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Bank of England Raises Rates, ECB Abstains, Waiting for NFPThe news attention of the markets yesterday was riveted not to the US, but to Europe. The Bank of England and the ECB announced their decisions on the parameters of monetary policy. As expected, the Bank of England raised the rate by 0.25%, bringing it to 0.5%. Recall that at the previous meeting the rate was also increased, but by 0.15%. That is, we have two rate increases in a row - for the first time since 2004 (!). The underlying motivation for these actions is obvious – inflation. The Bank of England raised its own inflation forecast to 7.25% from 6%, which was predicted in December. The ECB decided not to touch the rate. However, it is also predictable. The current concept of the ECB: the economy is primary and the main thing is not to harm it. Accordingly, raising the rate is not their option. Considering such scenarios, let's once again pay attention to the sales of the EURGBP pair against the backdrop of an increase in the interest rate differential in favor of the pound. Mark Zuckerberg lost $29 billion yesterday after shares of Meta Platforms Inc posted a record one-day drop of 26%. Whereas Jeff Bezos added $20 billion to his net worth following Amazon's great quarterly results and the company's stock up 15% in post-closing trading. The main event of today is the publication of statistics on the US labor market. Considering how bad ADP's numbers have been, there's plenty of room for intrigue. And if so, then you can try news trading, since a surge in volatility seems inevitable, or at least very likely. The optimal choice of instrument for trading is a pair of USDCAD - simply because at the same time with the figures from the US, data on the Canadian labor market will be published, which is of increased importance for the Canadian dollar. Recall the sequence of actions. A minute before the release of the data, we place pending orders of the stop type for buying and selling in 20 points from the price that is in the pair at that time. And then we wait. If there is weak data from the US and strong data from Canada, a sell stop is picked up, and if it is weak from Canada and strong from the US, then buy stop. Well, then it remains to be patient at least for a couple of hours, after which we fix the profit.
Short
by Trade24Fx
Why the Stock Market Grew on the Failed Data from ADPThe most interesting and noteworthy in yesterday's news background is, perhaps, the data on US employment from ADP. Yes, the markets are much more interested in official figures in the form of NFP, and the correlation between NFP and ADP is about 25%, but still this is an indicator that directly characterizes the US labor market. So yesterday, according to ADP, the US economy lost 301K jobs in January. Once again, it did not show a smaller increase than the markets expected (and the markets were counting on 200K+ after the growth of 776K in December), namely that it lost over 300K jobs. This is a failure. The last time this happened, except for January 2021, just at the start of the first lockdowns. Tellingly, the basic reason for the failure is the same – the outbreak of a pandemic. This time, omicron, even without full-fledged lockdowns, dealt a rather tangible blow to the labor market. In general, supporters of the idea of ​​further rapid economic recovery have another headache. A natural question arises: if the data is so bad, then why did the US stock market grow (SP500 and Dow closed the day in positive territory). Indeed, in theory, what is bad for the country's economy is bad for its stock market. The answer to this question lies in the plane of monetary policy and the dual mandate of the Fed. Yes, the US Central Bank is on the warpath against inflation, but it must also take into account the state of the labor market when making decisions. And such data here give hope for a lower level of aggressiveness in the actions of the Fed in terms of tightening monetary policy. And this is definitely positive for the US stock market. OPEC+ yesterday agreed to increase oil production by 400,000 bpd. Recall that we keep medium-term sales of the asset, even despite its recent growth. The reason was recalled in the OPEC + report: the total surplus in 2022 in the oil market will reach 1.3 million barrels per day. And an excess of an asset is a reason for lowering its prices. Today is interesting primarily for the announcement of the results of the meeting of the Bank of England, as well as the ECB. And if everything is more or less clear with the second one - they will adhere to the line of ultra-soft monetary policy, then the Bank of England is expected to raise the rate again. In this light, the pound looks quite advantageous on the currency market, primarily against the euro. So the sales of the EURGBP pair look promising.
FOREXCOM:NAS100Short
by Trade24Fx
Fed's Trying to Calm Markets, & Sector's Pleased with ReportingWe already wrote that there is a competition among analysts and experts who will predict more rate hikes from the Fed in 2022. Some consensus is in the region of 3-4 increases. Although there are extreme cases like 7 promotions. In general, the markets thoroughly wound themselves up. The Fed, seeing this, decided to reassure the public a little. This week, several central bank officials said at once that the Fed will not make any sudden moves, monetary tightening will be gradual and any new move will depend on economic data. As a result, we see a return of demand for risky assets, accompanied by a decrease in Treasuries yields and dollar weakness. In general, the game continues. The markets were looking for an excuse to breathe, the Fed gave them this reason. In our opinion, this is the only way to perceive what is happening. An additional reason for joy was the reporting of technology giants. Alphabet and AMD released quarterly results that were better than expected. Alphabet, after 32% revenue growth and 65% share price growth over the past year, even announced a 20-to-1 stock split that will go into effect in July. Last but not least, according to the Department of Labor, there were almost 11 million job openings in December, more than 4.6 million more than the overall unemployment rate. That is, demand in the US labor market significantly exceeds supply.
