Traders Market Weekly: War Power, Diversion and Inflation

February 20 – 26 2022

FEAR NOT Brave Investors

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War Dance Continues as Inflation Soars

The Week That Was – What Lies Ahead?

Contents

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

Editorial

Markets are behaving as you would expect with war drums beating over the Russian Ukraine situation elevating risk concerns. Geopolitical concerns remained at the forefront ahead of the long weekend, U.S. officials maintained that a full Russian invasion of Ukraine is imminent, on a near-daily basis for about two weeks. Ukraine’s defense minister told the Kyiv Independent that the risk of an “all-out” invasion by Russia is “not high,” adding that Ukrainians are safe everywhere in the country except for the war zone in Donbas. Throw in the reality of soaring inflation and concerns about the Fed removing policy accommodation with the alternative narrative of the Fed being behind the curve with inflation. None of this background leaves investors oozing with confidence. US treasury yields out the curve were sharply lower with the 10-year down to 1.927%, down from the 2.06% high for the week (also a new cycle high). The 30-year yield is at 2.24% from 2.388%.

Earnings for growth companies continues to deliver outsized negative responses. On Friday alone we saw Roku (ROKU 112.46, -32.25, -22.3%), DraftKings (DKNG 17.29, -4.77, -21.6%), and Redfin (RDFN 22.86, -5.78, -20.2%) each wrecked.  The market is volatile and illiquid, one needing quick reactions by experienced traders. This is where for the inexperienced sitting on your hands and biding your time for best case scenarios is a prudent response. With a 3-day weekend and US Markets closed Monday, Feb 21, for President’s Day you bulls got a sense of relief.

Safe havens appear to be traditional. Gold rose for the 3rd straight week with its best week since May 2021 as it broke and heldthe largely weekly pennant we had been watching. Compare this to Bitcoin, our go to for evaluating the high-risk punter in the market and on Thursday it collapsed the most in almost a month losing 7.7%, ending the day near $40,700. Ethereum also fell 7.7%, while other leading altcoins from the top ten also fell with Terra down 8.5%. The total capitalization of the crypto market lost 7.3%, to $1.94 trillion CoinGecko said. The Cryptocurrency Fear and Greed Index fell 22 points to 30 back to a state of fear. Warren Buffet’s chum Charles Munger compared cryptocurrencies to a “venereal disease” and praised China for banning them given he saw crypto as just a bastion for hackers, criminals and tax evaders.

Oil prices fell on Thursday through Friday over 3 per cent though bounced back by days end. Indeed, oil experienced its first weekly loss in 2022. It is another sign of a confused market, Iran sanctions coming off versus the alarms about an imminent Russian invasion of Ukraine. The potential of a supply disruption from conflict in Ukraine is massive as Russia produces around 10 million barrels of oil a day. Either way oil is still extremely high hitting pockets around the world. Brent crude was trading at $US92.92 a barrel, down 0.2 per cent. West Texas Intermediate fell 0.3 per cent to $US91.37.

Inflation, Oh inflation

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 sre 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.

The Federal Reserve in the coming week can expect to see their key inflation metric accelerate to a fresh forty year high. The personal consumption expenditures price index (PCE), which the Fed uses for its inflation target, is forecast to have jumped to 6% in January from a year earlier. The core measure, which excludes food and fuel, is forecast to climb 5.2%.

We are now less than a month before the Fed’s next policy meeting, with a much swifter rise in PCE could turn up the heat for a half-point increase in the benchmark interest rate. January’s CPI and PPI both rose more than forecast. We get speeches by Governors Christopher Waller and Michelle Bowman and regional Fed presidents Loretta Mester of Cleveland, an FOMC voter in 2022, Raphael Bostic of Atlanta, and Thomas Barkin of Richmond next week to keep the algorithms busy.

We also get a look at our favorite Asia-Pacific rate hikers both meeting this week, the Reserve Bank of New Zealand widely expected to raise interest rates again and the Bank of Korea is seen holding steady at Lee Ju-Yeol’s final meeting as governor, having already raised three times since the summer.

The question investors have to ask is what he can do to inflation given most of it is supply driven, which he does have the tools for and how quickly can consumers and businesses alike recalibrate from Supply chain issues? Not to through in the energy crisis engulfing the world and the continuing war drums from Biden with Russia and The Ukraine.

