Traders Market Weekly: War, Inflation and Central Banks

April 7, 2024

FEAR NOT Brave Investors

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Volatility

The Week That Was – What Lies Ahead?

Contents

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

Editorial

Volatility picked up this week, no surprise a new quarter, heighted geopolitical risk and rates rising. Oil continued to run higher and climbed for the sixth consecutive day Friday, nearing $87/bbl with supply concern and geopolitical threats. Gold hit new all-time highs. No surprise that Energy remains the best-performing group in this environment, ExxonMobil (XOM) stock hit an all-time high.

Major indices settled lower, the Dow Jones Industrial Average (-2.3%) and Russell 2000 (-2.9%) the weakest and the S&P 500 and Nasdaq Composite declined 1.0% and 0.8%, respectively. Increased geopolitical tensions in the Middle East related to a potential retaliation by Iran against Israel also contributed to the negative bias this week, in addition to some normal consolidation efforts after the strong start to the year.

The prices moved with bonds. The 10-yr note yield jumped 12 basis points to 4.33% and the 2-yr note yield rose 10 basis points to 4.72%. U.S. Treasuries fell Friday, sending yields on 5s and longer tenors to their highest closing levels of the year. The US Employment Situation report for March was strong enough to support ongoing hawkishness from the Fed, which kept Treasuries under pressure.

Money Market Fund Assets (MMFA) surged $70.5 billion last week to a record $6.111 TN. MMFA have ballooned $1.553 TN, or 34.1%, since the Fed initiated its “tightening” cycle in March 2022. In just over four years since the onset of the pandemic, MMFA have inflated $2.477 TN, or 68.2%.

The implied likelihood of a rate cut in June has fallen to just 52.4% from 65.8% Friday. This week’s underperformance in longer tenors alleviated some pressure on the 2s10s spread, expanding it by seven basis points to -35 bps. Minneapolis Fed President Kashkari (not an FOMC voter) was among the Fed officials to draw attention, saying it’s possible the Fed might not cut rates this year if progress on inflation stalls.

Where is the Fear?

The Cboe Volatility Index (VIX) closed at its highest level since November on Thursday holding above its 200-day moving average., before dipping Friday as US stocks climbed.

The February Personal Spending and Income report, released last Friday when markets were closed, showed some sticky inflation figures in the form of the PCE Price Indexes. This week the March ISM Manufacturing Index and the March employment report, reflected ongoing strength in the economy. The March ISM Non-Manufacturing PMI and weekly jobless claims report showed some softening, though.

“Former Treasury Secretary Lawrence Summers said that the surge in US payrolls in March illustrates that the Federal Reserve is well off in its estimate of where the neutral interest rate is and cautioned against any move to lower rates in June. ‘This was a hot report that suggested that, if anything, the economy is re-accelerating,’ Summers said… Alongside other factors including an ‘epic’ loosening in financial conditions, ‘it seems to me the evidence is overwhelming that the neutral rate is far higher than the Fed supposes,’ he said.”

April 5 – Bloomberg (Christopher Anstey)

Nine of the 11 S&P 500 sectors finished lower. The health care sector (-3.1%) the worse hit after the CMS left its originally proposed payment rate increase for Medicare Advantage plans for 2024-2025 unchanged at 3.70% against expectations for an increase. The real estate (-3.0%) and consumer staples (-2.7%) sectors were also notable weakeners.

“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.

Our take remains the Fed is not just focused on inflation but risks such as the commercial real estate debacle. the high US dollar and the massive Federal debt refunding cost.

Quite the Rally: Since the Fed’s December “dovish pivot”

  • S&P500 jumped 17.2%.
  • The Semiconductor Index surged 25.3%,
  • NYSE Arca Computer Technology Index 19.0%.
  • Nvidia has almost doubled at up 98%, with Meta up 52%, Micron 41%, and Netflix 36%.
  • Investment-grade spreads (to Treasuries) dropped from 1.04 to 0.88 – outside of a couple of months in 2021, the narrowest since March 2007 (20-year avg. 1.49).
  • High yield spreads collapsed from 3.63 to 2.92 – that, excluding the six months beginning in June 2021, are the narrowest since July 2007 (20-yr avg. 4.93).
  • “The tightest spreads on AA bonds since 2005” and “Single B Spread Index Makes New 16 year Low.”
  • Gold prices have rallied $185, or 9.4% to $2,165, trading this week to an all-time high $2,221.