FOREXCOM:NAS100Short
by Trade24Fx
Worst Month's Over, but There Are No More Reasons for OptimismJanuary ended for the US stock market on a positive note, which, however, does not negate the fact that the month was one of the worst in history. To recap: S&P 500 down 5% (worst since March 2020), Dow down over 3% (worst since October 2020), Nasdaq Composite down 9% in January (or 12% from highs) November), making January the worst month for the index since October 2008. Recall that the main reasons for the sales were the expectations of a tightening of the Fed's monetary policy (by the way, Goldman Sachs Group Inc. laid out their forecast for the number of Fed rate hikes in 2022 - 5 pieces), inflation, as well as problems with global logistics. That's not counting the omicron, the scaling back of fiscal stimulus, geopolitical risks, and so on. Eurozone reported on GDP growth in the fourth quarter. 0.3% growth is not an inspiring figure. Especially when you consider that the main economy of the Eurozone - Germany - is at risk of sliding into recession in the first quarter of 2022 (the fourth quarter of 2021, the German economy closed with a decrease of 0.7%). And in the US economy, everything is not cloudless, despite the excellent data on GDP for the fourth quarter. Goldman Sachs (NYSE:GS) cut its 2022 GDP forecast to 3.2% from a consensus forecast of 3.8%. The reasons for such pessimism are the same: fiscal support is weakening, and Omicron is pressing. Therefore, it is more than premature to say that the worst is over and start buying everything in a row. And finally, a few words about oil (one of the key drivers of inflation, by the way), whose prices are in no particular hurry to decline. This week, OPEC+ (another meeting at the start of the month) may support sellers by increasing oil production by 400K b/d once again. But the main problem is that it seems that with each new increase, market doubts about the ability of OPEC + to actually increase production are growing. OPEC+ is currently producing 600K b/d less than it should be according to plans.
DJ:DJIShort
by Trade24Fx
Week in a Glance: Aggressive Fed, US GDP, Reporting seasonEven despite Friday, the past week can hardly be called successful for risky assets. Rather, she just managed at the last moment not to become a failure. The S&P 500, meanwhile, is gearing up for its worst January ever. Formally, the main reason for buyers' pain was and remains the US Central Bank, which was very aggressive last week, announcing the end of the quantitative easing program in early March, followed by a rate hike, which in turn will be followed by a reduction in the Fed's balance sheet. In general, inflation is the No. 1 goal and priority for the Central Bank, and it is ready to use all available tools. And the Fed can be understood. Inflation at the highest level in 40+ years. But at the same time, GDP is growing at a pace not seen since 1984, which gives the Central Bank room to maneuver. In this regard, the current week will be quite interesting, at the end of which data on the US labor market will traditionally be published. If the NFP does not fail, then the Fed will get a complete card blanche to tighten monetary policy. The reporting season, which could have saved the situation on the US stock market, is still causing rather mixed feelings. It seems that there is Microsoft and Apple with their excellent reporting. What are at least $ 123.9 billion in quarterly income of an apple company. On the other hand, the heroes of last year Tesla, Robinhood and others like them no longer inspire. And if Robinhood was consistently a failure in both reporting and forecasts, then Tesla posted more than decent financial results. But it confirmed the main fears of the markets associated with any car company - a shortage of chips in 2022 could hit Tesla hard. Well, the reporting of a number of companies, such as McDonald's, reminds everyone of another problem - the growth of producers' costs, which must be taken on and sacrifice profits or try to pass it on to consumers and risk losing market share. Such a lose-lose situation. Alphabet, Amazon, Meta Platforms, Merck, Exxon Mobil, as well as Ford and General Motors, to name a few, will give food for thought this week in the form of reporting.