The Fed is losing control of the markets with rate markets pricing in 6.3 25 bps rate hikes by the FOMC’s December 14th meeting. After last week’s aggressive Bullard’s 50 bp call and next day walk back by about 3 hawks to 25 bp it’s fair to say there’s any FOMC consensus for such aggressive moves.

Credit markets are splintering. An index of U.S. investment-grade CDS rose four to 68 bps this week to the high since September 2020. High-yield CDS surged 14 to a 15-month high 369 bps. U.S. bank CDS prices continue to march skyward. Bank of America CDS rose four this week to a 20-month high 68 bps. JPMorgan CDS rose four to a 20-month high 63 bps. Morgan Stanley CDS rose four to 72 bps, and Goldman Sachs added one to 81 bps.

Volatility

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

CME FedWatch Tool shows the probability for a rate hike in March. 

Fed March Meeting

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


PART A – Stock Markets

Highlights – USA

  • Dow industrial average fell -2.75% from the Wednesday high, for the week, the Dow was down -1.9%. The Dow all-time high close at 36952.65.
  • S&P index fell -3.13% from the Wednesday high, S&P was down -1.6%. The S&P all-time high close at 4818.62.
  • NASDAQ index fell -4.35% from the Wednesday high. For the week, Nasdaq was down -1.8%.
  • Russell 2000 fell -1.0% for the week (down 10.5% y-t-d).
  • S&P 400 Midcaps fell -0.6% (down 7.4% y-t-d).
  • The obsession of Apple hitting 3 trillion market at $182.86 was achieved (182.94 high)
  • Utilities sank 1.3% (down 8.5% y-t-d).
  • Transports slipped 0.2% (down 9.1% y-t-d).
  • Banks sank 3.0% (up 3.8% y-t-d).
  • Broker/Dealers fell 1.4% (up 0.7% y-t-d).
  • Semiconductors increased 0.6% (down 14.2% y-t-d).
  • Biotechs sank 3.4% (down 10.5% y-t-d).
  • With bullion jumping $40, the HUI gold index surged 6.5% (up 9.2% y-t-d).

Major US Stock Indices
Cboe Daily Market Statistics

US Markets YTD

  • Dow Jones Industrial Average -6.2% YTD
  • S&P 500 -8.8% YTD
  • Russell 2000 -10.5% YTD
  • Nasdaq Composite -13.4% YTD

Highlights – Europe Stocks

  • The German DAX equities index lost 2.5% (down 5.3% y-t-d).
  • Spain’s IBEX 35 equities index slumped 2.4% (down y-t-d).
  • Italy’s FTSE MIB index fell 1.7% (down 3.1% y-t-d).
  • France’s CAC40 declined 1.2% (down 3.1% y-t-d).
  • U.K.’s FTSE equities index fell 1.9% (up 1.7% y-t-d).

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

 Highlights – Asia Stocks

  • Japan’s Nikkei: dropped 2.1% (down 5.8% y-t-d).
  • China’s Shanghai Composite: gained 0.8% (down 4.1% y-t-d).
  • India’s Sensex: declined 0.6% (down 0.7% y-t-d).
  • South Korea’s Kospi:  little changed (down 7.8% y-t-d).

 Highlights – Australian Stocks

  • Australia’s ASX All Ordinaries: – Third straight week of gains despite fresh global jitters over Ukraine ASX 200 edged 0.1% higher this week, despite dropping 1 per cent, or 74.5 points to 7221.7 on Friday.
  • Iron ore Friday -3.9% to $US134.50 (Qingdao)

 Highlights – Emerging Markets Stocks 

  • EM equities mostly lower.
  • Brazil’s Bovespa index slipped 0.6% (up 7.7%),
  • Mexico’s Bolsa fell 1.8% (down 1.9%).
  • Turkey’s Borsa Istanbul National 100 index fell 0.9% (up 9.4%).
  • Russia’s MICEX equities index sank 4.3% (down 10.4%).

Stock valuations, as measured by forward price-to-earnings ratios are near their highest level since the 2000 dot-com boom.

