Traders Market Weekly: Yield Inversion Therapy Kill Growth To Kill Inflation

April 3-9 2022

FEAR NOT Brave Investors

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

The Week That Was – What Lies Ahead?

Contents

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

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

Editorial

Stock markets continued to melt up until the end of the quarter. We finished the week with a US jobs report that came around expectations inclusive of the revisions. The report keeps the Fed on target for a 50 BP hike at the May and most likely another at the June meeting as well. The employment report fed into expectations for a 50-basis-point hike next month. The CME FedWatch Tool is currently assigning a 75.5% probability for a 50-bps hike at the May meeting, versus 69.4% yesterday.

That would take the target rate to 1.25% to 1.50%. With just 6 meetings to the end of the year. Rises of 25 basis points after takes the target rate to 2.25% to 2.5%. This is the so-called neutral rate that Fed officials speak of. John Williams believes such action, rate increases and balance sheet reductions, will help reduce inflation to around 4% this year. He then sees “close to our 2% longer-run goal in 2024”

The NFP came in at 431K vs a 490K estimate but the prior month was revised up 72K to 750K from 678K. The Unemployment rate was lower at 3.6% (vs 3.7%) and approaching the 50 years low of 3.5%. It is the service economy running the US as always. goods producing jobs have added 200K over the last 3 months whilst service jobs have added 1463K over that time. Leisure and Hospitality added 112k, while higher paying Professional and business services added 100K for the 2nd consecutive month.

The bond market is doing the Fed’s work for them, the fed funds futures market increased its expectations for a 50-bps rate hike in May. The post-data selling was most pronounced in the 5-yr note and shorter tenors while 10s and 30s tried to climb off their session lows. The rebound eventually pressured the 30-yr yield below the 2-yr yield, resulting in the first inversion of the 2s30s spread since 2007. The expectations for aggressive rate hikes later this year incites concerns about a negative impact to growth down the line. The inversion was clear with 2-yr at 2.43% (+14 bps for the week). 10-yr 2.38% -11 bps for the week and 30-yr 2.42% -18 bps for the week.  After beginning the year at 78 bps, the 2-yr/10-yr Treasury yield spread ended the week at negative eight bps

Inflation got a break, after oil prices closed under $100 $99.54, -0.89, -0.9%), lower by 12.6% for the week. Crude was pressured by news that other IEA nations like Europe, Canada, Mexico, Japan, and South Korea will join the U.S. in releasing oil from their reserves. Commodity inflation is perhaps best gauged by Australia’s Index, March Commodity Prices were up 40.9% yr/yr (last 16.7%). The weak yen has fueled the carry trade as dollar yen hits highs last seen in 2015. On Friday former Japanese currency official warned that the recent rapid depreciation in the yen is a negative since it reflects waning competitiveness.

Of interest was Russian Foreign Minister Lavrov’s trip this week to China. China is hardly condemning Russia, Foreign Minster Wang said “There is no ceiling for China-Russia cooperation, no ceiling for us to strive for peace, no ceiling for us to safeguard security and no ceiling for us to oppose hegemony.”

We are in the murkiness of the largest European war since WWII at a critical cycle time with prices and uncertainty already in play. Putin expected a weak Biden to be indecisive at best, what he didn’t count on was Europe being wary of the weakness and filling that vacuum and some. Watchers from the region were not surprised however with little Estonia and Latvia on the front foot from the start signaling and taking on Germany to affectively shame them into taking on Russia in the financial markets.

A fun fact is April is historically the best month for stocks from a seasonality perspective, can the ongoing market volatility and headwinds fall into place again?

Inflation, Oh inflation

Food prices are surging, with that expect to see even higher grocery store and energy bills as elevated commodity prices send the fallout from Ukraine’s humanitarian crisis rippling across the world in the coming weeks. With all the redirection of blame at the Fed about inflation one has to understand it is a global phenomenon outside the Fed’s Control. With the war drums louder than ever the supply chain issues are out of control. The Federal Reserve is not in control of global energy and commodities prices.