TVC:DXY
by Trade24Fx
Surprise from US GDP, Apple Reporting and Robinhood ProblemsThe main event of yesterday, which breathed a little optimism into the financial markets, was the publication of US GDP data for the fourth quarter of 2021. With an average growth forecast of 5.5%, in fact, 6.9% came out. The figure itself is great, and if you remember all the difficulties, from omicron to problems with logistics, then the joy of buyers in the US stock market is understandable and justified. After all, it turns out that in 2021, US GDP grew by 5.7%. And this is nothing less than the best result since 1984. However, it is still too early to rush headlong into purchases. Inflation hasn't gone away, as has the Fed's desire to fight it. And the reporting season is still quite ambiguous. On the one hand, Apple broke every conceivable record, demonstrating quarterly revenue of $123.9 billion (up 11% from the same quarter a year ago), which was almost $5 billion higher than analysts' forecasts. Earnings also came out better than expected. On the other hand, McDonald's earnings and revenue fell short of analysts' expectations. The reason is on the surface - high costs (hello inflation) ate profits. But the main reminder that the covid bacchanalia in the stock market is coming to an end was the reporting of Robinhood. The company expects first-quarter 2022 revenue to be less than $340 million, down 35% from 2021. At the same time, according to FactSet, markets expected revenue of $448.2 million in the first quarter. Well, monthly active users fell to 17.3 million last quarter from 18.9 million in the third quarter. Naturally, Robinhood's stock plummeted. At the moment they are quoted 85% (!) lower than six months ago. This is how bubbles burst.
NASDAQ:TSLAShort
by Trade24Fx
1
Fed Decision and Sell-off, Tesla Reporting and Chip ShortagesThe main event of yesterday, and of the week as a whole, was the announcement of the results of the meeting of the Fed's Open Market Committee. Not to say that there were any special surprises, but the general hawkish tone of the Central Bank gave another reason for the sell-off in the US stock market. Of the main results, it is worth noting the fact that the rate was not changed as expected, but it was noted that it is not far off (March). At the same time, the asset purchase program will end at the beginning of March, and the balance sheet reduction will begin after the start of rate hikes. Actually there is something cleansing in these sales. On the one hand, they are massive (in the sense they sell shares of almost all companies), but you should not count on a massive recovery of all. In fact, there is a process of cleansing the grains from the tares and that which is dead will have to die. So we do not recommend buying everything in a row and indiscriminately. Well, you can’t help but pass by Tesla reporting. The electric car market is a topic too hyped to ignore. From the latest forecasts: BloombergNEF analysts predict that 10 million electric vehicles will be sold worldwide this year. But back to Tesla. Since the company publishes production and sales volumes in advance, no one expected any surprises from these key parameters and all attention was focused on when, for example, factories in Berlin and Austin will open, as well as what the company's vision is for the foreseeable future. So for the year, revenues grew by 65% ​​(better than expected), profit by 760% (also better than expected), and production in Austin and Berlin will be actively increased in 2022. Despite all this optimism, the hand does not rise to recommend buying Tesla shares - they are too overpriced, and for years to come. But as for the threats, they are quite real, but they are not included in the price at all. Take, for example, the main scourge of the automotive industry in 2021 - the shortage of chips. Yes, Tesla somehow managed to get away with it last year, unlike other manufacturers. But the situation continues to be extremely unfavorable - even Musk admits this, calling the shortage of chips the main limiting factor for the company. In general, according to the latest data from the US Department of Commerce, the average stock of chips fell 8 (!) times from 40 days to less than 5. That is, roughly speaking, any even the slightest supply failure, for example, due to bad weather or a pandemic outbreak, and many enterprises will be forced to stop production due to lack of components.
FOREXCOM:NAS100Short
by Trade24Fx
FOMC Results, and Markets Getting Ready for Crypto WinterThe financial markets are exceptionally restless and volatile. Tellingly, there is no unity among financial market participants. As a result, the US stock market and the cryptocurrency market are frantically chatting. Perhaps the direction will return to the price dynamics tonight. Everyone is waiting with bated breath for the outcome of the two-day meeting of the Fed's Open Market Committee. It would seem that everything is expected – the monetary policy parameters will be left unchanged today. But the markets are not interested in this, but in the future actions of the US Central Bank. Recall that some analysts are waiting not for 2-3 rate hikes in 2022, but from 5 to 7. In addition, the Fed's comments on the reduction of the Central Bank's balance sheet will be extremely important: when will it start? What scale does it provide? In general, markets are waiting for a signal from the Fed about the level of aggressiveness of the Central Bank. If the FOMC is focused on inflation and is ready to act as quickly as possible, then we will see a new round of sales of risky assets. But if the US Central Bank shows uncertainty and tries to take a wait-and-see attitude, there may well be cries of “buy a drawdown” in the markets. Taking into account the scale of inflation, its uncontrollability and obvious tendencies for further growth, we are inclined to the first option and prefer selling risky assets to buying them. After Bitcoin peered into the abyss on Monday, the situation somewhat stabilized and improved. But the losses of the cryptocurrency market are still very massive. And if the growth of inflation stimulates the growth of inflation, then the fall of the crypt stimulates the fall of the crypt. Let's take mining for example. Paying the already increased electricity bills at the price of bitcoin under 70K and around 35K are two big differences. Fewer miners means less hashrate. Less hashrate - the network works worse. Well, do not forget that the vast majority of cryptocurrency buyers are fans of fast money, and when the crypt is not only growing, but falling, you can’t earn not only fast money on purchases, but also no money at all. This means that the number of buyers will physically decrease, and we may well see a repetition of 2018-2019, when the crypt suddenly became uninteresting to most participants in the financial markets, bitcoin was freely sold at 3-4K and no one was excited about the word at all.
