Traders Market Weekly: When The Rubber Meets The Road

December 4 – 9 2021

FEAR NOT Brave Investors

Where have we been and where are we going? Join our weekly market thread on Traders Community…

Omicron, Fear and Inflation

The Week That Was – What Lies Ahead?

Contents

• 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

This week saw a flow on from last, investors being double dumped by Omicron and Powell tapering and rate talk. We then saw the always hawkish and some would say never accurate Fed Governor Bullard pushing the more overvalued punter stocks over the edge Friday. This was after an essentially non-threatening November jobs report and as for inflation, maybe it is more transient then we think with oil and natural gas getting donkey punched this week.

We hear all this talk about rates and tapering, but lets be very clear here it is a taper of a massive $120 billion in monthly bond purchases that have supported the recovery. In plain English there will be still huge amounts of bond purchases. Rates are at or near historically lows. What we are hearing is excuses from people who thought this time was different kept buying stocks of high beta stocks, considered crypto safe and Meta real. It is always some one elses fault isn’t it. Let us get get this sanguine point if you portfolio was destroyed by nary a whisper of tapering and rates way out there possibility rising then [perhaps you have an issue in investing and risk. Inflation has been on the tear for months, supply risks same story, now as they are tapering off (sorry had to) its a new fear, give me strength!

Here we have been eschewing all the risks to be wary off and received plenty of flak from it. It’s not rocker science valuations defied gravity, the S&P 500’s price-to-earnings ratio on a forward 12-month basis stands at 21.3, a 35% premium to its 20-year average, according to Refinitiv Datastream. The discount of risk continued and then from triggered fear for markets who had ignored it’s risk. We always talk here about expect the unexpected and the rubber always meets the road, and here we are.

Tapering is but an excuse, we reiterate from two weeks ago when we saw Fed governors turn more hawkish the previous week.

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 said 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 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

Here is what the market miscalculated; With all this investors will be watching Fed Chair Jerome Powell and U.S. Treasury Secretary Janet Yellen’s appearance before Congress to discuss the government’s COVID response on Nov. 30.  The CME FedWatch Tool showed the probability for a rate hike in May 2022 decreased on Friday to 36.4% from 55.3% on Wednesday, and the probability for a rate hike in June 2022 decreased to 61.8% from 82.1% on Wednesday. 

OPEC+ also came and went with little change but keep in mind with these lower oil prices me they had warned of oil gluts in response to the U.S. announcing it will release 50 million barrels of oil from the Strategic Petroleum Reserve in an attempt to drive prices lower.

Deja Vu …Complacency Leads to Fear

We warn about complacency here at TradersCommunity and a complacent market had seen COVID-19 drop to a distant fifth in a “tail risks” list to the market in a recent survey of fund managers by BofA Global Research. The top risks were inflation and central bank hikes. The previous Friday’s swoon underscored this with the Cboe Volatility Index VIX surge with many market makers off and options investors scrambling to hedge their portfolios. This week we got the same result .

Our weekly reminder for risk, timely given Friday’s collapse. 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

• S&P500 fell 1.2% (up 20.8% y-t-d)
• Dow declined 0.9% (up 13.0%)
• Nasdaq100 dropped 2.0% (up 21.9%). 
• S&P 400 Midcaps dropped 2.8% (up 17.1%)
• Small cap Russell 2000 sank 3.9% (up 9.3%).
• Transports declined 1.5% (up 27.7%)
• Utilities gained 1.0% (up 7.6%).
• Banks dropped 3.2% (up 33.2%)
• Broker/Dealers slumped 2.2% (up 24.3%).
• Semiconductors rose 1.3% (up 36.1%).
• Biotechs fell 3.2% (down 9.0%).
• With bullion down $19, the HUI gold index slumped 4.0% (down 17.9%).

Highlights – Europe Stocks

• U.K.’s FTSE rallied 1.1% (up 10.2% y-t-d).
• France’s CAC40 increased 0.4% (up 21.9%).
• German DAX equities index declined 0.6% (up 10.6%).
• Spain’s IBEX 35 equities index fell 1.9% (up 2.1%).
• Italy’s FTSE MIB index added 0.3% (up 16.7%). 