Chair Powell to David Scott Chairman of our House Agriculture Committee: “Sir, your point is very well taken and I think… it’s shipping, it’s corn, it’s wheat, as you pointed out, it’s fertilizer, and we see that getting into food prices and into the food supply just in these early days after the sanctions have been put in place and the war less than two weeks old now. I really — the Fed doesn’t really have the tools to address this.”

House Financial Services Committee hearing

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

We are now less than a month before the Fed’s next policy meeting. February’s CPI and PPI both rose more than forecast. 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.

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.

Monetary inflation is running wild. In 2021 Federal Reserve Credit expanded $1.391 TN or 19% to a record $8.742 TN. The Fed’s balance sheet inflated a mindboggling $5.015 TN, or 135%, in the 120 weeks since QE was restarted in September 2019. Federal Reserve Assets have now inflated 10 times since the mortgage finance Bubble collapse.

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

We are in an openly hawkish phase since late last year when the New York Fed president John Williams, who is a voting member continued with his hawkish tilt of late. He said we are seeing broader based increases in inflation. Fed Governor Bullard told US Core PCE Is “Quite High” and added that the Fed should take towards a more hawkish policy in the next couple of meetings. Then we had Fed Governor Christopher Waller say the rapid improving job market and deteriorating inflation data have pushed him towards favoring a faster pace of tapering and more rapid removal of accommodation.

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

– MoneyNeverSleeps

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

PART A – Stock Markets

Highlights – USA

• S&P500 little changed (down 4.6% y-t-d)
• Dow little changed (down 4.2%)
• Nasdaq100 increased 0.7% (down 8.9%).
• Small cap Russell 2000 rose 0.6% (down 6.9%).
• The S&P 400 Midcaps unchanged (down 4.6%)
• Utilities surged 3.7% (up 4.5%).
• Transports sank 5.3% (down 5.9%).
• Semiconductors fell 4.5% (down 14.7%).
• Biotechs rallied 4.1% (down 5.1%).
• While bullion was down $32, the HUI gold index gained 2.1% (up 24.1%).
• Banks slumped 6.7% (down 7.3%)
• Broker/Dealers lost 2.2% (down 3.5%).

US Markets YTD

• Dow Jones Industrial Average -4.1% YTD
• S&P 500 -4.7% YTD
• Russell 2000 -7.5% YTD
• Nasdaq Composite -9.4% YTD

Highlights – Europe Stocks

• U.K.’s FTSE equities index added 0.7% (up 2.1% y-t-d).
• France’s CAC40 rallied 2.0% (down 6.6%).
• German DAX equities index recovered 1.0% (down 9.1%).
• Spain’s IBEX 35 equities index rose 2.1% (down 2.4%).
• Italy’s FTSE MIB index jumped 2.5% (down 8.0%). 

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: -0.6% (-1.7% for the week)
• Hong Kong’s Hang Seng: +0.2% (+3.0% for the week)
• China’s Shanghai Composite: +0.9% (+2.2% for the week)
• India’s Sensex: +1.2% (+3.3% for the week)
• South Korea’s Kospi: -0.7% (+0.4% for the week)

 Highlights – Australian Stocks

• Australia’s ASX All Ordinaries: Australia’s ASX All Ordinaries rose 87.6 points, or 1.2 per cent, to 7493.8 this week
• Rose for third straight week on Friday as strong gains from the mining sector helped local shares offset their year-to-date losses.
• The ASX rose 6.4% for the month of March, the market’s best performance since November 2020.
• The energy and materials sector up around 10% for the month. Lithium giant Allkem rose 8.5% on Friday, having hit a record high of $12.47 during the day.
• Iron ore +0.2% to $US150.84 per tonne (Tianjin)

The Australian ASX 200 Stock Market Closed Up 13% in 2021 With Lithium Plays Starring

 Highlights – Emerging Markets Stocks 

• EM equities were in rebound mode
• Brazil’s Bovespa index gained 2.1% (up 16.0%)
• Mexico’s Bolsa index gained 2.1% (up 6.3%)
• Turkey’s Borsa Istanbul National 100 index jumped 3.5% (up 21.2%).
• Russia’s MICEX equities index surged 11.1% (down 27.1%).