FOREXCOM:NAS100Short
by Trade24Fx
1
Business Activity Worries Amid Energy CrisisYesterday were published data on business activity in Europe from Markit. On the one hand, everything seems to be not bad: business activity in the service sector and manufacturing is growing (indices above 50). On the other hand, in most cases the data came out worse than expected, and in the service sector of the Eurozone it is generally at the lowest level since April last year. Well, and another alarming signal (according to British data) more and more companies as a method of dealing with rising costs are choosing to raise prices for their products. That is, the inflationary spiral unwinds. It will be all the more interesting to follow the results of the meeting of the Federal Open Market Committee on Wednesday. Moreover, the competition among analysts who will give a larger forecast for the number of rate hikes in 2022 continues. According to Goldman Sachs, the Fed could raise rates 7 times (!) in 2022. In addition to this, according to Goldman experts, the Fed may announce the beginning of balance sheet reduction in May already in May. But we will talk about this in more detail on the eve of the announcement of the results, that is, tomorrow. And today I would like to note the high prices for energy assets. The threat of Russian military action against Ukraine greatly worries market participants, especially at the peak of gas consumption. Recall that it was the situation on the European gas market that provoked the energy crisis. In this light, the continued rise in oil prices looks quite natural. But our medium-term position is still unchanged - we believe that the worst-case scenario will not come true, which means that current oil prices are definitely overpriced. We also note that negotiations with Iran seem to be close to a happy ending. And this means the lifting of sanctions, which almost automatically means an increase in supply on the oil market.
FOREXCOM:NAS100Short
by Trade24Fx
Week in a Glance: Stock Market Nightmares, InflationThe past week can be safely called waking nightmares for buyers of risky assets. On Friday alone, the cryptocurrency market lost over 10% (and, by the way, there is no queue of buyers, and after all, Bitcoin is already 50% cheaper than it was just 2-3 months ago), and the US stock market, represented by the Nasdaq index, showed the worst week since spring 2020 and overall it was the worst January for the index since 2008. Since the spring of 2020 is the beginning of a pandemic, the start of lockdowns and complete uncertainty, and 2008 is a global financial crisis that almost buried the entire global financial system under it, it becomes obvious how bad things are now. Especially when you consider that nothing actually happened. You can't call the reporting season a failure. Even Netflix, which was kicked by everyone at the end of the week (shares down more than 20% - the worst result since 2012) actually showed more than decent financial results, exceeding earnings forecasts and did not disappoint on revenues. However, nothing surprising happens to us. We have been writing systematically for a long time that huge price bubbles have swelled in the markets for risky assets. And bubbles are not about the rational, they are about the irrational. So in this light, selling out of the blue is a classic example of the irrational. At the same time, the fundamental basis for sales was created a long time ago and is just now being worked out. We are talking about a total overvaluation of assets against the backdrop of an unwinding inflationary spiral. The mixture is extremely explosive, since the tightening of monetary policies by the leading central banks creates the prerequisites for a mass exodus from risky assets. By the way, this week on Wednesday we are waiting for the announcement of the results of the meeting of the FRS Open Market Committee. It is possible that it was precisely for this event that the markets were desperately trying to discount last week. Should the US stock market be buried? Definitely not. Can it still go down? Definitely yes. Will he do it this week? Unknown. Very often, markets tend to overreact, resulting in a correction.
