Traders Market Weekly: August 7 to 13 2021

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FEAR NOT Brave Investors

Inflation

 Strange times But remember The Joker once served as the Iranian ambassador for the United Nations.

Inflation, Fed Shakes and Rates

The Week That Was – What Lies Ahead?

Editorial

The week finished with Friday’s July jobs report which showed a healthy 943,000 increase in non farm payrolls. The market liked it with Dow and S&P 500 closed at new records highs Friday. The Dow gained 0.8% for the week, finishing at 35,208, while the S&P 500 rose 0.9% to 4,436. The Nasdaq rose 1.1% for the week to 14,835. Earnings continue to roll out with Walt Disney, eBay, Wendy’s on the docket. This leads into tapering talk with both CPI and PPI inflation data out it will ramp up or down depending on the release, weekly jobless claims are back on the watch list also with the Fed’s near ZIRP that has driven the liquidity feeding the stock market. Fed chair reminded us the labor market is key to what they do next and how it affects consumer sentiment which is key to the overall mood of the bull and bear.

Powell is struggling to justify ongoing historic monetary inflation as transitory with intense inflationary moves abound. Perhaps with so many destroyed economically and living on the breadline the Fed is well away they are surviving at best and aware  such lack of demand will become deflationary as supplies normalise.

‘Materials shortages, inflation and logistics continue to negatively impact the continuity of supply,’ Anthony Nieves, chair of the ISM’s Services Business Survey Committee, said… Prices paid by service providers jumped to 82.3 last month, the highest level since September 2005. Meantime, delivery times lengthened, with a gauge of supplier deliveries rising to its second-highest reading on record.”

Public confidence is eroding sharply with the US Administration and the Fed iseems to be the last hope for many. What happened if the insular American masses gather what is unfolding globally?

The three credit events that got our attention last week remain our key watches.

Firstly credit spreads on corporate bonds.

“The value of the world’s stock of negative-yielding debt has ballooned to more than $16.5tn, the highest in six months… Government bond yields have tumbled in recent weeks as some traders have piled in, a move that has blindsided many investors who expected an economic rebound from the pandemic along with rising inflation to lift long-term borrowing costs.”

The second again was the world’s most indebted developer, China Evergrande Group shares and bonds.

“China Evergrande Group bonds dropped to record lows after reports that creditor lawsuits against the world’s most indebted developer will be consolidated, a step that has preceded several high-profile defaults by Chinese borrowers. Cases related to Evergrande and its affiliates will be centralized in a Guangzhou court, Caixin reported… Speculation about the move triggered a slump in the developer’s bonds late Thursday, with losses deepening after the city of Beijing tightened property curbs and S&P Global Ratings cut its assessment of Evergrande for the second time in as many weeks.

The third was falling bond yields despite heightened inflationary pressures and further price increases.

“Ten-year Treasury yields jumped seven bps Friday to 1.30%, a rather dramatic reversal from Wednesday’s intraday 1.13% low. Treasury bonds have been pulled lower over recent months by Chinese Credit deterioration and myriad global Bubble fragilities. There’s always an Ebb and Flow associated with financial instability, and this week there was a Beijing-directed hiatus in the evolving Credit crisis. With a relatively tranquil week for China (and Asia & EM), Treasuries turned more attentive to U.S. overheating.”

After last week’s FOMC it’s worth reminding ourselves of  this insight from the The Economic Affairs Committee of the U.K.’s House of Lords report, “Quantitative Easing: A Dangerous Addiction?”

“No central bank has managed successfully to reverse quantitative easing over the medium to long term. In practice, central banks have engaged in quantitative easing in response to adverse events but have not reversed the policy subsequently. This has had a ratchet effect and it has only served to exacerbate the challenges involved in unwinding the policy. The key issue facing central banks as they look to halt or reverse quantitative easing is whether it will trigger panic in financial markets, with effects that might spill over into the real economy.”

In light of  recent ECB and FOMC meet and greets an important realisation that the Central Bankers are well of aware of the consequenses here.

“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

There is the prospect of an overheating U.S. economy, but remember we are coming off a low base and the lockdown has decimated many sectors of the economy and people’s lives. The relevaton from the speed of technology adapting and disrupting to a new world with the lockdown is transformative. The shift has enabled and transformed the traditional economy that we measure future outcomes off.

We still need to add almost 20 million jobs in the US alone to get back to par. Europe is in worse shape, so overheating at this point isnt a concern for most policymakers.  The unparalleled government monetary inflation has inflated many price levels and distorted asset markets BUT that was intended as to increase confidence in the ‘guts’ of the economy, homeowners and 401k holders. This point is missed by the uber bear community. From here is the big question. The RBA stability report gives us an insight into central banker thinking, they concluded Australian banks are in strong financial position coming out of pandemic and have abundant liquidity and funding,

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 tis continuos dip feed? At this point the Central Banks have kicked that answer down the road.

After the monthly and weekly employment data the market will be going though whether the recent stimulus rounds are working with in the background of the Federal Reserve Continuing to downplay inflation risk.

Of note during the Arctic Blast with the EV mania and the Biden Admin Green deal push we noted the spike in spot Texas electricity prices pushing the cost of electricity not on fixed plans to unheard of levels. Bloomberg reported on recharging a Tesla from about $18 to $900. Yes the price spike was fleeting but it should remind the sane amongst us the broader issue of the disconnect between the push toward electrification and our massively inadequate energy infrastructure. This is the area that needs investment, not just for our glorious EV but for all energy and possible disasters like we just saw.

Comments from Yellen and others on the same page suggest that low rates conveniently push potential debt instability far out into the future. The Fed is poised to expand its balance sheet, by adding liquidity to the tune of $1.5 TN this year with no regard for rampant asset price inflation and bubbles. Now the new administration has control of the blank checkbook and is determined to us it with no long-term thinking or planning; everything is short-term focused. Washington is gambling with our nation’s future, from kicking cans down the road to rolling drums down a hill. 

Contents

  • Part A: Stockmarkets
  • 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

 

PART A – Stock Markets

Highlights – USA

  • S&P500 gained 0.9% (up 18.1% y-t-d)
  • Dow increased 0.8% (up 15.0%).
  • Nasdaq100 advanced 1.0% (up 17.2%)
  • S&P 400 Midcaps increased 0.5% (up 17.8%)
  • Small cap Russell 2000 rose 1.0% (up 13.8%)
  • Utilities added 2.2% (up 7.3%)
  • Transports added 0.3% (up 16.0%)
  • Banks surged 4.3% (up 30.1%), Broker/Dealers jumped 4.4% (up 27.9%).
  • Semiconductors gained 1.7% (up 22.1%).
  • Biotechs rallied 3.6% (up 3.8%).
  • With bullion down $51, the HUI gold index sank 5.1% (down 13.3%).