Biggest SPX Stock Winners and Losers Last Week

S&P 500

Daily: SPX500 performed a perfect double bottom this week’s and by week’s end had completed a perfect measured 3 wave move on the 240 Murrey Math highlighted in the podcast. We bounced through the downward channel pulled by the twist ‘helium contusion’ on the completive. Recall the fuel from the top of the channel after completing 3 waves off ATH, accelerated after broke the Tenkan through to the 4600 OI where it reversed with impulse back to Tenkan Bulls this a (ii) of a 5. Bears this is 1-2 of (i) completive V of degree. We watch if this low was a (iii), (a) or C. We have to respect the number of alternatives of degree of 5. With such trends keep it simple support is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

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

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

Weekly:

The S&P closed right on the weekly Kijun after blasting through the downtrend on quad witching. We corrected the reversal of the breakup at Tenkan from there we had had a powerful rally to ATH. Each new high evolved after testing Tenkan key support, we are now getting a retest as resistance, making it support on this move. We reiterate this needs to be recovered for a resumption of the uptrend. We broke the Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

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

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

Dow Jones

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

NASDAQ 100

Nasdaq spat the weekly cloud to the MM 6/8 and Tenkan confluence where it closed witht he cloud top and Kijun above. Immediate resistance is this confluence. Recall ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. From there we sold off right to Tenkan (as did SPX) and here we are. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue. Support Channel and cloud.

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 tested the 38.2% retracement of the move up from the March 2020 low before bouncing higher.

Unlike SPX we could not get through Tenkan and Kijun which rejected the bounce highlighting its weakness. However, like the NASDAQ we broke above the tenkan. This is the index showing more of the fast money crowd and is trading like it. Closed right in the middle of the cloud. Needs to get traction in here for bulls. 8/8 Support now and then cloud base

Semiconductors SMH

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)

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.

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.

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

US Stocks Watch

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

Earnings Highlights This Week:

TICKER COMPANY EPS FORECAST

Monday includes

Tuesday includes Acuity Brands, Greenbrier Companies

Wednesday includes Levi Strauss

Thursday includes Constellation Brands, Conagra Brand

Friday includes

“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 $2.548 billion, while junk bond funds posted inflows of $1.244 billion (from Lipper).

The bond market is doing the Fed’s work for them, the fed funds futures market increased its expectations for a 50-bps rate hike in May. The post-data selling was most pronounced in the 5-yr note and shorter tenors while 10s and 30s tried to climb off their session lows. The rebound eventually pressured the 30-yr yield below the 2-yr yield, resulting in the first inversion of the 2s30s spread since 2007. The expectations for aggressive rate hikes later this year incites concerns about a negative impact to growth down the line. The inversion was clear with 2-yr at 2.43% (+14 bps for the week). 10-yr 2.38% -11 bps for the week and 30-yr 2.42% -18 bps for the week.  After beginning the year at 78 bps, the 2-yr/10-yr Treasury yield spread ended the week at negative eight bps

• 2-yr: +15 bps to 2.43% (+14 bps for the week)
• 3-yr: +16 bps to 2.62% (+10 bps for the week)
• 5-yr: +13 bps to 2.55% (-2 bps for the week)
• 10-yr: +5 bps to 2.38% (-11 bps for the week)
• 30-yr: -2 bps to 2.42% (-18 bps for the week)

Rates on the 10-year note traded over 1.900% on Friday, for the first time since July 2019. Yields broke out of the small symmetrical triangle highlighted the past weeks, after forming a much larger symmetrical triangle.

All good while markets hold up but take note that the loosest financial conditions in history have supported record corporate debt issuance. While easy credit availability has supported economic activity, funding new investment whilst keeping vulnerable companies afloat. The combination of urban shifts through virus and riots fears has fueled a booming MBS market and record low mortgage rates pushing strong housing markets into Bubble risk territory.

Highlights – Mortgage Market

Unprecedented cash payments by the U.S. government to households, changing consumer preferences and lowest mortgage rates in history have fueled a pandemic boom in housing, the fastest pace of increase on record in data from 1988 and prices surpassing the peak from the last property boom in 2005. The S&P CoreLogic Case-Shiller U.S. National Home Price Index has marked the fastest pace of increase on record in data from 1988.