TVC:DXY
by Trade24Fx
1
Insider Info from Peloton, Netflix and the Bank of TurkeyNot so long ago, we wrote about insider sales, which in 2021 significantly exceeded the figures of the previous year. There was some more information yesterday. Total insider selling hit a record $170 billion last year, up from $94 billion in 2020, according to SmartInsider. Indicative in this regard is the example of Peloton. According to SEC filings, Peloton executives and insiders sold almost $500 million worth of their shares, and did so before the company's capitalization fell by more than 80% in 2021. So the old adage “corporate leaders and insiders sell their stocks near the highs” has been confirmed once again. The main question that is now tormenting everyone is whether the stock markets will get off with a slight fright or whether the bubble will burst. In this light, there is a number of positive news for buyers from the Bank of Japan and the ECB, which have unequivocally spoken out in favor of maintaining ultra-soft monetary policies. But the rest of the support is not very good. Reporting season is not yet able to extinguish the fears of the markets. Yesterday, for example, Netflix lost 11% after publishing quarterly reports. Profits are better than forecasts, revenues are within forecasts. It would seem, for which the streaming giant was beaten. The answer, as usual, lies in the dynamics of the number of subscribers. And not even according to the results of the 4th quarter, but the company's expectations from the 1st quarter of 2022, which the markets did not like (2.5 million against last year's value of 3.98 million). In general, the reporting was not bad, but the markets were looking for a reason to sell and found it. So far, there is nothing to catch buyers with such moods. In general, the month of January is quite interesting in terms of the local price pattern: sales in the last hour of trading became more frequent. So you can keep this in mind when making trading decisions, especially intraday trading. Common sense seems to be returning to the Turkish Central Bank. Apparently, they have finally moved to the stage of accepting the fact of the existence of economic laws and the inexorability of their action, which even applies to Turkey. So the Bank of Turkey did not dare to lower the rate again, leaving it unchanged at around 14%. Not that this is a reason for buying the Turkish lira, but it is probably worth fixing part of the profits in its sales.
FOREXCOM:NAS100Short
by Trade24Fx
If Inflation's Everywhere, How the Fed Raises Rates in 2022?Quite a lot of inflationary data was published yesterday. Prices in the UK grew at the highest rate in the last 30 years (5.4% on CPI). Similar figures for Canada - consumer prices rose by 4.8%. As a result, US Treasury yields continue to rise as markets discount for the tightening of the Fed's monetary policy. In addition, Germany's 10-year bond yield rose above zero for the first time since May 2019. Against the backdrop of such data, analysts continue to compete, who is more, in the competition of how many times the Fed will raise the rate in 2022. Anna Wong, chief economist at Bloomberg Economics, is in the lead and expects five increases of 25 basis points for the year (March, June, July, September and December). At the same time, some traders are even talking about a 50 basis point increase in March. Given that oil prices are not yet thinking of falling (the International Energy Agency in its latest report released yesterday raised its consumption forecast by 200,000 barrels per day, plus a fire on the pipeline from Iraq to Turkey, which increased fears about the already tense short-term supply outlook) and corporate costs continue to rise, there are all grounds for further inflation growth. In general, it is not surprising that the US stock market is under pressure, and Nasdaq Vera officially moved into correction territory, losing 10%. An interesting indirect sign in favor of further price cuts. Back in late October, Robinhood was the 9th most popular free investment app on the Apple App Store, according to Sensortower. Now it has dropped to 19th. Coinbase was #1 at the end of October. Currently, it is at number 5. That is, interest is falling and there will be less and less fresh meat.
FOREXCOM:NAS100Short
by Trade24Fx
Oil Rally amid Sales of Risky AssetsPerhaps it is too early to say with certainty that the wind in the financial markets has changed and turned from the north to the south, but the feeling that something is happening does not leave. One of the signs of a change in market reality is the formation of a desynchronization in the price dynamics of assets. The stock market, and the crypt, continue to crumble against the backdrop of the oil rally. Which is somewhat unusual, since in 2021 they usually grew at the same time. Although from the outside it looks quite logical. The stock market and the crypto are frightened by the outflow of liquidity due to the tightening of the Fed's monetary policy (a steady increase in the yield of Treasury bonds is a clear confirmation of this). Considering that these markets are the most overvalued, profit-taking first of all on the bottom looks quite logical. And the reporting season in the US started not so confidently. JPMorgan and Citigroup disappointed, while Wells Fargo confidently beat earnings and earnings forecasts. In any case, it is too early to draw conclusions, but the very fact of the heterogeneity of the results is definitely not in the treasury of buyers. The reporting of Goldman Sachs became indicative (shares lost almost 7% yesterday). The bank clearly demonstrated what we wrote about earlier: the growth of salaries provokes an increase in the costs of companies, and it will not be possible to endlessly shift them to consumers. So, Goldman's operating expenses grew by 23%, which naturally hit profits. So it is likely that this is one of the first swallows, and there will be more to come. The main event for the US stock market yesterday was the information that Microsoft will buy video game giant Activision Blizzard for $68.7 billion. The year started most successfully for the oil market. This was facilitated by the unabated energy crisis, which was also facilitated by frost, as well as the expectation of a further rapid recovery of the global economy, which will stimulate growth in oil demand. In addition, the Middle East is again restless (referring to the attack by the Yemeni Houthi group associated with Iran on the capital of the UAE, Abu Dhabi). Despite such convincing dynamics, we continue to believe that this is the last attempt to grow before a powerful correction, which will be caused by the transition of the oil market from a state of deficit to a state of surplus. In terms of news, today's day is interesting primarily for inflation data from the UK, the Eurozone and Canada. Another confirmation that inflation does not think to subside may provoke a new round of sales of risky assets.