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

 Highlights – Asia Stocks

• Japan’s Nikkei Equities Index dropped 2.5% (up 2.1% y-t-d).
• South Korea’s Kospi index gained 1.1% (up 3.3%). India’s Sensex equities index rallied 1.0% (up 20.8%). China’s Shanghai Exchange rose 1.2% (up 3.9%).

 Highlights – Australian Stocks

• Australia’s S&P/ASX200 0.5% lower in its fourth consecutive week of losses. The index is up 10% for the year.
• The energy sector among top performers. Oil Search +2.6%. Whitehaven Coal +2.95%, Bluescope Steel +2.45% Nickel Mines +2.18%
• Iron ore -2.7% to $US101.67 a tonne Friday

 Highlights – Emerging Markets Stocks 

• EM equities hit rallied
• Brazil’s Bovespa index jumped 2.8% (down 11.7%),
• Mexico’s Bolsa recovered 2.2% (up 14.8%).
• Turkey’s Borsa Istanbul National 100 index surged 7.5% (up 29.4%).
• Russia’s MICEX equities index recovered 2.7% (up 19.0%).

IPO and SPAC mania remains in full force.

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

This week’s top % gainers

• Healthcare: IMGN (6.62 +37.63%), RVNC (14.6 +13.8%), FGEN (13.51 +11.01%), PETQ (22.42 +7.42%)
• Materials: GCP (27.02 +20.14%), BAK (21.44 +19.11%), SSL (17.53 +12.81%), HMY (4.22 +9.33%)
• Consumer Discretionary: CHGG (28.56 +14.29%)
• Information Technology: MRVL (83.59 +16.11%), AMBA (193.52 +12.37%), EVTC (47 +11.88%), SABR (8.1 +10.81%), FICO (381.51 +10.38%), SIMO (75.04 +8.85%), HPQ (37.55 +8.59%), UMC (12.08 +8.54%)
• Financials: SQQQ (6.82 +5.57%)
• Energy: VET (10.26 +12.5%)
• Utilities: PAM (18.48 +10%)

This week’s top % losers

• Healthcare: TGTX (15.64 -34.78%), ESPR (5.25 -32.52%), NVAX (160.48 -26.38%), ARRY (16.87 -25.75%)
• Consumer Discretionary: UXIN (1.59 -29.02%), DDS (250.78 -26.41%)
• Information Technology: DOCU (135.09 -45.88%), DOMO (48.26 -33.72%), ESTC (112.67 -26.75%), DQ (43.32 -25.97%)

S&P 500

Daily: SPX continued with impulse after completing 5. Reversed hard with energy fueled from the power impulse to near +1/8 ATH failing and a spit of the wave 3 high. It accelerated after it broke the Tenkan through the rejected channel and then the Kijun to close under the 50dma. Bulls this is a (ii) of a 5. Bears this 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.

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. 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.

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

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) Support Tenkan to Kijun. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

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 only to close through Tenkan and Kijun with ease. 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 through the flag. Needs to get traction in here for bulls. Support +1/8 through 7/8 (cloud base)

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with the retest & break of the triple top patterning ina pennant. Pull from Chip Shortage players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX

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.

Apple $AAPL

Apple gently motored up to new ATH over the massive $160 gamma level and then hit turbulence at $170. 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.

Amazon $AMZN

Amazon double top that filled the gap in 3 waves. From from there failing near the previous high. Watch action around support is 200dma and previous breaks. Resistance previous flag.

ARKK ETF

The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Support previous lows, needs to clear 130 to build C or iii for bulls. We saw ATH in NASDAQ & SPX yet this couldn’t raise a bid – very telling negative divergence. $ARKK circa 80 & 90 reversals and 200ma.

US Stocks Watch

This three-month period is the second to be compared to year earlier profits that were affected by the pandemic. According to Refinitiv, earnings for the second quarter are looking to be up 78.1%. With the US stock markets at record highs the downside to increasing profit expectations is the potential for some disappointments and that could cause adverse or stalled markets potentially.