US Indices 8 6 2021
 

Highlights – Europe Stocks

  • U.K.’s FTSE gained 1.3% (up 10.3% y-t-d).
  • France’s CAC40 jumped 3.1% (up 22.8%).
  • German DAX rallied 1.4% (up 14.9%).
  • Spain’s IBEX 35 advanced 2.3% (up 10.0%).
  • Italy’s FTSE MIB jumped 2.5% (up 16.9%).

 Highlights – Asia Stocks

  • Japan’s Nikkei Equities rallied 2.0% (up 1.4% y-t-d)
  • South Korea’s Kospi recovered 2.1% (up 13.8%).
  • India’s Sensex jumped 3.2% (up 13.7%).
  • China’s Shanghai Exchange rallied 1.8% (down 0.4%).
  • Australia’s ASX 200 rose 1.9% for the week with a new record high 7538.4 in its best performance since May.

 Highlights – Emerging Markets Stocks 

  • EM equities popped.
  • Brazil’s Bovespa index gained 0.8% (up 3.2%),
  • Mexico’s Bolsa added 0.5% (up 16.0%).
  • Turkey’s Borsa Istanbul National 100 index surged 3.0% (down 2.8%).
  • Russia’s MICEX equities index gained 0.9% (up 15.7%).

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

 Top US stocks W 8 6 2021

 S&P 500 Index Technical Analysis via @KnovaWave

SPX spent the week rebalancing the Chikou after all time highs remaining in the clear channel.  We have to respect the number of alternatives of degree of 5. With such trends keeps it simple support is Tenkan and Kijun and watch for ABC.

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.

 SPX D 8 6 2021

SPX has continued to roll higher since spat the weekly channel it had been tracking since the break of v of (III) or (V). Each new high has evolved after testing the Tenkan. look for failure when that doesn’t hold.

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 putcall 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 chickou rebalances

 SPX W 8 6 2021

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.

 NADSAQ 100

Nasdaq has been the messiest of the major indices, compare the clinical tests of the SPX Tenkan versus Spits of Tenkan to Kijun in NDX which helped fuel the more extreme moves.

 Nas 100 W 8 6 2021

Russell 2000

 The small cap Russell RUT has been developing a large flag which it spat though last week, only to close above the Tenkan. We need Kijun to close thru to get power to retest highs. Support the cloud should it fail.

RUT W 8 6 2021

Semiconductors SMH

The Semiconductor segment represented by $SMH cleanly with Murray Math levels & Tenkan keys. Previous high above +4/8 and Chikou rebalance patterning. Powered by Kijun spit to as the reaction from above reverted with $AMD & $NVDA $LSCC $MXIM accelerating up

SMH W 8 6 2021
 

NVidia $NVDA

Following the announcement of NVDA 4/1 split some levels off the energy break. This week we hit the 50% at $709 fueled by calls being cheap, we got earnings and $TSLA split memories and boom! The AMC meme move also fueled speculatiojn, at least NVDA has more substance than Doge!

NVDA W 8 6 2021
 

Apple $AAPL

 AAPL W 8 6 2021

Amazon $AMZN

Amazon high locked at Kijun seems …MM +3/8 and from there has built a large weekly flag after failing near the previous high. Watch Tenkan through Kijun for a bigger move down. Support is weekly cloud and resistance previous flag and Tenkan.

 AMZN W 8 6 2021

ARKK ETF

The ARKK ETF trading clinically, tested triangle breakdown and Tenkan after bouncing off 50 WMA. Support cloud, needs to clear Tenkan to test Kijun for bulls.

ARKK W 8 6 2021
 

US Stocks Watch

 

Earnings Week Ahead

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. 

Last week we heard from 

Take-Two Interactive, Mosaic, Vornado Realty, Eastman Chemical, Simon Property, Transocean, Pioneer Natural Resources, Reynolds Consumer Products, ON Semiconductor, NXP Semiconductor, AXA, Loews, Alibaba, Amgen, Eli Lilly, Clorox, KKR, Under Armour, Eaton, Discovery, Pitney Bowes, Marriott, ConocoPhillips, Activision Blizzard, Avis Budget, Public Storage, Devon Energy, Jacobs Engineering, Bausch Health, Incyte, Philips 66, Ralph Lauren, Expeditors International, Nikola, Warner Music, Booking Holdings, CVS Health, GM, Etsy, MGM Resorts, Allstate, Uber, Fox Corp., Electronic Arts, Roku, Kraft Heinz, Toyota, Sony, AmerisourceBergen, Marathon Petroleum, BorgWarner, Entergy, Apollo Global Management, New York Times, Scotts Miracle-Gro, Tupperware, MetLife, IAC/Interactive, Regeneron, ViacomCBS, Beyond Meat, DropBox, Expedia, Sprouts Farmers Market, TrueCar, Shake Shack, Square, TripAdvisor, Cushman and Wakefield, Kellogg, Cigna, Zillow, Lions Gate, Ambac, Virgin Galactic, Motorola Solutions, Zynga, Illumina, AIG, SeaWorld, Cardinal Health, Duke Energy, Thomson Reuters, Datadog, Eventbrite, NRG Energy, Choice Hotels, Parker-Hannifin, Wayfair, Zoetis, Liberty Broadband, Liberty Media, AMC Networks, Draftkings, Fluor, Gannett, Canopy Growth, Nuance Communiciations, Goodyear Tire

This week we hear from:

  • Monday starts us off with
  • Viatris, BioNTech, Barrick Gold, Air Products, AMC Entertainment, CF Industries, Planet Fitness, Elanco Animal Health, U.S. Foods, 3D Systems, Ethan Allen, Tegna

  • Tuesday with Earnings from
  • SoftBank, Coinbase, Sysco, Chesapeake Energy, Super Micro, WW International, Casper Sleep, Aramark

  • Wednesday Earnings Include
  • eBay, Wendy’s, Perrigo, Lordstown Motors, Opendoor Technologies, Nio, Rackspace, Vroom, Marqeta, Sonos, Bumble

  • Thursday Earnings Include
  • Walt Disney, Baidu, Airbnb, CyberArk Software, Azek, Palantir Technologies, DoorDash, SoFi

  • Friday Earnings include

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

 

IPO Wrap

US IPO Weekly Recap:

US IPO Weekly Recap: Postponements abound in a 4 IPO week August 6, 2021

After a busy July, the IPO market began to pump the brakes this past week with four IPOs and four postponements. SPAC activity remained steady with seven blank check IPOs. New filers trickled into the IPO pipeline, with only one IPO and six SPACs submitting initial filings.