FOREXCOM:NAS100Short
by Trade24Fx
Hedge Funds Confirm the Good Old TruthAccording to classical economic theory in the field of financial markets, it is not possible to “beat the markets” (to consistently show higher returns than the market as a whole): “You can’t beat the market.” At one time (2007), Warren Buffett tested the theory in practice, making a million-dollar bet that hedge funds over a period of 10 years would not be able to show returns higher than the S&P-500 index. In 2017, the bet ended with the victory of Warren Buffett. For nearly 10 years, the S&P 500 has returned 85.4% versus 22% for five hedge funds. And despite all this talk about a new financial reality, about fundamentally different conditions for the functioning of markets, in fact, everything is the same, everything is the same, as shown by the results of hedge funds in 2021. So, in 2021, a group of the top 20 hedge funds made a profit of $65.4 billion after paying fees. At the same time, the TCI Fund Management hedge fund alone earned $9.5 billion for clients in 2021, recording its 13th profitable year in a row, and showed a return of 23.3%. In general, according to LCH Investments, the 20 largest hedge funds have achieved a return on assets of 10.5%, which is almost 2 times better than the industry average. It would seem that success is what it is. But there is one big “but”: the S&P 500 is up 28.7% in 2021, including dividends. That is, starting from the first publications of Fame in the 60s of the 20th century, absolutely nothing has changed in this regard. And finally, a rhetorical question: if the best of the best, operating in billions for decades, how children rejoice at a yield of 10-20% per annum, why do people without education and experience believe that they can “squeeze” hundreds of percent per annum out of the markets?
TVC:DXYShort
by Trade24Fx
7
Week in a Glance: US Inflation and Powell, Omicron, ReportingThe past week turned out to be quite eventful for significant events for the US stock market. And most importantly, it is difficult to name any positive, at least for risky assets. Inflation in the US continued to break records. The consumer sector, with its 7%, was noted at the maximum levels since 1982, while the production sector remained at the historical highs of 10%. That is, by itself, she does not think to resolve. So it's not surprising that Powell, speaking in Congress, was quite aggressive in his rhetoric and said that the economy is ready for monetary tightening. In 2022, we should expect not only the complete curtailment of the quantitative easing program by March, but also 3-4 rate hikes, as well as a reduction in the Fed's balance sheet. That is, the Central Bank uncovers all guns. Markets eventually revised their expectations on the timing of the start of the increase in stakes. If at the start of the week the consensus was May 2022, then by the middle of the week, with a probability of 90%, the rate increase is expected in March. The pandemic continues to rampage and set new records. The number of Covid-19 patients in US hospitals has surpassed last winter's high, with the US reporting 1.5 million and China locking down 5 million people living in the city of Anyang. In general, China, with its zero tolerance policy, greatly exacerbates the already difficult situation in global logistics. Another negative of the past is the fact that retail sales in the US fell by 1.9% in December (much worse than the 0.1% decline expected by experts). One of the main reasons is rising inflation. In general, while everything is developing exactly as we warned earlier. The more interesting it will be to watch the seasonal reporting in the US, which last week moved into an active phase. By the way, it was on him that buyers relied. But the financial statements of banks, which traditionally open the reporting season, disappointed. That is, the reporting was generally not bad, but investors were disappointed. If in the case of Citigroup they can be understood (profit decreased by 26%), then in the situation with JPMorgan Chase (income and profit growth exceeded experts' forecasts), it is less clear. In general, we have what we warned about. Expectations are too high and any deviation from them will provoke sharp sales. So, given the results of last week, this week in the US stock market, we would be looking for opportunities to sell.