Last quarter continued the short squeeze, followed by asset chasing that began last year as financial conditions loosened further, building on the Fed’s Q4 dovish pivot. The standouts of course were the AI inspired rally led by NVidia and the crypto rip which saw Bitcoin break to new highs. The spectacular risk asset melt-up was ongoing and global, with record highs in the US, Germany, France and Australia indices to name a few.

We need to grasp all the risks to be wary of but not ignore price reaction. 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 focus on the crowd psychology aspect.

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. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off this continuous dip feed? At this point the Central Banks have kicked that answer down the road.


PART A – Stock Markets

Highlights – USA

  • S&P500 declined 1.0% (up 9.1% y-t-d),
  • Dow lost 2.3% (up 3.2%).
  • S&P 400 Midcaps fell 1.9% (up 7.5%),
  • Small cap Russell 2000 lost 2.9% (up 1.8%).
  • Nasdaq100 declined 0.8% (up 7.6%).
  • Utilities slipped 0.7% (up 3.6%).
  • Banks dropped 2.8% (up 6.1%)
  • Broker/Dealers fell 1.7% (up 8.2%).
  • Transports slumped 1.8% (up 0.1%).
  • Semiconductors fell 1.8% (up 15.4%).
  • Biotechs declined 1.8% (down 4.2%).
  • With bullion surging $100, the HUI gold index jumped 7.3% (up 9.0%).
Major US Stock Indices

Highlights – Europe Stocks

  • U.K.’s FTSE equities index dipped 0.5% (up 2.3% y-t-d).
  • France’s CAC40 fell 1.8% (up 6.9%).
  • German DAX equities index lost 1.7% (up 8.5%).
  • Spain’s IBEX 35 equities index declined 1.4% (up 8.1%).
  • Italy’s FTSE MIB index dropped 2.1% (up 12.1%).

 Highlights – Asia Stocks

  • Japan’s Nikkei Equities Index dropped 3.4% (up 16.5% y-t-d).
  • South Korea’s Kospi index fell 1.2% (up 2.2%).
  • India’s Sensex equities index increased 0.8% (up 2.8%).
  • China’s Shanghai Exchange Index rallied 0.9% (up 3.2%).

 Highlights – Australian Stocks

  • Australia’s ASX All Ordinaries: Friday -0.6% to 7773.3 (-1.6% for the week).
  • NB: Record intraday of 7901.2 points, Record closing high 7896.9
  • Up 3.9% this year, an extension of a 7.8 per cent rally in 2023.
  • The ASX posted its third loss in four days Friday.
  • The interest rate-sensitive technology sector on Friday fell 1.4 % and the materials sector 0.8%
  • Iron ore prices dropped 1.5% to $US98 a tonne, weighing on miners. BHP lost 0.9% to $44.35 and Rio Tinto 1% to $120.55. Copper advanced to its highest in 14 months and gold inched lower on Friday after reaching a record earlier in the week.

 Highlights – Emerging Markets Stocks 

  • Brazil’s Bovespa index declined 1.0% (down 5.5%),
  • Mexico’s Bolsa index gained 1.3% (up 1.2%).
  • Turkey’s Borsa Istanbul National 100 index jumped 5.2% (up 28.8%).
  • Russia’s MICEX equities index rose 1.9% (up 9.6%).

Biggest SPX Stock Winners and Losers Last Week


Technical Analysis 

Technical Analysis of key markets via KnovaWave

S&P 500

Daily: We saw a violent ABC for the 5 waves up for SPX continue right into bottom of the median line to give us an (a) or C of a 4. with impulse after completing 5. Reversed hard with energy fueled from the power impulse down from near +1/8 ATH. On the way up (just like down) It accelerated after it broke the Tenkan through the rejected Kijun and then the Kijun to close back over the median and 8/8. Bulls this was a (ii) of a 5. Bears this is a a-b of a C off a completive V of degree. We watch if this low was a (iii), (a) or C. Will determine if sharp ABC completed off all time highs around +1/8. We have to respect the number of alternatives of degree of 5. With such trends keep it simple support is Tenkan and Kijun and watch for ABC. No fear is the driving element.