Four companies postponed: biopharmaceutical royalty company Healthcare Royalty (HCRX), clinical trial solutions provider WCG Clinical (WCGC), nutraceutical maker The Better Being Co. (BBCO), and law enforcement supplier Cadre Holdings (CDRE).

Adagio Therapeutics (ADGI) upsized and priced at the midpoint to raise $309 million at a $2.0 billion market cap. This biotech develops antibody therapies licensed from Adimab to treat and prevent COVID-19. The company’s lead program has completed enrollment in a Phase 1 trial for the treatment of COVID-19, and is also currently in a Phase 2/3 global trial for prevention of COVID-19. Adagio Therapeutics finished up 23%.

Outdoor grilling brand Weber (WEBR) downsized and priced below the range to raise $250 million at a $4.1 billion market cap. The company offer gas grills, charcoal grills, electric grills, smokers, and wood pellet grills and boasts a 23% share of the US grill market. While it is leveraged post-IPO, the company has delivered solid growth and plans to pay a dividend. Weber finished up 29%.

Hair removal chain European Wax Center (EWCZ) priced within the range to raise $180 million at a $1.1 billion market cap. The company franchises a chain of over 800 wax-based hair removal salons across the US. European Wax Center was hard hit by pandemic restrictions, and it is highly leveraged post-IPO. European Wax Center was finished up 32%.

Orange County Bancorp (OBT) upsized and priced at the midpoint to raise $34 million at a $188 million market cap. This New York bank has 14 full-service branches and one loan production office across the Lower Hudson Valley. As of 3/31/21, the company had $1.9 billion in assets, $1.2 billion in loans, $1.7 billion in deposits, and $135 million in stockholders’ equity. Orange County Bancorp finished up 2%.

Seven blank check companies raised $1.1 billion this past week, led by healthcare-focused SPAC Healthwell Acquisition (HWELU) and Riverview Acquisition (RVACU), each of which raised $250 million.

 

US IPO Week Ahead:

US IPO Week Ahead: 2 banks test the waters amid annual summer slowdown August 6, 2021

The IPO market is getting a breather as the August lull continues to set in, with just two banks scheduled for the week ahead.

Utah-based digital bank FinWise Bancorp (FINW) plans to raise $58 million at a $183 million market cap. FinWise Bank makes loans to and takes deposits from consumers and small businesses across the US. As of 3/31/21, FinWise Bancorp had total assets of $330 million, total loans of $245 million, total deposits of $189 million, and total shareholders’ equity of $52 million.

Alabama bank Southern States Bancshares (SSBK) plans to raise $40 million at a $174 million market cap. Southern States Bank is a full service community bank, serving businesses and individuals through 15 branches across Alabama and Georgia. As of 3/31/21, Southern States had total assets of $1.5 billion, total loans of $1.1 billion, total deposits of $1.3 billion, and total shareholders’ equity of $145 million.

IPO data via Renaissance Capital

Part B : Bond Markets

Highlights – Treasuries

Why the angst in the bond market?

The After the FOMC presented new economic projections including a forecast of 6.5% for gross domestic product this year with PCE inflation going to 2.4% this year, but falling to 2% next year. Powell reiterated that the Fed sees only a temporary pickup in inflation this year because of the base effects against last year’s numbers when prices fell. The Fed will target an average range of inflation around 2%, meaning it could exceed that threshold for some time which is a change to the Fed’s ground rules. The majority of Fed officials did not see any interest rate hikes through 2023.

What concerns bond holders and impacts stocks over the past weeks is the Fed appears to be too Blaise about inflation. This view got added weight when crude oil hit the highest prices since 2019 after OPEC decided to stay pat on production for April. But since then Crude has fallen over 12% in just a week from those highs. Hence why Powell has said “We’re going to wait to see signs of actual inflation or the appearance of other risks that could threaten the achievement of our goals. And we’ve seen that the economy can sustain exceptionally low levels of unemployment without inflation.”

There is a view that Powell also refuses to be dictated to and set the bond bullies up for failure. The V reversal this month suggests that. Air needs to come out of the market, particularly Tech, this is best illustrated by the ARK Funds and Semi-Conductor SMH ET’s (see below). From here we have another massive $1.9 Trillion stimulus. Is that enough to keep asset prices elevated, hard to fight the Fed and that kind of cash floating around. Watch the argument from analysts that higher yields mean the economy is growing, stocks are value versus hyperinflation is on its way.

Raise your eyes and look at the stopped car in front of you you may want to hit the brakes.The pandemic is not close to our greatest worry, nor is energy it seems. The  runaway credit bubble in the era of delusion and entitlement has multiple unintended consequences or are they intended? The stockmarket has lost rationality  the danger is should the bubble pop the consequences of a historic debt crisis in a deeply divided nation and unprepared social and geopolitical backdrops could be earth shattering as the Fed disregards asset inflation and bubble dynamics.

  • Investment-grade bond funds saw outflows of $364 million, and junk bond funds posted negative flows of $1.155 billion (from Lipper).
  • Three-month Treasury bill rates ended the week at 0.0425%. Two-year government yields gained two bps to 0.21% (up 9bps y-t-d). Five-year T-note yields rose eight bps to 0.77% (up 41bps). Ten-year Treasury yields jumped eight bps to 1.30% (up 38bps). Long bond yields increased five bps to 1.95% (up 30bps). Benchmark Fannie Mae MBS yields surged 10 bps to 1.78% (up 44bps).

 

All good while markets hold up but take note that the loosest financial conditions in history have supported a record $1.4 trillion of 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 rose 14.6% in the 12 months through April, according to the latest available numbers, marking the fastest pace of increase on record in data from 1988.

  • Freddie Mac 30-year fixed mortgage rates fell three bps to a five-month low 2.77% (down 11bps y-o-y).
  • Fifteen-year rates were unchanged at 2.10% (down 34bps).
  • Five-year hybrid ARM rates dropped five bps to 2.40% (down 50bps).
  • Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates down five bps to 2.97% (down 15bps).