Biggest SPX Stock Winners and Losers Last Week


Technical Analysis 

Technical Analysis of key markets via KnovaWave

S&P 500

Daily: SPX500 bounced to top of channel after completing 3 waves off ATH, accelerated after broke the Tenkan through to the 4600 OI where it reversed with impulse back to Tenkan Bulls this a (ii) of a 5. Bears this is 1-2 of (i) completive V of degree. We watch if this low was a (iii), (a) or C. We have to respect the number of alternatives of degree of 5. With such trends keep it simple support is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

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

Daily S&P 500 Flat Top Triangle

The break up was from above the 200dma. The balance from sharp reversal after the initial 3 wave down from the SPX wave 5 extension as Covid19 fed impulse accelerated under the Tenkan. From there we had seen the ABC or 1-2-3 spinning around the 61.8% of the move. Support began at the October 2019 lows. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in. A manic wave 5 or 3 of some degree was a resolution for the ages. Note the 100% extension from the emotive element and MM levels when the spit kicks in

Weekly:

S&P index rose 23.11 points Friday or 0.52% at 4500.54. S&P index rose 1.51% for the week. The S&P all-time high close at 4818.62. We have reversed the breakup at Tenkan from there we had had a powerful rally to ATH. Each new high evolved after testing Tenkan key support, this needs to be recovered for a resumption of the uptrend. We tested the Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

S&P500 Weekly Outlook

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

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

Dow Jones

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

DJIA Weekly

NASDAQ 100

Nasdaq spat the weekly cloud to the MM 6/8 and Kijun Tenkan confluence where it sold off. 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). Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue. Support Channel and cloud.

NASDAQ Record Highs

Russell 2000

The small cap Russell RUT had been developing a large flag which it did a false break to fuel the selling from there we replicated to the down (Adam’s theory).

Russell 2000 low-price at 1901.35 got within 12 points of the 38.2% retracement of the move up from the March 2020 low before bouncing higher.

Unlike SPX and NDX we could not get through Tenkan and Kijun which rejected the bounce highlighting its weakness. 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. Resistance 8/8 Support cloud base, gap below

Russell Index Negative Divergence to NASDAQ

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with the retest & break of the triple top patterning in a pennant. Pull from Chip Shortage players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX saw Semiconductors rise 2.9% (up 40.0% YTD)

VanEck Vectors Semiconductors ETF

NVidia $NVDA

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

Nvidia NVDA stock chart

Apple $AAPL

On the way up Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level on the way down these levels became key energy levels. Support held at the previous break near 50wma to close over Tenkan and Kijun as it rebalanced Chikou. Resistance now Fibs and Murrey Math levels. Remember the impact $AAPL has, at least short term on all the major indices.

Apple AAPL Stock Chart

Amazon $AMZN

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

ARKK ETF

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

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

Ark ARKK ETF Stock Chart

US Stocks Watch

Fourth-quarter results season kicks into high gear next week, with overall S&P 500 earnings expected to climb 23.1%, according to Refinitiv IBES. Technology sector earnings (SPLRCT) are expected to rise by 15.6%, as other groups have benefited more from the economy’s rebound from pandemic lockdowns in 2020.

Companies in the S&P 500 growth index (IGX), which is replete with tech stocks, are expected to increase earnings 16%, compared to a 26% rise for the S&P 500 value index (IVX), more heavily weighted in banks, industrials and other economically sensitive companies, according to Credit Suisse

The tech sector is trading at about 27 times earnings estimates for the next 12 months, near its highest in 18 years, compared to 21 times for the overall S&P 500, according to Refinitiv Datstream.

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:

Monday includes

TICKER COMPANY EPS FORECAST

  • The New York Stock Exchange and NASDAQ will all be closed on Monday, February 21 for President’s Day.

Tuesday includes

CNP CenterPoint Energy $0.33
HR Healthcare Realty Trust $0.44
HD Home Depot $3.22
M Macy’s $1.91
MDT Medtronic $1.38
PANW Palo Alto Networks $-0.42
TOL Toll Brothers $1.26

Wednesday Includes 

BBWI Bath & Body Works $2.25
BCS Barclays $0.29
EBAY eBay $0.82
HEI Heico $0.57
NTAP NetApp $1.07

Thursday includes

ADSK Autodesk $0.89
AXON Axon Enterprise $-0.07
SQ Block $-0.06
CVNA Carvana $-0.76
DELL Dell Technologies $1.94
DISCA Discovery $0.84
GCI Gannett $-0.03
NTES NetEase $0.82
NKLA Nikola $-0.46
VMW VMware $1.44
ZS Zscaler $-0.57

Friday includes

AES AES Corp. $0.46
CNK Cinemark Holdings $-0.16
DSX Diana Shipping $0.30
SSP E.W. Scripps $0.46
FL Foot Locker $1.46

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

IPO Wrap

US IPO Week Ahead:


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 $2.54 billion, and junk bond funds posted negative flows of $3.55 billion (from Lipper).