• Freddie Mac 30-year fixed mortgage rates surged 25 bps to 4.67%, the high since December 2018 (up 149bps y-o-y).
• Fifteen-year rates rose 20 bps to 3.86% (up 138bps).
• Five-year hybrid ARM rates gained 14 bps to 3.50% (up 66bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 39 bps to a decade-high 4.91% (up 162bps).

Highlights – Federal Reserve

• Federal Reserve Credit last week declined $21.3bn to $8.903 TN. Over the past 133 weeks, Fed Credit expanded $5.176 TN, or 139%.
• Fed Credit inflated $6.092 Trillion, or 217%, over the past 490 weeks.
• Fed holdings for foreign owners of Treasury, Agency Debt last week rose $13.9bn to $3.464 TN.
• “Custody holdings” were down $87.4bn, or 2.5%, y-o-y.
• Total money market fund assets jumped $29.7bn to $4.590 TN. Total money funds increased $93bn y-o-y, or 2.1%.
• Total Commercial Paper gained $12.0bn to $1.062 TN. CP was down $37.7bn, or 3.4%, over the past year.

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 jumped 17 bps to 2.80% (up 148bps y-t-d).
• Ten-year Portuguese yields rose 15 bps to 1.33% (up 86bps).
• Italian 10-year yields surged 19 bps to 2.08% (up 91bps).
• Spain’s 10-year yields gained 13 bps to 1.44% (up 88bps).
• German bund yields surged 21 bps to 0.59% (up 76bps).
• French yields jumped 19 bps to 1.02% (up 82bps).
• The French to German 10-year bond spread narrowed about two to 47 bps.
• U.K. 10-year gilt yields surged 20 bps to 1.70% (up 72bps).

Highlights – Asian Bonds

• Japanese 10-year “JGB” yields added three bps to 0.24% (up 17bps y-t-d).

Part C: Commodities

Highlights

• Bloomberg Commodities Index dropped 4.6% (up 24.9% y-t-d).
• Spot Gold declined 1.7% to $1,926 (up 5.3%).
• Silver fell 3.5% to $24.63 (up 5.7%).
• WTI crude sank $14.63 to $99.27 (up 32%).
• Gasoline slumped 9.1% (up 42%),
• Natural Gas rose 2.7% (up 53%).
• Copper slipped 0.2% (up 5.0%).
• Wheat sank 10.7% (up 27.7%)
• Corn fell 2.5% (up 24%).
• Bitcoin rose $1,900, or 4.3%, this week to $46,297 (down 0.2%).

Risk markets continue to respond to the war in Ukraine and the supply crisis from the Coronavirus outbreak and lockdowns.

BDI Freight Index

• The Baltic Exchange’s dry bulk sea freight index had a third consecutive weekly decline on Friday, pulled down by falling rates for panamax and supramax vessels. The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, fell by one point to 2,357 points, its lowest since March 8. The index fell 7.4% over the week.
• The capesize index gained 104 points, or 5.9%, to 1,864 but was down 1.2% for the week.
• Average daily earnings for capesizes, which typically transport 150,000 tonne cargoes such as iron ore and coal, increased $867 to $15,460.
• The panamax index dipped 68 points, or 2.2%, to 3,073 points for its lowest level since March 21, down almost 10% on the week.
• Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes, lost $613 to $27,660.
• The supramax index dropped 53 points to 2,755 points, down 8.8% for the week.

Source: Baltic Exchange’s Capesize index Falls 28% For the Week Pushing Dry Bulk Sea Freight Index Down Further

Aluminum (Alcoa)

We analyze Alcoa as a surrogate to Aluminum given its high beta relationship and more liquid aspect as an investment vehicle.

We have seen $AA retest the previous high after the +3 Spit as the Chikou rebalanced. We have the Gap below at +1/8 confluence. We move to 240 for this pennant resolution.