FOREXCOM:NAS100Short
by Trade24Fx
1
March Rate Hike, Oil and China StrikesAfter the highest consumer inflation in the last 40 years, followed by a 10% increase in producer prices, the ranks of the Fed finally closed: it is necessary to tighten monetary policy as soon as possible. And if at the start of the week the markets were counting on an increase in May, then after a series of aggressive comments from the Fed officials after inflation, now with a probability of 90%, a rate increase is expected in March. In fact, March is just around the corner. So before the denouement, there was nothing left. A little longer until the resolution of the pandemic issue. China, with its zero tolerance for the pandemic, is starting to harm the global economy, slowing down global logistics, which cannot recover without it. Well, Biden, meanwhile, is going to use the army to ensure the functioning of hospitals. Formally, the current fundamental background is quite favorable for the US dollar, but it has been sold all week. The fall looks manageable so far, and we see it as more of an excuse to buy cheaper than to flip short. The best candidate for mid-term purchases of the dollar among the majors is the euro. Well, the Turkish lira remains an attractive target for sales against the US dollar. Where the negative fundamental factors have not yet been sufficiently taken into account, it is in the oil market. Everyone somehow forgot about the next increase in production from OPEC +, about the growth of production in the US, about interventions from the States in the form of sales of the strategic reserve (the US Department of Energy said on Thursday that it sold 18 million barrels of strategic reserves of crude oil to six companies) , about thousands of canceled flights around the world due to the outbreak of omicron, the closure of cities in China, etc. In general, selling oil at current prices is a great trading idea.
FOREXCOM:NAS100Short
by Trade24Fx
2
Controlled Inflation, Company Costs, and Omicron CollapseLooking at yesterday's data on consumer inflation in the United States, one involuntarily wonders what the Fed was counting on when they repeated the mantra about the temporality of inflation for six months and assured that it would resolve itself. It resolved to the highest growth rates since 1982 and an annual growth rate of 7%, which is unheard of for developed countries. Tellingly, everything points in favor of a further rise in prices: the energy crisis has received a second wind thanks to the winter and a cold snap, and the inability of automakers to meet demand due to a shortage of chips leads to an increase in prices for used cars. In light of such data, 2022 is simply bound to become the year of a comprehensive tightening of monetary policy, however, Powell officially confirmed all this on Tuesday, speaking in Congress. Recall that the Fed's target is 2%. Markets estimate the chances of a first rate hike as early as May at 79%. However, yesterday the markets once again decided to ignore reality and pretended not to notice either inflation or the consequences that it entails. But the consequences are not only a tightening of monetary policy, but also an increase in companies' costs. And endlessly transferring them to consumers will not work. Sooner or later, you will have to sacrifice margin and profit. Banks are already reporting tomorrow and the reporting season is entering an active phase. It will be very interesting to see how corporations deal with inflation this time around. If they decide to give up some of the profits so as not to lose customers, then the disappointment of buyers of shares can be transformed into a sale. The number of covid diseases in the world has jumped over 3 million (!) new cases per day. As a result, the FDA said extremely ominously in Congress that an unprecedented wave of omicronic infections across the country could provoke the inoperability of police, health care and transportation services. What can we say about non-emergency services - all kinds of production, services and other elements of the economic system. By the way, we wrote about this earlier - if everyone is sick at the same time, then there will simply be no one to work. And now everyone is getting sick en masse.
FOREXCOM:NAS100Short
by Trade24Fx
2
Aggressive Powell Against Omicron RecordsRisky assets were recovering yesterday, while the VIX Fear Index was declining. To say that there were some special reasons for this, perhaps, is impossible. On the contrary, the headlines of the leading news agencies set up rather gloomy thoughts. Let's start with the fact that Fed Chairman Jerome Powell said that the economy is in good enough shape for the Central Bank to start tightening monetary policy without fear. Recall that the Fed plans for 2022 are as follows: a reduction in the volume of the quantitative easing program (it should be brought to zero in March), followed by 3-4 rate hikes, and the reduction in the Fed's balance sheet will be the icing on this cake. It's strange that the markets go out of their way to ignore this elephant in the china shop. Apparently, they are waiting for the dishes to start beating. We continue to believe that it is possible to act ahead of the curve, the outcome is too obvious. Meanwhile, the number of Covid-19 patients in US hospitals has surpassed last winter's high, with the US reporting 1.5 million. Such is the "soft" omicron. In fact, what is expected due to a sharp increase in the incidence of diseases, even with a smaller proportion of hospitalizations, US hospitals are overloaded, which may well cause a local collapse of the healthcare system. China, meanwhile, placed under lockdown 5 million people living in the city of Anyang after two cases of omicron infection were reported there. In general, of any rational reasons for the growth of the US stock market this week, one can only note the start of the reporting season and extremely optimistic expectations of the markets, the implementation of which investors are trying to take into account by buying in advance.