U.S. Treasuries finished the week on a higher note with 10s and 30s recording solid gains while shorter tenors ended closer to their flat lines. Today’s advance helped longer tenors turn positive for the week while shorter tenors added to this week’s gains after pacing last week’s retreat. The 2s10s spread widened by two basis points to 46 bps this week after tightening by 17 bps a week ago.

  • 2-yr: UNCH at 1.47% (-5 bps for the week)
  • 3-yr: -1 bp to 1.68% (-6 bps for the week)
  • 5-yr: -2 bps to 1.82% (-5 bps for the week)
  • 10-yr: -4 bps to 1.93% (-3 bps for the week)
  • 30-yr: -6 bps to 2.25% (-1 bp 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 surged 23 bps to a 31-month high 3.92% (up 111bps y-o-y).
  • Fifteen-year rates jumped 22 bps to 3.15% (up 94bps).
  • Five-year hybrid ARM rates rose 18 bps to 2.98% (up 21bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 21 bps to 4.20% (up 119bps).

Highlights – Federal Reserve

  • Federal Reserve Credit last week jumped $20.8bn to a record $8.859 TN. Over the past 127 weeks, Fed Credit expanded $5.132 TN, or 138%.
  • Fed Credit inflated $6.027 Trillion, or 214%, over the past 484 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt last week dropped $17.9bn to $3.448 TN.
  • “Custody holdings” were down $101.8bn, or 2.9%, y-o-y.
  • Total money market fund assets dropped $43.5bn to $4.550 TN. Total money funds increased $217bn y-o-y, or 5.0%.
  • Total Commercial Paper increased $4.0bn to $1.023 TN. CP was down $52.6bn, or 4.9%, over the past year.
Fed Total Assets

We do know we have massive speculation pockets, viz a viz the Meme or GameStop, Weed stocks and cryptocurrency spectacles in just the matter of weeks. The Fed is today throwing additional fuel on historic speculative manias.

The Fed QE infinity programme is a yield curve control policy with long government bond yields coming down. Bond supply and continued central bank resistance to more negative policy rates limits the move. Central banks have been cutting rates and adding liquidity to avoid systematic failure.

Highlights – European Bonds

  • Greek 10-year yields fell six bps to 2.56% (up 125bps y-t-d).
  • Ten-year Portuguese yields dropped nine bps to 1.08% (up 62bps).
  • Italian 10-year yields sank 11 bps to 1.84% (up 67bps).
  • Spain’s 10-year yields slipped a basis point to 1.20% (up 64bps).
  • German bund yields dropped 11 bps to 0.19% (up 37bps).
  • French yields fell eight bps to 0.69% (up 49bps).
  • The French to German 10-year bond spread widened three to 50 bps.
  • U.K. 10-year gilt yields sank 17 bps to 1.38% (up 41bps).

Highlights – Asian Bonds

  • Japanese 10-year “JGB” yields declined two bps to 0.22% (up 15bps y-t-d).

Part C: Commodities

Highlights

  • Bloomberg Commodities Index jumped 1.6% (up 12.6% y-t-d).
  • Spot Gold rose 2.1% to $1,898 (up 3.8%).
  • Silver gained 1.4% to $23.92 (up 2.6%).
  • WTI crude declined $2.03 to $91.07 (up 21%).
  • Gasoline dropped 2.5% (up 20%),
  • Natural Gas surged 12.4% (up 19%).
  • Copper increased 0.4% (up 1.4%).
  • Wheat was little changed (up 4%),
  • Corn added 0.3% (up 10%).
  • Bitcoin sank $2,016, or 4.8%, this week to $40.341 (down 13%).

Risk markets continue to respond to a Coronavirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.

BDI Freight Index

  • The Baltic Exchange’s dry bulk sea freight index rose on Friday, helped by an uptick in capesize and panamax vessel rates. The overall index, which factors in rates for capesize, panamax and supramax vessels, rose 78 points, or 4.1%, to 1,964.
  • The BDI however dropped 0.7% for the week.
  • Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, rose by $1,888 to $13,888.
  • The capesize index jumped 228 points, or 15.8%, to 1,675. The panamax index edged up 10 points to 2,375.
  • Average daily earnings for panamaxes, which ferry 60,000-70,000 tonne coal or grain cargoes, rose $87 to $21,375.
  • The supramax index fell by 1 point to 2,325.
Baltic Dry Index Weekly

Copper

Copper rebounded sharply off the 50wma pulled up by the flattening Tenkan and Kijun to close right at the channel break – a key juncture. #HG shrugged off demand concerns from resurgence in Covid-19 supply disruptions. The power spits of +8/8 and +2/8 were rebalanced by the Tenkan breaking the Kijun with 50wma and cloud below. Copper had been a leader in the risk on movement for commodities.