Highlights – Federal Reserve

  • Federal Reserve Credit last week declined $10.8bn to $8.189 TN. Over the past 99 weeks, Fed Credit expanded $4.462 TN, or 120%.
  • Fed Credit inflated $5.378 Trillion, or 191%, over the past 456 weeks. 
  • Fed holdings for foreign owners of Treasury, Agency Debt last week declined $6.6bn to a six-month low $3.508 TN.
  • “Custody holdings” were up $99bn, or 2.9%, y-o-y.
  • Total money market fund assets were little changed at $4.501 TN.
  • Total money funds declined $75bn y-o-y, or 1.6%.
  • Total Commercial Paper slipped $1.4bn to $1.138 TN. CP was up $119bn, or 11.7%, 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 fell five bps to 0.6% (down 7bps y-t-d).
  • Ten-year Portuguese yields declined four bps to 0.13% (up 10bps).
  • Italian 10-year yields fell five bps to 0.57% (up 2bps).
  • Spain’s 10-year yields slipped three bps to 0.24% (up 19bps).
  • German bund yields added a basis point to negative 0.46% (up 11bps).
  • French yields dipped a basis point to negative 0.12% (up 2bps).
  • The French to German 10-year bond spread narrowed two to 34 bps.
  • U.K. 10-year gilt yields rose five bps to 0.61% (up 41bps).

Highlights – Asian Bonds

  • Japanese 10-year “JGB” yields declined a basis point to 0.02% (down 1 basis point y-t-d).

 

Part C: Commodities

Highights

  • The Bloomberg Commodities Index fell 1.7% (up 21.3% y-t-d).
  • WTI crude sank $5.67 to $68.28 (up 41%).
  • Gasoline fell 3.3% (up 60%),
  • Natural Gas jumped 5.8% (up 63%).
  • Copper dropped 3.0% (up 24%).
  • Wheat gained 2.2% (up 12%).
  • Corn roses 2.1% (up 15%).
  • Bitcoin jumped $2,321 this week to $43,905 (up 51%).
  • Risk markets continue to respond to a Conronvirus outbreak and failed negotiations between Congress and the White House over an additional economic stimulus package to boost economic demand.
  • U.S. producers production still under pre Laura levels.
  • Higher crude prices prompt some U.S. producers start drilling again with rigs up for the ninth week in a row.

BDI Freight Index

  • Baltic Dry Index was up 2.4% in the first week of August, its third weekly gain. The Baltic Dry Index fell 0.2% to 3,371 on Friday, following two straight sessions of gains,
  • Capesize index, which tracks iron ore and coal cargos of 150,000-tonnes dropped 1.2% to 4,359, amid lower prices for iron ore and steel as Chinese demand remains sluggish on steel production controls.
  • Panamax index which tracks cargoes of about 60,000 to 70,000 tonnes of coal and grains, rose 1% to 3,449, the highest since July 27th.
  • Among smaller vessels, the supramax index rose 13 points to 2,996.
  • Source: Baltic Exchange

 BDI W 8 6 2021

Copper

Copper has been a leader in the risk on movement for commodities. The weekly channel since the low has captured the move and has rebalanced the Chikou after the power spits of +8/8 and +Copper W 8 6 20212/8. Support at the Tenkan and Kijun – beware of possible H&S Break retest would be +4/8

 Corn

 Corn W 8 6 2021

 Lumber

 Lumber W 8 6 2021

US Crude Oil (WTI)

4 Hour:: After WTI Oil failed right at 7/8,  the breakdown on July 14 retested, accelerating  down after the Tenkan crossed the Kijun  impulsively thru the cloud to close near weeks lows under Tenkan, Kijun and 50ma. Support -2/8 MM and recent lows.

WTI 240 8 6 2021
 

Daily: WTI rebound in 3 waves sharply reversed and closed at the daily cloud base, the question is this a 1-2 or the C of the correction off the $76 highs? Recall that WTI sharply corrected in 3 waves the May breakup at -1/8 and the daily cloud (where broke the double top successfully to close above +2/8 multiple resistance). We since collapsed back thru tenkan and kijun as the market rebalanced at the Chikou.

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. Resistance is the 50dma, kijun, tenkan & prev high confluence. ;

WTI D 8 6 2021
 

Weekly: WTI Fell back through the weekly Tenkan as it corrects off previous highs in clinical ABC negating the at a rebalanced Chikou indicative of crowd behavior around $70 strike and 50% fib at 70.29 over 7/8. Recall first test we didn’t quite test Kijun and closed right above it at week’s end. Reflect on series of fractals at last Dec wave 1 turn after we had completed 5 waves as marked, from here we watched 3 & 5 waves develop. Support below at Kijun and 50 wma It must retain this energy to take out new highs.

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 

 WTI W 8 6 2021

 

Oil 2020 2021

Oil 2014 2021

Oil 2020 2021

US Natural Gas (Henry Hub)

Daily: US Natural Gas August Nymex contract rallied impulsively as expected, completing 5 waves spitting the 50% before correcting impulsively down.  NG has been working around $4.00, given last week was the first time since 2018 settling at $4.060/MMBtu that is healthy.  The move after completing the ( C of 4 bullish scenario has played out the consolidation phase since it completed its IV ( Bull Case) last year since then a series of 3 waves. Price is testing the Tenkan and Kijun with the 50dma support.  It accelerated through previous highs (flat topped triangle energy) and over the resistance at 8/8 and new highs, we are testing that break in a pennant ABC. 

 NG D 8 6 2021

Weekly: Natty continues to move in a series of 3’s spitting the key 50% longer term  as Chikou rebalances. Recall the impulse wave powered from the spit of  the 50 wma to get over weekly Kijun and Tenkan and bounced off the 50wma. Breaking recent highs on its 3rd attempt.   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.

NG W 8 6 2021 

  Key Energy Reports

 

Precious Metals

Highlights

  • Spot Gold dropped 2.8% to $1,763 (down 7.1%).
  • Silver slumped 4.6% to $24.33 (down 7.8%).

Gold

Gold vulnerability remains, hanging on at base of weekly cloud after another rejection of the tenkan, Kihun and 50wma after wave (ii) alt gains favor. Still listless after manic rise to +5/8 weekly rebalance of Chikou in 5 waves. To be bullish we would need to get and stay above the cloud. Murrey Math resistance, watch Fibs & Chikou.

 Gold W 8 6 2021

 Gold 2 26 21 Fail

Silver

Silver is back at the cloud spitting 50wma providing support after reversed with a double top. The weekly Tenkan crossing the Kijun signaled downside and is now resistance. Major support is the 50wma

 Silver W 8 6 2021

 

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 gained 0.7% to 92.80 (up 3.2% y-t-d)
  • Majors for the week on the upside, the Australian dollar 0.2%. On the downside, the Swiss franc declined 1.0%, the euro 0.9%, the Canadian dollar 0.6%, the Japanese yen 0.5%, the British pound 0.2% .
  • Minors for the week on the upside the he South Korean won increased 0.7%, the New Zealand dollar 0.5%) On the downside, the Mexican peso 0.9%, the Swedish krona 0.9%, the Norwegian krone 0.8%, the Brazilian real 0.4%, and the South African rand 0.2%. The Chinese renminbi declined 0.33% versus the dollar (up 0.68% y-t-d).