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: The weekly shows us the reenergized SPX tripped in 3 to test recent break up at Tenkan from there we had had a powerful rally to ATH. Again notice what happened “Each new high has evolved after testing Tenkan key support which is the next line after Friday’s dump & minor bounce.” We watch for a spit of a spit Extensions are difficult to time, keep it simple.

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

Dow Jones

DJIA Weekly

NASDAQ 100

Nasdaq move to ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. From there we sold off right to Tenkan (as did SPX) and bounced hard Support Tenkan to Kijun. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

NASDAQ Record Highs

Russell 2000

The small cap Russell RUT has been developing a large flag which it did a false break to fuel the selling from there we replicated to the down (Adam’s theory). Unlike SPX and NDX we could not get through Tenkan and Kijun which rejected the bounce. This is the index showing more of the fast money crowd and is trading like it. Closed right at the top of the cloud and at the channel. the flag. Needs to get traction in here for bulls. Support +1/8 through 7/8 (cloud base)

Russell Index Negative Divergence to NASDAQ

US Stocks Watch

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

Microsoft MSFT

Microsoft Weekly Shape

NVidia $NVDA

Following the announcement of NVDA 4/1 split some levels off the energy break NVidia hasn’t looked back with many gaps below. We saw another power move off the $200 retest (old $800) & earnings off $300 which are retesting. It is a clear leader of #SOX #SMH look for cues there and ABC failures for changes.

Nvidia NVDA stock chart

Apple $AAPL

Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level. These levels will be key energy levels. Support from previous highs, resistance now Fibs and Murrey Math levels. Remember the impact $AAPL has, at least short term on all the major indices.

Apple AAPL Stock Chart

Meta $META

Exxon Mobil $XOM

Exxon Stock Chart

Part B: Bond Markets

Highlights – Treasuries

  • U.S. Treasuries fell Friday, sending yields on 5s and longer tenors to their highest closing levels of the year.
  • The US Employment Situation report for March was strong enough to support ongoing hawkishness from the Fed, which kept Treasuries under pressure.
  • The implied likelihood of a rate cut in June has fallen to just 52.4% from 65.8% Friday.
  • This week’s underperformance in longer tenors alleviated some pressure on the 2s10s spread, expanding it by seven basis points to -35 bps.
  • Crude oil climbed for the sixth consecutive day Friday, nearing $87/bbl.
  • The U.S. Dollar Index rose 0.2% to 104.30, narrowing its loss to 0.2% after a volatile week.
  • Corporate debt issuance is nothing short of breath taking. “The primary US investment-grade corporate bond market logged its busiest first quarter on record, super-charged by investors clamoring for high yields before the Federal Reserve starts cutting interest rates. Blue-chip firms have capitalized on robust investor demand to borrow a record $529.5 billion this year through Wednesday, far outpacing the previous high of $479 billion in the first three months of 2020… Sales hit a record in January and February and March issuance of $142.2 billion has exceeded expectations.” March 28 – Bloomberg (Caleb Mutua)
  • Total money market fund assets declined $5.7bn to $6.041 TN. Money funds were up $909 billion, or 17.7%, y-o-y.
  • Total Commercial Paper jumped another $21.2bn to a 15-year high $1.350 TN. CP was up $213bn, or 18.7%, over the past year.
  • 2-yr: +9 bps to 4.73% (+11 bps for the week)
  • 3-yr: +8 bps to 4.54% (+13 bps for the week)
  • 5-yr: +8 bps to 4.37% (+15 bps for the week)
  • 10-yr: +7 bps to 4.38% (+18 bps for the week)
  • 30-yr: +6 bps to 4.53% (+18 bps for the week)

“The primary US investment-grade corporate bond market logged its busiest first quarter on record, super-charged by investors clamoring for high yields before the Federal Reserve starts cutting interest rates. Blue-chip firms have capitalized on robust investor demand to borrow a record $529.5 billion this year through Wednesday, far outpacing the previous high of $479 billion in the first three months of 2020… Sales hit a record in January and February and March issuance of $142.2 billion has exceeded expectations.” March 28 – Bloomberg (Caleb Mutua)

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 fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory. What we are seeing now is the same risk, on steroids is in the commercial real estate market (CRE).