Weekly Copper Outlook
Copper Supply Crunch

Corn

Corn Futures Outlook

Lumber

Lumber Futures

Soybeans

Soybeans finally found bids after hitting weekly lows well under weekly cloud and well under 50wma to close over the weekly Tenkan, Kijun and 50wma. – Watch for impulse

Soybeans Weekly Outlook

Energy

US Crude Oil (WTI)

Daily:

Another big week for oil, after hitting our initial 8/8 target completing either a iii of (5) or (v) of 5 as marked. From there we saw a sharp ABC higher and MM recalculation higher. We are in a completive mode with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs. Recall prior to this move the completion in 5 waves (iii or i) saw heavy selling with eventual confluence kiss of death with 50dma at the top of the cloud. From there down in 3 waves, completing a C or IV? Support wasn’t found until 0-8. From there we have accelerated higher through the cloud twist. Support Kijun and Tenkan. Closed above 50dma with grid above

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

WTI Daily KnovaWave

Weekly:

WTI crude Oil futures continued higher 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. Support previous high and Weekly Tenkan & Kijun which closed turning up under the 61.8% to give next impulse clue after holding above 50wma after regaining energy above Tenkan and Kijun. Resistance the Murrey Math levels and previous breaks (off monthly)

WTI Weekly KnovaWave Shape

These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all time lows to negative pricing we have seen mirror replications.” Support is previous channels, tenkan and Kijun. Above we have Murrey Math time and price 

Oil Price Recovery

US Natural Gas (Henry Hub)

Daily:

 US Natural Gas completed 3 waves correcting the daily 8/8 spit after a classic euphoria wave 5. Two clear alternatives, we are correcting the highs 5 or that was a 3 and we go higher. The Cloud top after broke Kijun and Tenkan with a kiss of life. Meaning that 3 was either an a i or iv– impulse in a nutshell. 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)

Notice the fractals of the move after completing the C of 4 bullish scenario played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. For the bulls all this needs to hold for the highs to be a (iii) looking at possibilities we have the 161.8% at 7.026 if we get ‘silly’ 50dma support.

US Natural Gas KnovaWave Daily Grid

Like the larger wave on the way up it accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs. We successfully tested that break in a pennant ABC. Previous highs (flat topped triangle energy) and 8/8 and new highs underscore the structure that fed the move and is key longer term.

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

US Natural Gas KnovaWave Weekly Grid

Recall the impulse wave powered from the spit of 50wma to get over weekly Kijun and Tenkan.  This was energized with a series of fractals between old 38 and 50% channel, as you would expect in a seasonal commodity with weather a prime mover. Resistance is Fib/Murrey confluence, support Tenkan, Kijun – as always count your ABC’s

US Natural Gas 2014 and 2021 cycle Double Top

Key Energy Reports

Precious Metals

  • Spot Gold rose 2.1% to $1,898 (up 3.8%).
  • Silver gained 1.4% to $23.92 (up 2.6%).

Gold

February gold (GCG22) on Friday closed down -10.80 (-0.59%) after for the week up $14 with the high price $1847.94 on Thursday. Again, the yellow metal failed to break the weekly triangle higher. After a three-day plunge of 3.74% amid USD strength, gold found support above its uptrend line since the August 2021 bottom and Kijun. Above base of weekly cloud after closing over the Tenkan, Kijun and 50wma after wave (ii) alt gains favor to top of cloud, can it sustain it? Still rebalancing after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.