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

Last Week:

Salesforce.com, Box, Hewlett Packard Enterprise, NetApp, Zscaler, Ambarella, Royal Bank of Canada, PVH, Okta,  Five Below, CrowdStrike, Splunk, Snowflake, Synopsys, Ulta Beauty, Signet Jewelers, Dollar General, Express, Kroger, Toronto Dominion, Imperial Canadian Bank, DocuSign, Assana, Marvell Technology, Ollie’s Bargain Outlet, Zumiez, Smith and Wesson

This Week:

Monday starts us off with

• Earnings: MongoDB and Coupa Software

Tuesday with Earnings from

• Earnings: SentinelOne, Toll Brothers and Stitch Fix

Wednesday Earnings Include

• Earnings: UiPath, Campbell Soup, RH and GameStop

Thursday Earnings Include

• Earnings: Broadcom, Costco, Hormel, Lululemon and Chewy

Friday Earnings include

• Earnings: Centene Investor meeting

These are the highlighted earnings for the US this week. Please check daily schedules for more reports.

“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

Highlights – Treasuries

Investment-grade bond funds saw outflows of $3.860 billion, and junk bond funds had negative flows of $2.623 billion (from Lipper).

• Three-month Treasury bill rates ended the week at 0.0425%.
• Two-year government yields jumped nine bps to 0.59% (up 47bps y-t-d).
• Five-year T-note yields declined three bps to 1.13% (up 77bps).
• Ten-year Treasury yields dropped 13 bps to 1.35% (up 43bps).
• Long bond yields sank 15 bps to 1.68% (up 3bps).
• Benchmark Fannie Mae MBS yields declined one basis point to 1.99% (up 65bps).

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 mark the fastest pace of increase on record in data from 1988 in 2.

• Freddie Mac 30-year fixed mortgage rates added one basis point to 3.11% (up 40bps y-o-y).
• Fifteen-year rates declined three bps to 2.39% (up 13bps).
• Five-year hybrid ARM rates increased two bps to 2.49% (down 37bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up five bps to 3.22% (up 28bps).

Highlights – Federal Reserve

• Federal Reserve Credit last week dropped $41.0bn to $8.610 TN. Over the past 116 weeks, Fed Credit expanded $4.884 TN, or 131%. Fed Credit inflated $5.800 Trillion, or 206%, over the past 473 weeks.
• Fed holdings for foreign owners of Treasury, Agency Debt last week sank $16.5bn to a one-year low $3.459 TN. “Custody holdings” were down $9.0bn, or 0.3%, y-o-y.
• Total money market fund assets jumped $23.7bn to $4.621 TN. Total money funds increased $301bn y-o-y, or 7.0%.
• Total Commercial Paper declined $8.3bn to $1.094 TN. CP was up $126bn, or 13.0%, year-over-year.

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 dropped nine bps to 1.19% (up 57bps y-t-d).
• Ten-year Portuguese yields fell eight bps to 0.28% (up 25bps).
• Italian 10-year yields declined six bps to 0.92% (up 37bps).
• Spain’s 10-year yields fell eight bps to 0.35% (up 30bps).
• German bund yields declined five bps to negative 0.39% (up 18bps).
• French yields dropped seven bps to negative 0.03% (up 31bps).
• The French to German 10-year bond spread narrowed two to 36 bps.
• U.K. 10-year gilt yields fell eight bps to 0.75% (up 55bps).

Highlights – Asian Bonds

•  Japanese 10-year “JGB” yields slipped two bps to 0.05% (up 3bps y-t-d).

Part C: Commodities

Highlights

• The Bloomberg Commodities Index sank 4.3% (up 22.7% y-t-d).
• Spot Gold fell $19 to $1,783 (down 6.1%).
• Silver dropped 2.7% to $22.52 (down 14.7%).
• WTI crude dropped $1.89 to $66.26 (up 37%).
• Gasoline dropped 3.8% (up 39%),
• Natural Gas sank 24.1% (up 63%).
• Copper dipped 0.6% (up 21%).
• Wheat dropped 4.3% (up 36%),
• Corn declined 1.3% (up 21%).
• Bitcoin lost $1,313 or 2.4%, this week to $52,405 (up 80%).

