bio (PASG), and Rocket Pharmaceuticals (RCKT).
• Cboe Global Markets will launch a one-day version of its flagship VIX index in an expansion of the product offerings traders can use to bet on volatility.
• The IPO lock-up period ends on a block of shares of Mobileye (MBLY).
• Shareholders of record with Lucid Group (LCID) will vote on six proposals at the company’s annual meeting.

Tuesday

• Ionis Pharmaceuticals (IONS) and Biogen (BIIB) on watch with the FDA action date arriving on the review of tofersen.
• The Stifel 2023 Targeted Oncology Days event will feature presentations by Kymera Therapeutics (KYMR), Black Diamond Therapeutics (BDTX), IGM Biosciences (IGMS), Kura Oncology (KURA), Viracta Therapeutics (VIRX), and a number of other healthcare companies.

Wednesday

• The three-day CoinDesk Consensus event will take place with a long list of featured speakers scheduled including Edward Snowden, Anthony Scaramucci, as well as execs from Amazon (AMZN), Google (GOOG), LVMH (OTCPK:LVMHF), Mastercard (MA), Coinbase Global (COIN), and Warner Music Group (WMG).
• FDA action date hits for Seres Therapeutics (MCRB) and its SER-109 Biologics License Application
• The invite-only Bitcoin Policy Summit could create some headlines regarding cryptocurrency regulations with both U.S. Senator Cynthia Lummis and U.S. House member Tom Emmer scheduled to speak.
• Final report is expected to be issued from UK’s Competition and Markets Authority on Microsoft’s (MSFT) acquisition of Activision Blizzard (ATVI).
• Shareholders with Teck Resources (TECK) will vote on the plan to split the company into two separate entities.

Thursday

• Shareholders with NuVasive (NUVA) and Globus Medical (GMED) will vote on the planned merger.
• The MJ Unpacked event in New York City will showcase hundreds of cannabis CPG brands with retailers, manufacturers, and investors.

Friday

• Shareholders with Black Knight (BKI) and Intercontinental Exchange (ICE) will vote on the planned merger.
• Deutsche Bank (DB) will hold a fixed income investor conference call.

IPO Wrap

US IPO Week Ahead:

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

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