Fed Total Assets

Highlights – Mortgage Market

  • Freddie Mac 30-year fixed mortgage rates added three bps to 6.82% (up 55bps y-o-y).
  • Fifteen-year rates declined five bps to 6.06% (up 53bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up three bps to 7.34% (up 59bps).

Highlights – Federal Reserve

  • Federal Reserve Credit declined $36.1bn last week to $7.427 TN.
  • Fed Credit was down $1.463 TN from the June 22nd, 2022, peak.
  • Over the past 238 weeks, Fed Credit expanded $3.700 TN, or 99%.
  • Fed Credit inflated $4.616 TN, or 164%, over the past 595 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt recovered $4.7bn last week to $3.345 TN.
  • “Custody holdings” were up $26.2 billion y-o-y, or 0.8%.

We do know we have massive speculation pockets, viz a viz the Semi stocks and cryptocurrency mania in just the matter of weeks. The Fed is effectively throwing additional fuel on historic speculative manias. Central banks have been adding liquidity to avoid systematic failure.

Highlights – European Bonds

  • Italian yields rose 14 bps to 3.82% (up 12bps y-t-d).
  • Greek 10-year yields increased six bps to 3.44% (up 39bps).
  • Spain’s 10-year yields gained seven bps to 3.23% (up 24bps).
  • German bund yields jumped 10 bps to 2.40% (up 38bps).
  • French yields rose 10 bp to 2.91% (up 35bps).
  • The French to German 10-year bond spread was unchanged at 51 bps.
  • U.K. 10-year gilt yields jumped 14 bps to 4.07% (up 53bps).

Highlights – Asian Bonds

  • Japanese 10-year “JGB” yields jumped six bps to 0.79% (up 18bps y-t-d).

Part C: Commodities

Highlights

  • The Bloomberg Commodities Index jumped 3.4% (up 4.3% y-t-d).
  • Spot Gold rose 4.5% to $2,230 (up 12.9%).
  • Silver surged 10.1% to $27.48 (up 15.5%).
  • WTI crude jumped $3.74, or 4.5%, to $86.91 (up 21%).
  • Gasoline rose 2.5% (up 32%),
  • Natural Gas gained 1.2% to $1.79 (down 29%).
  • Copper surged 5.7% (up 9%).
  • Wheat gained 1.2% (down 10%),
  • Corn fell 1.8% (down 8%).
  • Bitcoin dropped $2,070, or 3.0%, to $67,620 (up 59%).

“Commodities will advance this year as central banks in the US and Europe move to reduce interest rates, helping to support industrial and consumer demand, according to Goldman Sachs… Raw materials may return 15% over 2024 as borrowing costs come down, manufacturing recovers, and geopolitical risks persist, analysts including Samantha Dart and Daan Struyven said…. Copper, aluminum, gold and oil products may climb, according to the bank, which also stressed the need for investors to be selective as gains wouldn’t be universal.”March 25 – Bloomberg (Yongchang Chin)

BDI Freight Index

  • The Baltic Exchange Dry Index dropped by 44 points, or 2%, to 2,196 on Friday, extending losses for a fourth day to a fresh low since March 6th. On the week, the BDI dropped 7.8%, after six straight weeks of gains.
  • The capesize index plummeted by 106 points, or 3%, to 3,482. Average daily rates for capesize vessels decreased by $877 to $28,875.
  • The panamax index fell by 39 points or 1.8% to 2,165. Average daily rates for panamax vessels fell $315 at $19,483
  • The supramax index saw a slight increase of 4 points, 1,383. On the week, the Baltic index dropped 7.8%, after six straight weeks of gains. Source: Baltic Exchange
Baltic Dry Index Weekly

Copper

Copper continued its rally after rebounding 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.

“Copper rallied to the highest in 14 months as investors flock to the bellwether industrial metal in response to rising supply risks and hopes for a global recovery in demand. Prices climbed as much 1.5% on Thursday after dovish comments from Federal Reserve Chair Jerome Powell added impetus to a rally that began in early February on fast-mounting risks to supply. Disruptions at major mines have left smelters paying historically steep prices to get hold of mined ore, and Chinese plants — which produce more than half of the world’s refined copper — are moving closer to implementing a joint output cut in response.”