Copper

Copper rebounded sharply off the 50wma but again has failed on the cloud spit and channel break. The flattening Weekly Tenkan and Kijun acted as a magnet to close right there. #HG power spits have quickly rebalanced back into the wide channel. Copper had been a leader in the risk on movement for commodities.

Lumber

Grains

It has been an ominous quarter for the global food supply and its pricing. Wheat, Corn and Soybeans are all significantly higher.

Wheat

We analyze the WEAT ETF as a surrogate to Wheat given its high beta relationship and more liquid aspect as an investment vehicle.

Wheat futures sank 10.7% (still up 27.7% YTD) this past week. WEAT still resides in the large pennant since it spat 8/8, and the minimum target. We have completed a measured 4/8 correction off highs meaning key support as that base, the 50dma and the pennant confluence.

Corn

Corn fell 2.5% this week (up 24% YTD) after is has been consolidating and retesting the April 21 highs after it accelerated higher after breaking the cloud. This week’s low is key for ABC measurement 2/8 measured move.

Soybeans

Soybeans for the first time in the past month futures have drifted below the $16/bushel benchmark. Futures spat the Weekly +4/8 over $17.50/bushel. Prices accelerated lower finding no bids falling under tenkan and closing near weekly lows. The flattening Kijun the magnet just under the 8/8. The weekly cloud and 50wma mingle around the $146/bushel benchmark.

Energy

US Crude Oil (WTI)

Daily:

Another big week for oil, April WTI crude oil (CLJ22) futures settled at $115.68 per barrel. That’s the highest close since September 2008. The high price$115.94, low price today $107.29. For the week, the price is up over 25%. The power was this move was built after hitting our initial 8/8 target completing a iii of (5) or (iii) of 5 as marked. From there we saw a sharp ABC higher and MM recalculation higher. We are in a completive mode with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. On the way up potent WTI price action indicative of 3rd wave energy highlighted by spits of the Tenkan to new highs.

Recall prior to this move the completion in 5 waves (iii or i) saw heavy selling with eventual confluence kiss of death with 50dma at the top of the cloud. From there down in 3 waves, completing a C or IV? Support wasn’t found until 0-8. From there we have accelerated higher through the cloud twist. Support Kijun and Tenkan. Closed above 50dma with grid above.

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

Weekly:

WTI crude Oil futures continued higher with aggression after corrected the sell off after it’s measured move reversed from 7-year highs and regained them right to the top of the weekly channel with the downside open. Support is the median and Tenkan/Kijun. Long term 61.8% target fueled the spit of a spit by ABC bull flag after rebalanced Chikou sated the 5 waves. Resistance the Murrey Math levels and previous breaks (off monthly)

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

US Natural Gas (Henry Hub)

Daily:

US Natural Gas has continued higher after it completed 3 waves correcting the daily 8/8 spit correction to -2/8. Two clear alternatives, we are correcting the highs 5 or that was a 3 and we go higher. We closed over the 2 most recent highs and +1/8 right. Support is Tenkan, Kijun below.

The Cloud top broke Kijun and Tenkan with a kiss of life. Meaning that 3 was either an a i or iv– impulse in a nutshell. Prior to this move the adjunct failure of the 50dma and Tenkan opened up the retest of 3.80-3.60 last time which fueled this week’s move higher. From there we fell sharply to the Kijun, A completion of 4 (bear) or (i) of 5 (bull) which gave this move sustenance

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

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

Weekly

Notably no sharp reversal, like the previous impulsive spikes. We saw a clean break of the Kijun to close back over near highs. This move was fueled by a fractal of the classic double top playing out after a spit of the weekly Kijun was sent back off Tenkan only to reverse all the way to spit the 50wma for the energy needed. Resistance is Previous highs and Murrey Grid.