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 Dry Index rose 1.8% to a one-month high of 3,171 on Friday, extending gains for a seventh straight session, driven by gains across all vessel segments.  
• The Baltic Dry Index gained 14.6% this week, its biggest weekly rise since the week ended on August 20th, attributed to factors such as rebounding Australia and Indonesia coal flows, as well as tighter capacity supply. 
• The capesize index, which tracks iron ore and coal cargos of 150,000-tonnes, jumped 1.3% to 4,595, its highest level since October 27th.
• The panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, advanced 3.2% to 3,128.
• The supramax index, for smaller vessel segments added 29 points, or 1.2% to 2,431, its highest level in a month. 

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.

Corn

Lumber

Soybeans

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

Energy

US Crude Oil (WTI)

4 Hour: WTI oil stayed below the 240 cloud after testing the 50 ma (green). This is a market that is reflective of fear and greed, note the reaction when Kijun and Tenkan cross or touch and Murrey Math confluence. Sell off capitulated to -4/8

Daily: On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs. The completion in 5 waves 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 iii? Support wasn’t found until 0-8. Resistance the Tenkan

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 50dma 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 previous high confluence.

Weekly: WTI crude Oil futures continued with it’s measured move then reversed from 7-year highs. Long term 61.8% target fueled by ABC bull flag after rebalanced Chikou sated the 5 waves. Weekly Tenkan & Kijun closed touching to give next impulse clue after closing at 50wma. It must regain energy to complete correction

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

US Natural Gas (Henry Hub)

4 Hour::  The 240 shows the waves are clear in the Murrey Math grid. Note impulses off Kijun/Tenkan crosses Recall natural gas spitting to +8/8 than +1/8 240 before retreating in 3 waves to spit violently the 50 4hr ma stayed above the cloud until the completive 5. That means a saturated bull pen and we are still in a developing 3 or C down. Continue to watch Kijun reactions and Murrey Math confluence.

Daily: US Natural Gas completed 3 waves correcting the daily 8/8 spit after a classic euphoria wave 5. However it was rejected hard at the Kijun and cloud top at 6/8. Meaning that 3 was either an a of a C or a iii – impulse in a nutshell. The adjunct failure of the 50dma and Tenkan open up a retest of 3.80-3.60.

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

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

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 the 50wma. Natural gas continued to retrace with impulse after reaching it’s 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.

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

Key Energy Reports

• Around The Barrel – US Crude Oil Builds +6088Kbbl But WTI Cushing Around 2018 Lows
• Into The Vortex – EIA Reports Build of 81 Bcf in Natural Gas Inventories
• EIA Forecasts U.S. Natural Gas Inventories To Enter Winter Heating Season Below Average
• U.S. Natural Gas Consumption Down With Switch to Coal Due To Higher Gas Prices
• Desperate China Orders Inner Mongolia Coal Mines To Boost Production by 55%
• Natural Gas Flowing on Nord Stream 2 From Russia to Germany
• Natural Gas Volatilty a Lesson in The Reversal of Fortunes
• Record High Chinese Coal Futures Prices After Biggest Coal Producing Region Floods
• East China Manufacturing Hub Zhejiang Orders Production Suspensions to Meet Energy Targets
• ConocoPhillips Buys Shell’s Delaware Basin Assets for $9.5 bln in Cash.
• Europe Energy Crisis Years in the Making With Reactionary Environmental policy
• Oil Supply is Tighter Than Industry Estimates Morgan Stanley Says

Precious Metals

• Spot Gold fell $19 to $1,783 (down 6.1%).
• Silver dropped 2.7% to $22.52 (down 14.7%). 

Gold

Gold continued to rally after it broke back over base of weekly cloud  closing above 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.

Silver

Silver, like Gold bounced off the cloud base. Back over 50wma after spitting Tenkan providing support after reversed. Closing at weekly Kijun which is now resistance. Major support is the 50wma 

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 little changed at 96.12 (up 6.9% y-t-d).
• Majors for the week on the upside, the Swiss franc 0.6%, the Japanese yen 0.5%, On the downside, the Australian dollar declined 1.7%, the British pound 0.8%, and the Canadian dollar 0.4%.
• Minors for the week For the week on the upside, the Mexican peso increased 3.1%, the South African rand 1.3%, the South Korean won 1.1%, the Swedish krona 0.2% and Chinese renminbi increased 0.26% versus the dollar (up 2.36% y-t-d). For the week on the downside, Norwegian krone 1.1%, the Brazilian real 0.9%, the New Zealand dollar 0.7%

 Australian Dollar – AUDUSD

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

New Zealand Dollar – NZDUSD

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

Canadian Dollar – USDCAD

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

Euro – EURUSD

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

British Pound – 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.