April 4 – Bloomberg (Mark Burton and Annie Lee)
Copper Futures Outlook

Gold

  • Gold hit an all-time record this week helped by China’s central bank (PBOC) buying for its reserves for a 17th straight month in March. Bullion held by the People’s Bank of China rose to 72.74 million fine troy ounces last month, according to official data released Sunday.
  • Precious metals were the stellar performer in the commodities arena in Q1. Gold surged $167, or 8.1%, to an all-time high $2,230. Silver jumped 4.9% to $24.96.
  • Central bank buying has also been a significant driver of its strength since 2022. Global central banks, led by China and India, continued adding to their gold reserves in February, marking a ninth straight month of growth, according to the World Gold Council.
  • China’s official reserve assets rose to the highest since November 2015. The country’s foreign exchange reserves rose to $3.2457 trillion by the end of March, the highest since December 2021, as the central bank aims to maintain stable holdings to fend off risks. They rose 0.6% from February and were up 1.9% from a year earlier.
Gold Weekly Outlook

Energy

US Crude Oil (WTI)

Daily: WTI Crude Oil has continued to rally since retesting the pennant breakout last December after completing the correction in 3 waves. From there it broke the pennant and retested to continue to retest the breakdown last October to break above those descending levels for higher. We are in a completive mode for bulls with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. Completing a C or IV? Support is previous lows and the bull flag. The bear case is the high was a complete 5.

WTI Daily KnovaWave

Weekly: WTI crude oil futures held the support line from July 2021, having plunged around 50% off 2022 highs. It has broken to the topside of its sphere of influence to close out the quarter over Kijun and Tenkan which are now support. WTI completed 3 waves and powered through the tenkan and 50wma, h and held the retest. Risk support is the grid. Resistance weekly channel, Murrey Math levels and previous breaks (off monthly). Bear case is Wave 5 complete.

What we broke……. Crude Oil in the past quarter built a huge bull flag. We watch if the recent break was false, or we fail. Very clear pattern.

WTI Weekly KnovaWave Shape

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.

US Natural Gas (Henry Hub)

Daily: US Natural Gas futures are a great example of rebalancing mania. The market is still correcting the manic 5 post the Ukraine invasion. Since the breakdown of the correction channel with failed breakups we have continued to multi year lows in a pennant formation after holding the daily 1/8. We now look at our Adam’s theory fractal rules with fractal spits powering these moves lower. Two clear alternatives, we are correcting the highs 5 or that was a 3 and we go higher. Resistance is heavy: 2/8 and cloud above. Kijun, 50 dma and cloud. Support is previous lows. Important to watch how this energy was built for shape correlation.

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: Natural gas still correcting the past month when blew through all levels of support after breaking the weekly 50wma and the Kijun gave a kiss of death. From there we Broke down out of the corrective channel (Wave 4 or IV) to new multi-year lows. This week we closed right at the weekly Kijun and 1/8. around the 50wma and tenkan in the cloud. The instability stems from the sharp reversals that have failed indicative of speculative fervor like the previous impulsive spikes. Support is the 1/8 Sphere. Bulls need all the damage down to be rebuilt. Kijun is major resistance given energy higher came from a clean break of the Kijun.

US Natural Gas KnovaWave Weekly Grid

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

In the first quarter the dollar rode high against almost every major currency. We saw central banks, from Japan, China and India intervene, or consider intervening, to bolster their currencies. The yen in view of USDJPY 152 and the yuan struggling to break back below 7.2 USDCNH officials have stepped up efforts to stem any further depreciation.

In Japan it’s been verbal warnings, in China it has been state banks buying yuan and selling dollars.
Remember these two are major competitors for export dollars. With that there’s a school of thought that Beijing could have grown more tolerant of a weak yuan to maintain its competitive edge against the yen.

  • For the week the U.S. Dollar Index slipped 0.2% to 104.30 (up 2.9% y-t-d).
  • On the upside, South African rand increased 1.0%, the Norwegian krone 0.9%, the Australian dollar 0.9%, the Mexican peso 0.6%, the euro 0.4%, the Swedish krona 0.4%, and the British pound 0.1%.
  • On the downside, the Brazilian real declined 1.0%, the South Korean won 0.4%, the Canadian dollar 0.4%, and the Japanese yen 0.2%. The Chinese (onshore) renminbi declined 0.15% versus the dollar (down 1.84% y-t-d).