Australian Dollar – AUDUSD

The Aussie dollar has corrected in 3 waves since completing a 5 at the pysch 80 level and it back break retest of wave 1 and the weekly cloud as one would expect after it completed 5 waves in emotive fashion. The Australian dollar fell to its lowest value since December under 73 US cents. Resistance the Tenkan and Kijun like many commodities. The AUDUSD old three year high of 0.7820 from January 6 is a key option energy point playing out.

AUD W 8 6 2021

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.

NZD W 8 6 2021

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.

CAD W 8 6 2021

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.

EUR W 8 6 2021
 

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.

GBP W 8 6 2021
 

EuroPound – EURGBP

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

 EURGBP W 8 6 2021

Japanese Yen – USDJPY

USDJPY continues to test wave i after the recent weakness with Treasury yields. 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

JPY W 8 6 2021

 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.

MXN W 8 6 2021

Turkish Lire USDTRY

The Turkish Lire after falling in 5 waves closed under the Tenkan with the weekly cloud Kijun and 50wma below. The cloud and gap below offer targets with resistance tankan and USDTRY highs.

 TRY W 8 6 2021

Bitcoin

Bitcoin has corrected impulsively since 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 saw extreme volatility to the top of the cloud which is now key as to what the recent bottom marked. Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking . (Recall what happened after the CME and CBOE futures starts)

We have seen what you would expect from a 5 wave impulse peak, a violent correction or completion. Use Murrey Math levels for corrections and targets as algos control the herd here, support is the cloud and sharp ABC, 1-2 moves.

 BTC W 8 6 2021

 

 

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 

Geopolitical Tinderbox Radar

Trade Imbalances IMF

Italy CDS
Turkey Geopolitical

Economic and Geopolitical Watch

Job Losses

United States Unemployment Rate

Over 14.5 million are collecting traditional jobless benefits, up from 1.7 million a year ago, with no end in sight. on Thursday, the Labor Department reported under 800,000 Americans applied for unemployment benefits for the second time since the crisis.  With the Covid shutdown we lost over 22 million jobs in March and April. Still a huge shortfall in jobs, and the big question is will they come back?

US Politics

July 28 – CNBC (Jacob Pramuk): “The Senate voted Wednesday to advance a bipartisan infrastructure plan, a critical step toward Democrats passing their sweeping economic agenda. Senators voted 67-32 to push the bill forward; 17 Republicans and all 50 Democrats voted yes. The vote opens the process to debate and amend the proposal, which would put $550 billion into transportation, broadband and utilities. While senators who backed the procedural motion could oppose a final package, Wednesday’s vote bodes well for its chances of passage.”

July 24 – New York Times (Jim Tankersley and Cecilia Kang): “President Biden has assembled the most aggressive antitrust team in decades, stacking his administration with three legal crusaders as it prepares to take on corporate consolidation and market power with efforts that could include blocking mergers and breaking up big companies. Mr. Biden’s decision this past week to name Jonathan Kanter to lead the Justice Department’s antitrust division is the latest sign of his willingness to clash with corporate America to promote more competition in the tech industry and across the economy. Mr. Kanter has spent years as a lawyer fighting behemoths like Facebook and Google on behalf of rival companies.”

The virus and psychological affect on domestic and trade relationships have impacted growth strategies with unexpected consequences   In a  fully fledged stock mania, nothing matters until it does. That is the feral nature of greed.

Drought Watch

July 24 – Bloomberg: “Extreme weather is slamming crops across the globe, bringing with it the threat of further food inflation at a time costs are already hovering near the highest in a decade and hunger is on the rise. Brazil’s worst frost in two decades brought a deadly blow to young coffee trees in the world’s biggest grower. Flooding in China’s key pork region inundated farms and raised the threat of animal disease. Scorching heat and drought crushed crops on both sides of the U.S.-Canada border. And in Europe, torrential rains sparked the risk of fungal diseases for grains and stalled tractors in soaked fields.”

June 4 – CNBC (Emma Newburger): “Nearly three-fourths of the U.S. West is grappling with the most severe drought in the recorded history of the U.S. Drought Monitor, as hot and arid conditions are set to exacerbate the threat of wildfires and water supply shortages this summer. Parts of California, Nevada and Washington experienced sweltering triple-digit temperatures over the past week amid the drought… Conditions this spring are much worse than a year ago. In fact, nearly half of the continental U.S. is in a moderate to exceptional drought, marking the most significant spring drought in the country since 2013, according to… the National Oceanic and Atmospheric Administration.”

June 10 – Reuters (Andrea Januta and Daniel Trotta): “The reservoir created by Hoover Dam… has sunk to its lowest level ever, underscoring the gravity of the extreme drought across the U.S. West. Lake Mead, formed in the 1930s from the damming of the Colorado River at the Nevada-Arizona border about 30 miles (50 km) east of Las Vegas, is the largest reservoir in the United States. It is crucial to the water supply of 25 million people including in the cities of Los Angeles, San Diego, Phoenix, Tucson and Las Vegas. As of 11 p.m. PDT Wednesday, the lake surface fell to 1,071.56 feet above sea level, dipping below the previous record low set on July 1, 2016.”

June 18 – Wall Street Journal (Katherine Blunt and Jim Carlton): “States across the West are at risk of electricity shortages this summer as a crippling drought reduces the amount of water available to generate hydroelectric power. Some of the region’s largest reservoirs are at historically low levels after a dry winter and spring reduced the amount of snowpack and precipitation feeding rivers and streams. The conditions are especially dire in drought-stricken California, where officials say the reservoir system has seen an unprecedented loss of runoff this spring—800,000 acre-feet, or enough to supply more than a million households for a year.”

June 16 – CNBC (Emma Newburger): “An extreme heat wave gripping the western United States will intensify and spread this week, creating dangerous conditions amid the worst drought in the last two decades and raising concerns about severe wildfires and electrical grid failures. More than 40 million people in the country are forecast to experience triple-digit temperatures this week, and roughly 200 million people are projected to see temperatures over 90 degrees Fahrenheit. More than three-fourths of the West is in severe drought… Temperatures in some areas could surpass 120 degrees, and excessive-heat warnings are in place for several states. Nevada and Arizona are forecast to see record temperatures of 125 and 128 degrees, respectively.”