Euro Pound – EURGBP

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

Japanese Yen – USDJPY

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

Mexican Peso USDMXN

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

Turkish Lire USDTRY

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

Bitcoin

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

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

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

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

Post 2008 it has been about easy money from Central Banks to the bank center, loan forgiveness and the like which has pumped assets at a speed and level never seen before. Given that we keep an eyes on the banking sector, it’s moves and earnings

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.

• Goldman Sachs Advice on Mergers and Acquisitions Brought in a Record $1.65 billion Last Quarter
• Wells Fargo Earnings Suffer From Less Interest Income on Lower Loans
• JPMorgan Earnings Boosted By Trading and Release of Loan Loss Reserves
• Blackrock Earnings Beat Expectations With Record $ 9.5 Trillion Assets and ETFs Under Management
• PNC Bank Revenue Rises, Expects $900 million in Cost Savings From BBVA
• Citigroup Earnings Rise on Equity Trading and Loss Reserve Release
• Bank of America Earnings Lift With Higher Long Term Interest Rates And Steady Costs
• Morgan Stanley Acquisitions of E-Trade and Eaton Vance Boosted Wealth and Asset Management

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

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

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

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

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

The Week Ahead – Have a Trading Plan

Keys focus this week will be the US consumer price index (CPI) report. It was was up 6.2% in October from a year ago, its highest level in 31 years. Core inflation, which excludes food and energy, increased 4.6%. The hope is that this could be near the high-water mark but consensus estimates are for November CPI to rise to 6.7%, with core inflation up to 4.9%.

Eyes will be the China trade report (November). With warnings that disruptions at Chinese ports could impact deliveries in the runup to Christmas, businesses placed orders early. Guesses for November are expected to show a modest slowdown in export growth to around 19.8% year-on-year. Central Bank watchers will be firmly eyeing the RBA rate meeting. After the Reserve Bank of New Zealand raised interest rates by 25bps to 0.75% last month, attention now turns to the Reserve Bank of Australia. The question is, will the RBA follow suit? The data and forecasts do not support a hike. That said yields remain at elevated levels, suggesting that markets don’t believe the central bank’s narrative.

Fear resides with unraveling Omicron contagion.

Third-quarter earnings season is nearing an end but one report after Friday’s swoon is of interest, GameStop Q3 results. The volatility around this meme stock is alive and well, the GME share price is still up 900% year-to-date. The called ‘Apes’ and Reddit day-traders came to earth on Friday, lets see is they have learned anything and whether they truly do blindly hold as the myths cry out they do.

Other earnings include; MongoDB, Coupa Software, SentinelOne, Toll Brothers , Stitch Fix, UiPath, Campbell Soup, RH ,   GameStop, Broadcom, Costco, Hormel, Lululemon , Chewy and Centene Investor meeting .

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

Monday

• 3:00 p.m. New York Fed President John Williams 
• 3:05 p.m. Fed Chairman Jerome Powell makes opening remarks at New York Fed event introducing the New York Innovation Center
• 5:05 p.m. Fed Governor Michelle Bowman

Tuesday

• 10:00 a.m. Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen speak before Senate Banking on Coronavirus and the CARES Act
• 1:00 p.m. Fed Vice Chairman Richard Clarida and Cleveland Fed President Loretta Mester

Wednesday

• 10:00 a.m. Powell and Yellen at House Financial Services committee
• 10:30 a.m. New York Fed’s Williams
• 2:00 p.m. Beige book

Thursday 

• 8:30 a.m. Atlanta Fed President Raphael Bostic
• 11:30 a.m. Atlanta Fed’s Bostic
• 1:00 p.m. Fed Vice Chairman Randal Quarles

Economic Events in the Week Ahead:

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2020. One suspects it will be a year long Groundhog day for Trump, the GOP and the Democrats. 

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