 Australian Dollar – AUDUSD

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

Australian Dollar KnovaWave Weekly Outlook

Japanese Yen – USDJPY

USDJPY broke above after weakness with Treasury yields to rush to +2/8 and channel convergence, we have come a long way from that 108.00 massive support for dollar-yen back to test the top of the flat-topped triangle at 151/152. Any change will come from the weekly Kijun. Use your USDJPY Murrey 7/8 8/8 grid for now. EURJPY AUDJPY will determine risk on/off.

Japanese Yen v Dollar KnovaWave Weekly Outlook

Chinese Yuan – USDCNH

China manages its currency onshore by setting a daily reference rate against the dollar at 9:15 a.m. local time, around which it is then permitted to trade in a 2% range. The PBOC has kept the daily rate in such a tight range this year that a gauge of volatility in the fixing has dropped to the lowest since before the shock yuan devaluation of 2015.

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 with oil price impacting direction. Watch flat Kijun and Tenkan at 8/8. Use Fibs for support and resistance.

Canadian Dollar KnovaWave Weekly Outlook

Euro – EURUSD

Euro continues to bump up against that downtrend line from 2020 and spinning around the 50% of that year’s panic sell. The euro trades in what seems like eternal flags in the channel. We watch if Kijun (pink) testing Tenkan (orange) creates any impulse as EURUSD consolidates at 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 pulls of cloud twist after ABC correction – will need Tenkan to break through Kijun for more strength. The upcoming month will be heavy on UK data and election speculation which could mean an eventful time for the British pound.

British Pound KnovaWave Weekly Outlook

Bitcoin

Crypto Q1 24 Highlights

  • Bitcoin surged 64% during the quarter,
  • Ethereum gained 53%
  • Binance Coin soared 95%.
  • Having started trading on January 11th, the iShares Bitcoin ETF rose 52%.

Bitcoin is performing technically to perfection. Impulse begets impulse. To understand panic, understand greed. Bitcoin exploded higher following its 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 to a new record high and retest.

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.

On the Risk Radar

Akio Morita mistakes

 Geopolitical Tinderbox Radar

The Week Ahead – Have a Trading Plan

Watch EarningsCentral Bankers and Geopolitics speeches, reports and rate moves. 

The week ahead’s key highlight comes Wednesday, we get US CPI, Bank of Canada with a policy decision, statement, and full Monetary Policy Report including updated forecast. Then follows he FOMC minutes to the March meeting. Eyes will be also on China’s CPI later that evening and then Thursday’s ECB deliberations. We also get half dozen other central banks policy decisions over the coming week; Bangko Sentral ng Pilipinas, RBNZ, Bank of Thailand, Peru’s central bank and the Bank of Korea.

US Economic Highlights

  • Monday: Nothing of note
  • Tuesday: NFIB Small Business Optimism Index (prior 89.4) at 6:00 ET and $58 bln 3-yr Treasury note auction results at 13:00 ET
  • Wednesday: Weekly MBA Mortgage Index (prior -0.6%) at 7:00 ET; March CPI (prior 0.4%) and Core CPI (prior 0.4%) at 8:30 ET; February Wholesale Inventories (prior -0.3%) at 10:00 ET; weekly crude oil inventories (prior +3.21 mln) at 10:30 ET; $39 bln 10-yr Treasury note reopening results at 13:00 ET; and March Treasury Budget (prior -$296.3 bln) at 14:00 ET
  • Thursday: March PPI (prior 0.3%), Core PPI (prior 0.6%), Weekly Initial Claims (prior 221,000), and Continuing Claims (prior 1.791 mln) at 8:30 ET; weekly natural gas inventories (prior -37 bcf) at 10:30 ET; and $22 bln 30-yr Treasury bond reopening results at 13:00 ET
  • Friday: March Import/Export Prices at 8:30 ET and preliminary April University of Michigan Consumer Sentiment (prior 79.4) at 10:00 ET

Bond market Highlights

  • Monday: 
  • Tuesday: $58 bln 3-yr Treasury note auction results at 13:00 ET
  • Wednesday: $39 bln 10-yr Treasury note reopening results at 13:00 ET; and March Treasury Budget (prior -$296.3 bln) at 14:00 ET
  • Thursday: $22 bln 30-yr Treasury bond reopening results at 13:00 ET

Central Bank Highlights

Seven central banks with decisions this week, heavy Fed-speak is on tap.