Global Watch

Hot Spots

  • July 29 – Wall Street Journal (Keith Zhai and Quentin Webb): “China moved to ease investor concerns about crackdowns on listed companies, with a top regulator privately telling global financial firms that Beijing will consider the market impact before introducing future policies… Fang Xinghai, vice chairman of the China Securities Regulatory Commission, spoke to representatives of global banks including Goldman Sachs… and UBS Group AG, as well as some investment firms on Wednesday evening… Yi Huiman, the securities regulator’s chairman, was also present at the closed-door meeting in Beijing, they added. After the meeting, and following a series of upbeat articles in state media, Chinese technology stocks listed in New York and Hong Kong jumped, helping pull broader markets higher and clawing back some of their recent steep declines.” July 28 – Bloomberg: “China’s central bank broke out of its usual pattern of daily liquidity operations, as it boosted a cash injection into the financial system, soothing market nerves frayed by regulatory crackdowns. The People’s Bank of China added 30 billion yuan ($4.6 billion) of liquidity into the financial system with seven-day reverse repurchase agreements…”
  • June 7 – Reuters: “A report on the origins of COVID-19 by a U.S. government national laboratory concluded that the hypothesis of a virus leak from a Chinese lab in Wuhan is plausible and deserves further investigation, the Wall Street Journal said…, citing people familiar… The study was prepared in May 2020 by the Lawrence Livermore National Laboratory in California and was referred to by the State Department when it conducted an inquiry into the pandemic’s origins during the final months of the Trump administration…”
  • July 27 – Reuters (Nandita Bose): “President Joe Biden… warned that if the United States ended up in a ‘real shooting war’ with a ‘major power’ it could be the result of a significant cyber attack on the country, highlighting what Washington sees as growing threats posed by Russia and China. Cybersecurity has risen to the top of the agenda for the Biden administration after a series of high-profile attacks on entities such as network management company SolarWinds, the Colonial Pipeline company, meat processing company JBS and software firm Kaseya hurt the U.S. far beyond just the companies hacked. Some of the attacks affected fuel and food supplies in parts of the United States. ‘I think it’s more than likely we’re going to end up, if we end up in a war – a real shooting war with a major power – it’s going to be as a consequence of a cyber breach of great consequence and it’s increasing exponentially, the capabilities,’ Biden said…” July 29 – Reuters (Polina Ivanova): “Russia and China will conduct joint military exercises involving 10,000 troops in mid-August, the Interfax news agency cited the Russian defence ministry as saying… Moscow has sought to boost relations with China since 2014, when its political ties with the West sank to post Cold-War lows over the annexation of Crimea from Ukraine.”
  • ”Geopolitical tensions with China and India are on the rise as China increases military hardware near the China and India’s Himalaya border, a potential negative shock not priced by markets.
  • June 9 – Bloomberg (Maria Eloisa Capurro and Max de Haldevang): “Latin America’s top central banks are coming under growing pressure to raise interest rates, as inflation stands way above the target ceiling in Brazil and Mexico. Consumer prices in both countries came in above forecasts in May, showing persistent inflationary shocks… The data came ahead of interest rate decisions in both countries. Brazil’s central bank is expected to lift interest rates by 75 bps next week, its third consecutive hike of that magnitude this year. Mexico’s central bank… will revisit later this month its decision to hold the benchmark rate at a near five-year low of 4%. Consumer prices in Brazil jumped 8.06% in May from a year earlier… In Mexico, annual inflation slowed slightly to 5.89%, still way above the 3% goal.”
  • June 7 – Reuters (Andrey Ostroukh): “Russia’s annual consumer inflation accelerated to 6.0% in May, overshooting expectations and adding arguments for tighter monetary policy days before the central bank’s rate-setting meeting… Inflation, the central bank’s main area of responsibility, accelerated to its highest since October 2016 when the central bank’s key interest rate was at 10%.”
  • June 17 – Reuters (Trevor Hunnicutt and Simon Lewis): “President Joe Biden on his first foreign foray sought to cast Russia not as a direct competitor to the United States but as a bit player in a world where Washington is increasingly pre-occupied by China. Aides said Biden wanted to send a message that Putin was isolating himself on the international stage with his actions, ranging from election interference and cyber-attacks against Western nations to his treatment of domestic critics. But Biden could struggle in a parallel attempt to stop the rot in U.S.-Russia relations and deter the threat of nuclear conflict while also talking down Russia, some observers said. ‘The administration wants to de-escalate tensions. It’s not clear to me that Putin does,’ said Tim Morrison, a national security adviser during the Trump administration. ‘The only cards he has to play are those of the disruptor.’”
  • June 8 – Bloomberg (Jason Scott): “As worsening geopolitical tensions with China spill into trade reprisals, Australian Prime Minister Scott Morrison is heading to the U.K. to meet global leaders this week with a message: There’s strength in numbers. ‘Patterns of cooperation within the liberal rules-based order that has benefited us for so long are under renewed strain,’ Morrison said… In order to support a ‘world order that favours freedom over autocracy and authoritarianism,’ he urged ‘active cooperation among like-minded countries and liberal democracies not seen for 30 years.’
  • Since Australia-China relations went into a tailspin after Morrison’s government last year called for Beijing to allow independent investigators to probe the origins of the pandemic, he’s become a vocal proponent of bolstering partnerships between what he calls ‘like-minded democracies.’”
  • ‘Polarization among Chinese developers will deepen this year, and more developers are likely to suffer from debt failures,’ said John Sun, co-managing partner at Aplus Partners Management Co… Weaker developers ‘will need to sell assets to fight for survival, while some will likely default on their debt.’”
  • May 20 – Reuters: “German producer prices rose by 5.2% year-on-year in April, the biggest increase in nearly a decade…, in a further sign that supply bottlenecks are leading to increased inflation pressure in Europe’s largest economy. The rise in producer prices followed a 3.7% year-on-year increase in March and compared with a Reuters poll forecast of 5.1%. Compared to the previous month, producer prices were up 0.8% in April…”
  • May 20 – Associated Press (Vladimir Isachenkov): “Russian President Vladimir Putin alleged… some of the country’s foreign foes dream about biting off pieces of the country’s vast territory, warning that Moscow would ‘knock their teeth out’ if they ever try. In strong remarks during a conference call with officials, the Russian president noted that foreign efforts to contain Russia date from centuries ago. ‘In all times, the same thing happened: once Russia grew stronger, they found pretexts to hamper its development,’ Putin said… ‘Everyone wants to bite us or bite something off us, but those who would like to do so should know that we would knock their teeth out so that they couldn’t bite,’ the Russian leader said. ‘The development of our military is the guarantee of that.’”c
  • For emerging markets the lower US dollar ihad been helping the Fragile 5. Argentina and Turkey are still red letter risks with Covid however.
  • June 16 – Wall Street Journal (Caitlin Ostroff): “Early tightening of the Federal Reserve’s policy could ripple across emerging markets that are dependent on the U.S. dollar. Prime among them is Turkey. The Turkish lira has come under pressure in recent weeks as investors try to assess whether the country’s central bank will heed the demands of its president to cut interest rates. But a rate cut could drag the lira down further at the same time that the country’s high inflation rate is already diminishing the currency’s buying power. Turkey’s economy is among the most vulnerable to signs the Fed is going to raise rates since a stronger dollar makes it harder for Turkey to pay its foreign-currency debts.”