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

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

Key Energy Reports

• Around The Barrel – Crude Oil Outlook with A Desperate United States Turning to Iran with Prices Vertical
• Into The Vortex – Natural Gas Outlook with Threats of Russian Ukraine Conflict Hitting Global Supply
• ExxonMobil Delivers Big Earnings, Continues to Pay Down Debt as Oil and Gas Prices Surge
• The Energy Crisis and Volatility See Natural Gas and VIX the Best Performing Futures in January
• Chevron Earnings Miss on Weaker Production Outweighing Gains from Soaring Oil and Natural Gas Prices
• Natural Gas Squeezes in Largest One Day Percentage Move on Record as Traders Caught Short Molecules
• Australian Coking Coal Record High with Strong Demand in Korea and Japan
• OPEC Monthly Oil Market Report January 2022
• Lower US Producer Price Inflation Dependent on Oil Prices
• Fitch Outlook For North American Oil & Gas is Neutral in 2022

Precious Metals

• Spot Gold declined 1.7% to $1,926 (up 5.3%).
• Silver fell 3.5% to $24.63 (up 5.7%).

Gold

Gold futures settled $8.00 Friday lower (-0.4%) to $1,954.20/oz, up more than +1% on the week. The yellow metal is consolidating after it accelerated after breaking the weekly triangle higher. Gold has bounced after support at it’s uptrend line since the August 2021 bottom and Kijun. It garnered strength after rebalancing after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we need to stay above the triangle. Murrey Math resistance, watch Fibs & Chikou.

Silver

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

Part D: Forex Markets

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

Highlights

For the week, the U.S. Dollar Index declined 0.2% to 98.63 (up 3.1% y-t-d).

Majors:

• For the week on the upside, the euro 0.6%, the Swiss franc 0.4%
• On the downside, the British pound 0.5%, the Japanese yen 0.4%, the Canadian dollar 0.4%, and the Australian dollar 0.3%.

Minors

• For the week on the upside, Brazilian real increased 1.8%, the Mexican peso 0.9%, the Swedish krona 0.6%, the South Korean won 0.3%, The Chinese renminbi increased 0.05% versus the dollar (down 0.11% y-t-d) and the Singapore dollar 0.1%.
• On the downside, the Norwegian krone declined 1.6%, the South African rand 0.8%, the New Zealand dollar 0.7%, The Chinese renminbi increased 0.05% versus the dollar (down 0.11% y-t-d).

 Australian Dollar – AUDUSD

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

New Zealand Dollar – NZDUSD

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

Canadian Dollar – USDCAD

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

Euro – EURUSD

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

British Pound – GBPUSD

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

Euro Pound – EURGBP

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

Japanese Yen – USDJPY

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

Mexican Peso USDMXN

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

Turkish Lire USDTRY

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

Bitcoin

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

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

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

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

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

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.

• 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

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

Monday

• China markets closed in observance of Ching Ming Festival.
• 5:05: UK – BoE Gov Bailey Speaks

Tuesday

• Hong Kong and China markets closed in observance of Ching Ming Festival.
• 00:30: Australia – RBA Interest Rate Decision: forecast to remain steady at 0.10%.
• 4:30: UK – Services PMI: seen to remain flat at 61.0.
• 10:00: US – ISM Non-Manufacturing PMI: predicted to edge up to 58.0 from 56.5.

Wednesday

• 4:30: UK – Construction PMI: anticipated to ease to 57.3 from 59.1.
• 10:00: Canada – Ivey PMI: previously printed at 60.6.
• 10:30: US – EIA Crude Oil Inventories: last week’s release showed a drawdown of -3.449M
• 14:00: US – FOMC Meeting Minutes

Thursday

• 7:30: Eurozone – ECB Publishes Account of Monetary Policy Meeting
• 8:30: US – Initial Jobless Claims: expected to retreat to 200K from 202K.
• 10:30: US – EIA Natural Gas Crude Oil Inventories

Friday

• 8:30: Canada – Employment Change: likely plummeted to 80.0K from 336.6K.

Saturday

Sunday

Federal Reserve

Tuesday, April 5 ***NEW YORK – Federal Reserve Bank of New York President John Williams participates in “Health and the Economy” moderated discussion hosted by the New York Times, covering the intersection of health and economics, national efforts to promote a healthy workforce, and lessons learned during the pandemic, 1400 EDT/1800 GMT.

Wednesday, April 6 FOMC meeting minutes: 2022 1400 EDT/1800 GMT (for meeting of March 15-16)

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

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