  • Bangko Sentral ng Pilipinas is expected to leave its policy rate unchanged at 6.5% on Monday.
  • RBNZ forecast to hold its cash rate at 5.5% on Tuesday but signal further patience over coming meetings. The economy slipped into recession by the end of last year and inflation is sharply declining.
  • The Bank of Thailand is expected to hold at 2.5% on Wednesday.
  • The Bank of Canada policy decision, statement, and full Monetary Policy Report including updated forecasts (9:45amET) and then a press conference (10:30amET) on Wednesday. No policy rate change is expected. Key will be the bias, and on that, they should be exceptionally careful.
  • FOMC Minutes to the March 19th–20th FOMC meeting on Wednesday at 2pmET. The key to watch will be the promised fuller discussion about balance sheet management plans. Guidance pointed toward a decision “fairly soon” and further discussion. Markets took the communications somewhat dovishly when they arguably should not have. Since Q4 GDP was revised up afterward, core PCE inflation was revised higher to 0.5% m/m SA in January and printed at 0.3% in February, and nonfarm payrolls and wages came in strongly for February.
  • ECB on Thursday should be a placeholder before the more critical meeting on June 6th. Tuesday’s bank lending survey may inform one part of how the ECB is thinking about broad conditions in this case financial conditions and monetary policy transmission effects. There will be no forecasts offered with this meeting as they were updated the last time in March.
  • Peru’s central bank is expected to hold on Thursday.
  • The Bank of Korea is also expected to hold on Friday.

US Earnings Highlights

The S&P 500 trades at 20.7 times its estimated earnings for the next 12 months, near a more than two-year high of 21.2 hit in late March, according to LSEG Datastream at a time when elevated yields on Treasuries bolster the attractiveness of bonds.

Delta Air Lines (DAL), BlackRock (BLK), and JPMorgan Chase & Co (JPM.N) are among the companies scheduled to release their first quarter results next week. Analysts expect to see earnings growth of 5% in the first quarter, according to LSEG data. That would be the lowest since the second quarter of 2023. They expect margins to be squeezed by high interest rates, rising commodity costs, and falling corporate pricing power due to slowing inflation. Earnings grew by 10.1% in the fourth quarter of 2023.

  • Monday starts us off with Lotus Technology (LOT).
  • Tuesday includes Neogen (NEOG), PriceSmart (PSMT), and Tilray Brands (TLRY).
  • Wednesday Includes Delta Air Lines (DAL), Applied Digital (APLD), and Rent the Runway (RENT).
  • Thursday includes Constellation Brands (STZ), CarMax (KMX), and Fastenal (FAST).
  • Friday Markets includes JPMorgan Chase (JPM), Wells Fargo (WFC), BlackRock (BLK), and Citigroup (C).

Investor events

  • Intel (INTC) will hold its Intel Vision event in Phoenix, Arizona. This year’s event has the theme “Bringing AI Everywhere.”
  • The three-day Google (GOOG) (GOOGL) Cloud Next event will also take place during the week. The tech giant will show off AI-powered assistant Gemini, Generative AI Studio, and AI Platform tools during the event.
  • Marvell Technology (MRVL) will hold a special event with the title “Accelerated Infrastructure for the AI Era.” Management is anticipated to discuss the total addressable market for application-specific integrated circuits and custom ASIC ramps.

US IPO Week Ahead

The April IPO marketing is starting off with a fairly quiet calendar.

  • Companies expected to launch their IPOs in the week ahead include Neonc Technologies (NTHI), UL Solutions (ULS), and Cleancore Solutions (ZONE).
  • Birkenstock (BIRK) will also be watched, with its IPO lockup period expiring on April 8.

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2024. One suspects it will be a yearlong Groundhog Day for Biden, Trump, the GOP and the Democrats.  Throw on top of that Russia/Ukraine Israel/Gaza and China/Taiwan.

Trade Smart!

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

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