 

Trade Wars

  • Trade wars persist between Australia and China. The largest exporter of commodities and the worlds largest importer of commodities. China is experiencing record cold weather and it’s beligerance is hurting shooting itself in the foot. Regional partners such as Japan and India have supported Australia’s standing up to Chinese bullying.
  • In addition to rising tensions with China, the United States Trade Representative said last month said that the USTR is considering a new round of tariffs on $3.1 billion in European exports from France, Germany, Spain and the U.K..We are awaiting Biden’s offical resposne.
  • Chairman Chi and President Biden had a phone hook last month week with the US saying they will review all policies but tariffs to stand in the meantime. China continued it’s theats on the matter. 

 

Fat Tail Virus Risk

  • July 28 – Wall Street Journal (Sumathi Reddy): “The Delta variant of the virus that causes Covid-19 is often described as highly transmissible. So, what does that actually mean? Scientists studying Covid-19 say that Delta’s increased contagiousness means we need to update our thinking about exposure risks. Because people infected with Delta carry higher levels of virus than with earlier strains, the old rules of thumb no longer apply, they say—including the conventional wisdom that it takes 15 minutes of close contact with someone to get infected. Delta has already changed public-health advice about masking. The Centers for Disease Control and Prevention on Tuesday recommended that vaccinated people resume masking indoors in certain parts of the country. And local officials have begun to reinstate mask mandates, including in Los Angeles County and St. Louis County.”
  • July 28 – Bloomberg (Anna Edney): “The beginning of the school year is imminent, and superintendents around the country aren’t sweating bus schedules and bell times but Covid-19 vaccination rates and mask rules as the pandemic threatens to disrupt K-12 education for the third year running. School leaders face complex pressures with millions of students preparing to return. The spreading delta strain of the coronavirus is highly contagious, though it still appears that children typically fare better with the virus than their elders do. But they may bring deadly infections home.”
  • June 17 – CNBC (Holly Ellyatt): “The Covid-19 delta variant originally discovered in India is now spreading around the world, becoming the dominant strain in some countries, such as the U.K., and likely to become so in others, like the U.S… The World Health Organization said the variant had been detected in more than 80 countries and it continues to mutate as it spreads. The variant now makes up 10% of all new cases in the United States, up from 6% last week. Studies have shown the variant is even more transmissible than other variants. Scientists have warned that the data suggests the delta variant is around 60% more transmissible than the “alpha” variant… and is more likely to lead to hospitalizations…”
  • Fauci believes 70%-85% of the population must be vaccinated to reach herd immunity.

 

Banks

The major money cents banks released earnings with many record results for Q1. Mainly from trading and fees from IPO’s and SPAC’s. Rising interest rates also help the bottom line.

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

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

Banks are 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 to a record $60.113 trillion.

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

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

Akio Morita mistakes

The Week Ahead – Have a Trading Plan

Inflation the big watch this week, US, China and India will be publishing inflation updates for July in the coming week. Focus is on the US CPI and PPI. Those will be closely watched with jobless claims. Economists polled by Dow Jones expect another hot reading for the consumer price index, with core inflation rising 0.4% or 4.3% year over year. The CPI is released Wednesday. Headline inflation was at 5.4% in June, and core, excluding food and energy, was at 4.5%. Then you get PPI Thursday and import prices Friday. Import prices have been running hot and import prices are expected to be up 10.5% year-over-year. That follows over 11% the month before. Also out Q2 GDP releases from the UK, Malaysia, and the Philippines and factory production numbers from the Eurozone and India. We also have US consumer confidence, Germany trade balance, Japan current account and Australia business morale. Central banks in Mexico, Turkey and the Philippines will be deciding on interest rates. There are a few Federal Reserve officials speaking in the week ahead as one would expect with inflation and job numbers out. The expectation is that the Fed will announce in September or later in the fall that it will taper back its $120 billion a month bond program, starting at the end of the year or early next year. The tapering is expected to be gradual and continue for 10 months or more. The Fed’s own forecasts show its first rate hikes happening in 2023. More information could come from the Fed when officials gather for their annual symposium in Jackson Hole, Wyoming at the end of the month. But action is not expected to be taken until the September meeting or later. We start off with two voters Monday who are speaking and that’s important as both lean toward tapering, Atlanta Fed President Raphael Bostic and Richmond Fed President Thomas Barkin. We have Fed Governor] Lael Brainard and Chicago Fed President Charles Evans on one side and Fed Governor Christopher Waller and some of these Fed presidents on the other.

Central Banker and Geopolitics Watch speeches, reports and rate moves

Monday: August 9 2021

  • 10:10 Atlanta Fed President Raphael Bostic
  • 12:00 Richmond Fed President Thomas Barkin

Tuesday August 10 2021

  • 14:30 Chicago Fed President Charles Evans

Wednesday August 11 2021

  • None seen

Thursday August 12 2021

  • None seen

Friday August 5 2021

  • None seen

Improvements in some economic indicators, such as home sales, manufacturing activity and  in employment data have bolstered investor confidence and helped extend the rally in stocks. Support in markets comes from the Fed’s balance sheet which has ballooned to $7.2 trillion, and the central bank committed to monthly purchases of $80 billion in Treasury securities and $40 billion in mortgage securities.