Gold Weekly
Gold in Perspective

Silver

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

Silver Weekly Outlook

Part D: Forex Markets

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

Highlights

  • For the week the U.S. Dollar Index unchanged at 96.04 (up 0.4% y-t-d)
  • Majors for the week on the upside, the Australian dollar 0.6%, the South African rand 0.5%, the Swiss franc 0.5%, the Japanese yen 0.4%, and the British pound 0.2%. On the downside, the Canadian dollar 0.1%.
  • Minors for the week on the upside, the Brazilian real increased 2.1%, the Mexican peso 1.2%, the New Zealand dollar 0.8%, the South African rand 0.5%, the South Korean won 0.2%, and the Chinese renminbi increased 0.46% versus the dollar (up 0.48% y-t-d). On the downside, the Norwegian krone declined 1.4%, the Swedish krona 0.6%.
  • For 2021, the Turkish lira declined 44.1%, the Argentine peso 18.1%, the Chilean peso 16.5%, the Colombian peso 15.9%, the Thai baht 10.3%, the Peruvian sold 9.6%, the South Koran won 8.6%, the Romanian leu 8.6%, the Hungarian forint 8.5%, the Polish zloty 7.5%, the Bulgarian lev 6.8%, the Philippine peso 5.8%, the Malaysian ringgit 3.5%, the Czech koruna 1.9%, the Indian rupee 1.7%, the Indonesian rupiah 1.4% and the Hong Kong dollar 0.6%.

 Australian Dollar – AUDUSD

The Aussie dollar is still correcting since completing a 5 at the pysch 80 level to fall under the weekly cloud in emotive fashion. The Australian dollar fell to test of the August lows of 0.7106 with Omicron fears. Should that double bottom go support ia the Murrey Math Levels. Resistance the Cloud, Tenkan and Kijun like many commodities.

Australian Dollar KnovaWave Weekly Outlook

New Zealand Dollar – NZDUSD

The Kiwi mirrored the AUD in its wave (iii) spit and has corrected at the cloud much of the FOMO muster wave and retested the 50% Fib & 4/8 confluence. Kijun and Tenkan Resistance, which is pivotal. Support previous break spits.

Canadian Dollar – USDCAD

The Loonie is holding the Tenkan after a 3 year high in June and corrected that in 3 waves led by the AUD and NZD. #oil price impacting direction. Watch flat Kijun and Tenkan at -1/8. Use Fibs for support and resistance.

New Zealand Dollar KnovaWave Weekly Outlook

Euro – EURUSD

Euro continues to correct in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as #EURUSD consolidates in the cloud. Watch 3 waves to see development for continuation. Watch for impulse off Chikou rebalance. Again governed by EURGBP and Bund volatility.  

Euro KnovaWave Weekly Outlook

British Pound – USDGBP

British pound classic retest of daily cloud break with magnet pull of cloud twist after ABC correction – will need Tenkan to break through Kijun for more strength. The upcoming week will be heavy on UK data, which could mean an eventful week for the British pound.

British Pound KnovaWave Weekly Outlook

Euro Pound – EURGBP

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

Euro v British Pound KnovaWave Weekly Outlook

Japanese Yen – USDJPY

USDJPY broke above i after weakness with Treasury yields to rush to +2/8 and channel convergence at 115.00. With that resistance the weekly chart is showing a bearish engulfing bar taking in over a month of price to close right above the Tankan should that go a re-test of 112 is alive The 108.00 level should remain massive support for dollar-yen. Any change will come from the weekly Kijun as it breaks through the old channel. Use your USDJPY Murrey 4/8 8/8 grid for now. EURJPY AUDJPY will determine risk on/off

Japanese Yen v Dollar KnovaWave Weekly Outlook

Mexican Peso USDMXN

The Peso continues in the long triangle and consolidated despite outside uncertainty from oil and COVID19. Use the Gann octave and the extension fibs to help measure the noise.

Mexican Peso KnovaWave Weekly Outlook

Turkish Lire USDTRY

The Turkish Lira reversed after falling in 3 waves to explode over the Tenkan with the weekly cloud Kijun and 50wma below to see Turkish lira close the week at a record low 11.29 TRY/USD. The Murrey Math and Fib targets offer targets with the Lire at all time lows resistance in a hyper inflating collapse

Turkish Lire KnovaWave Daily Outlook

Bitcoin

Bitcoin performing technically to perfection. Impulse begets impulse. To understand panic, understand greed. $BTC is testing the top of a rising channel after the preceding sharp downturn which was the downside breakout of an earlier bearish flag, after breaking downside a H&S top.

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

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

Bitcoin KnovaWave Weekly Outlook

We have seen what you would expect from a 5 wave impulse peak and ABC correction, a violent correction and completion. Use Murrey Math levels for corrections and targets as algorithms control the herd here, support is the cloud and sharp ABC, 1-2 moves. From there prices agitated towards those ATHs as news of a Bitcoin ETF fueled the rally, sound familiar? But this time it wasn’t signaling we are in a 3 high probability but a 5.