Economic Events in the Week Ahead:

Sunday, August 8, 2021

  • 21:30 CNY CPI (MoM) (Jul)
  • 21:30 CNY CPI (YoY) (Jul)
  • 21:30 CNY PPI (YoY) (Jul)

Monday, August 9, 2021

  • All Day Holiday Singapore – National Day
  • All Day Holiday Japan – Mountain Day
  • All Day Holiday South Africa – Women’s Day
  • 01:45 CHF Unemployment Rate (Jul)
  • 02:00 EUR Gemran Current Account Balance (Jun)
  • 02:00 EUR German Trade Balance (Jun) 0
  • 4:30 EUR Sentix Investor Confidence (Aug)
  • 10:00 USD CB Employment Trends Index (Jul)
  • 10:00 USD JOLTs Job Openings (Jun)
  • 10:10 Atlanta Fed President Raphael Bostic
  • 11:30 USD 3-Month Bill Auction 11:30 USD 6-Month Bill Auction
  • 12:00 Richmond Fed President Thomas Barkin
  • 18:45 NZD Electronic Card Retail Sales (YoY) (Jul)
  • 18:45 NZD Electronic Card Retail Sales (MoM) (Jul)
  • 19:01 GBP BRC Retail Sales Monitor (YoY) (Jul)
  • 19:50 JPY Bank Lending (YoY) (Jul)
  • 19:50 JPY Current Account n.s.a. (Jun)
  • 20:00 AUD HIA New Home Sales (MoM)
  • 21:30 AUD Building Approvals (MoM)
  • 21:30 AUD NAB Business Confidence (Jul)
  • 21:30 AUD NAB Business Survey (Jul)

Tuesday, August 10, 2021

  • 01:00 JPY Economy Watchers Current Index (Jul)
  • 05:00 EUR German ZEW Current Conditions (Aug)
  • 05:00 EUR German ZEW Economic Sentiment (Aug)
  • 05:00 SGD Foreign Reserves USD (MoM) (Jul)
  • 05:00 EUR ZEW Economic Sentiment (Aug)
  • 06:00 USD NFIB Small Business Optimism (Jul)
  • 08:30 USD Nonfarm Productivity (QoQ) (Q2)
  • 08:30 USD Unit Labor Costs (QoQ) (Q2)
  • 08:55 USD Redbook (YoY)
  • 11:30 USD 52-Week Bill Auction
  • 13:00 USD 3-Year Note Auction
  • Tentative USD MBA Delinquency Rates (QoQ)
  • 16:30 USD API Weekly Crude Oil Stock
  • 19:00 KRW Unemployment Rate (Jul)
  • 20:00 SGD GDP (QoQ) (Q2)
  • 20:30 AUD Westpac Consumer Sentiment (Aug)

Wednesday August 11, 2021

  • 02:00 EUR German CPI (MoM) (Jul)
  • 02:00 EUR German HICP (MoM) (Jul)
  • 02:00 JPY Machine Tool Orders (YoY)
  • 04:00 EUR Italian CPI (MoM) (Jul)
  • 04:00 EUR Italian HICP (MoM) (Jul)
  • 07:00 USD MBA 30-Year Mortgage Rate
  • 07:00 USD MBA Mortgage Applications (WoW)
  • 07:00 USD MBA Purchase Index
  • 07:00 USD Mortgage Market Index
  • 07:00 USD Mortgage Refinance Index
  • 08:30 USD Core CPI (MoM) (Jul)
  • 08:30 USD CPI (MoM) (Jul)
  • 08:30 USD Real Earnings (MoM) (Jul)
  • 10:30 USD Crude Oil Inventories
  • 11:00 USD Cleveland CPI (MoM) (Jul)
  • 13:00 USD 10-Year Note Auction
  • 14:00 USD Federal Budget Balance (Jul)
  • 18:45 NZD FPI (MoM) (Jul)
  • 19:01 GBP RICS House Price Balance (Jul)
  • 19:50 JPY Core Machinery Orders (MoM) (Jun)
  • 19:50 JPY PPI (MoM) (Jul)
  • 21:00 AUD MI Inflation Expectations
  • 21:30 AUD Wage Price Index (QoQ) (Q2)
  • 23:00 NZD Inflation Expectations (QoQ)

Thursday, August 12, 2021

  • 00:30 JPY Industrial Production (MoM) (Jun)
  • 02:00 GBP Business Investment (QoQ) (Q2)
  • 02:00 GBP Construction Output (MoM) (Jun)
  • 02:00 GBP GDP (QoQ) (Q2)
  • 02:00 GBP Index of Services
  • 02:00 GBP Industrial Production (MoM) (Jun)
  • 02:00 GBP Trade Balance (Jun)
  • 04:00 USD IEA Monthly Report
  • 04:00 EUR Italian Trade Balance (Jun)
  • 05:00 EUR Industrial Production (MoM) (Jun)
  • 05:30 ZAR Gold Production (YoY) (Jun)
  • 05:30 ZAR Mining Production (Jun)
  • 07:00 USD OPEC Monthly Report
  • 08:30 USD Continuing Jobless Claims
  • 08:30 USD PPI (MoM) (Jul)
  • 08:30 USD Core PPI (MoM) (Jul)
  • 08:30 USD Initial Jobless Claims
  • 08:30 USD Jobless Claims 4-Week Avg.
  • 09:00 GBP NIESR Monthly GDP Tracker
  • 10:30 USD Natural Gas Storage
  • 11:30 USD 4-Week Bill Auction
  • 11:30 USD 8-Week Bill Auction
  • 12:00 USD WASDE Report
  • 13:00 USD 30-Year Bond Auction
  • 17:00 KRW Export Price Index (YoY) (Jul)
  • 17:00 KRW Import Price Index (YoY) (Jul)
  • 18:30 NZD Business NZ PMI (Jul)
  • 19:50 JPY Foreign Bonds Buying
  • 19:50 JPY Foreign Investments in Japanese Stocks
  • 21:30 AUD Employment Change (Jul)
  • 21:30 AUD Full Employment Change (Jul)
  • 21:30 AUD Participation Rate (Jul)
  • 21:30 AUD Unemployment Rate (Jul)

Friday, August 13, 2021

  • 01:30 EUR French Unemployment Rate
  • 02:00 EUR German WPI (MoM) (Jul)
  • 02:30 CHF PPI (MoM) (Jul)
  • 02:45 EUR French CPI (MoM) (Jul)
  • 02:45 EUR French HICP (MoM) (Jul)
  • 03:00 EUR Spanish CPI (MoM) (Jul)
  • 03:00 EUR Spanish HICP (MoM) (Jul)
  • Tentative CNY FDI
  • 04:30 HKD GDP (QoQ) (Q2)
  • 05:00 EUR Trade Balance (Jun)
  • 08:30 USD Export Price Index (MoM) (Jul)
  • 08:30 USD Import Price Index (MoM) (Jul)
  • 10:00 USD Michigan 5-Year Inflation Expectations (Aug)
  • 10:00 USD Michigan Consumer Sentiment (Aug)
  • 10:00 USD Michigan Inflation Expectations (Aug)
  • 13:00 USD U.S. Baker Hughes Oil Rig Count
  • 15:30 USD CFTC speculative net positions

 

 

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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