Bitcoin Mania in Perspective

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Turkey Geopolitical
Turkey Risk Monitor

Economic and Geopolitical Watch

Banks

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

Major US Banks Deliver Stoic Results in Q3, 2021

The major money cents banks released earnings with many record results for Q3. Mainly from trading and loss reserve releases from the pandemic kitty.  Rising interest rates also help the bottom line.

Banks stocks have benefited from the Federal Reserve partially lifting its hold on share buybacks, saying that banks can resume repurchases in the first quarter of 2021 as long they don’t exceed the average quarterly profits from their past four quarters. The change came after the Fed found that all major banks passed a second round of stress tests, indicating the firms can continue lending to businesses and households even if the economy dipped into a new recession.

Potentially the top six banks can buy back $11 billion in the first-quarter. Goldman Sachs shares after the announcement led the rally with a 7.7% increase. Morgan Stanley and JPMorgan jumped 6.4% and 4.9% at intraday highs. Within minutes of the announcement all three banks have announced plans to resume buybacks in the new year.

Banks are also benefiting from the Federal Deposit Insurance Commission intending to ease the Volcker Rule, which restricts banks from making large investments into venture capital. The Volcker Rule was enacted in the wake of the 2008 financial crisis, and the new changes could potentially free up billions in bank capital. Bank stocks rose. otal Non-Financial Debt (NFD) expanded $737 billion during Q3 2020 to a record $60.113 trillion.

Through the first three quarters of 2020, NFD surged an unprecedented $5.740 trillion, or 14.1% annualized. NFD was up $6.181 trillion over the past year (11.5%) and $8.817 trillion (16.7%) over two years. For perspective, NFD expanded on average $1.830 trillion annually over the past decade. NFD has ballooned 71% since the end of 2008.  

“Negative yields on long-dated government securities are more reflective of distorted market conditions than of stronger sovereign credit profiles, Fitch Ratings says. Lower interest service costs support sovereign creditworthiness, but this must be weighed against the impact of the economic conditions leading to lower yields and historically high government debt levels in a number of countries.- Fitch”

Akio Morita mistakes

The Week Ahead – Have a Trading Plan

Plenty of data to get the machines going.

  • Monday: Bond and equity markets closed for Washington’s Birthday
  • Tuesday: December FHFA Housing Price Index (prior 1.1%) and S&P Case-Shiller Home Price Index (Briefing.com consensus 18.3%; prior 18.3%) at 9:00 ET; preliminary February IHS Markit Manufacturing PMI (prior 55.5) and preliminary February IHS Markit Services PMI (prior 51.2) at 9:45 ET; February Consumer Confidence (Briefing.com consensus 109.0; prior 113.8) at 10:00 ET; and $52 bln 2-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -5.4%) at 7:00 ET and $53 bln 5-yr Treasury note auction results at 13:00 ET
  • Thursday: Q4 GDP — second estimate (Briefing.com consensus 7.0%; prior 6.9%), Q4 GDP Deflator — second estimate (Briefing.com consensus 6.9%; prior 6.9%), weekly Initial Claims (Brefing.com consensus 240,000; prior 248,000), and Continuing Claims (prior 1.593 mln) at 8:30 ET; January New Home Sales (Brefing.com consensus 805,000; prior 811,000) at 10:00 ET; weekly natural gas inventories (prior -190 bcf) at 10:30 ET; weekly crude oil inventories (prior +1.12 mln) at 11:00 ET; and $50 bln 7-yr Treasury note auction results at 13:00 ET
  • Friday: January Personal Income (Brefing.com consensus -0.3%; prior 0.3%), Personal Spending (Brefing.com consensus 1.5%; prior -0.6%), PCE Prices (prior 0.4%), Core PCE Prices (prior 0.5%), January Durable Orders (Brefing.com consensus 0.6%; prior -0.9%), and Durable Orders ex-transportation (Brefing.com consensus 0.3%; prior 0.4%) at 8:30 ET; January Pending Home Sales (prior -3.8%) and final February University of Michigan Consumer Sentiment survey (Brefing.com consensus 61.6; prior 61.7) at 10:00 ET

The earnings season has another busy phase in the coming week

Watch Central Banker and Geopolitics Watch speeches, reports and rate move

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

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Real Time Economic Calendar provided by Investing.com.

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