FOREXCOM:NAS100Short
by Trade24Fx
2
Bad Omens: China, Crypto, IPO, Woods and InsidersBuyers in the US stock market were again uncomfortable yesterday. There were no new reasons on the horizon: all the same talk about tightening the Fed's monetary policy. Meanwhile, the number of bad omens is growing. The point is that although the US stock market as a whole seems to be in order, some of its elements (the most extreme) or other risky assets are already being sold out with might and main. In today's review, we just want to talk about these early signals. We have already written about some of them earlier, but we will repeat ourselves in order to form a more complete picture. The US tech sector in the form of the Nasdak index added almost 30% at the end of 2021. But at the same time, a similar Chinese index lost about 50% (!). Or here's another fact. Katie Woods, who tripled investor investment in 2020, managed to lose over 40% in 2021. Once again: with the market growing by 30%, Katie Woods, when buying, managed to show the result in minus 40%. Why is that? Because it works with the most extreme assets that have just started to crumble. These assets are extreme also due to the riskiness. By the way, about the most risky assets. Our entire cryptocurrency market Bitcoin has lost about 40% over the past couple of months. And somehow the predictions about 100K or 500K per cue ball are no longer heard. But all these are links of one chain. It's just that at first the most risky assets fell down, and the rest will follow. Well, and a few more words about risky assets. 2021 was a record year for an IPO. But in fact, the year was a year of a record number of disappointed expectations and investors. Of the 50+ U.S. tech companies that went public in 2021 through an IPO, SPAC, or direct listing, only one company is less than 20% below the peak price. More than 20 companies out of 50 have lost at least half of their value compared to their peaks. We have already cited an interesting fact: American billionaires sold $ 42.9 billion in shares by the beginning of December 2021, which is more than double the $ 20.2 billion sold in all of 2020. It would seem that everything is growing, the prospects are sky-high - we must take it. But people who perfectly understand the real value of the company and the state of the markets are selling, and in record volumes. In general, if we combine all these facts into a big picture, we get the classic flight of rats from the ship. Moreover, these are only the first rodents so far, the rest will follow them, because the ship is doomed and it is only a matter of time until it finds its reef and it does not matter if it is an increase in the FRS rates, a new wave of a pandemic, political destabilization or an energy crisis.
FOREXCOM:NAS100Short
by Trade24Fx
1
Week in a Glance: FOMC, OPEC+ Protocols & Risky Assets ProblemsThe past week turned out to be one of the worst for risky assets in recent years: crypts were falling, sales were going on in the US stock market. And it was not about the omicron, which, although it provoked new world records of the pandemic (the number of new daily cases of diseases approached the 3 million mark, and a couple of weeks ago only slightly exceeded 1 million), was nevertheless stubbornly ignored by the markets. The trigger was rather the publication of the minutes of the last meeting of the FOMC FRS. It followed from the text that the US Central Bank was going to uncover almost all of its anti-inflationary bazookas in 2022: tapering, rate hikes, as well as a reduction in the Fed's balance sheet. Moreover, judging by the latest data from the Eurozone, annual inflation does not even think that it will decline, but even stop growing, having reached a new historical maximum of 5% in December. Well, on Friday, an additional reason for sales in the US stock market was provided by data on the labor market NFP came out 2 times worse than expected and even worse than the previous value, showing an increase of less than 200K. Perhaps the only risky asset that showed growth was oil. But there is a separate story with Kazakhstan. At the same time, we note that OPEC + continues to increase production by 400K b / d every month and in February there will be another increase in oil supply. So we believe that selling not only the stock market and crypto, but oil as well. The coming week will be interesting primarily for inflation statistics from the US, as well as retail sales in the States. It is quite possible that the week will become a defining one for the cryptocurrency market. A mining recovery in Kazakhstan could bring optimism back to the market and push prices up. But if this does not happen, then the remaining buyers may disappear from the market, and we will see Bitcoin at 30K or lower in the foreseeable future. Well, the reporting season. Banks traditionally open it.
FOREXCOM:NAS100
by Trade24Fx
1
Greetings from the Fed, Surprise from ADP and Risky Asset IssuesBuyers of risky assets were not in the mood for fun yesterday. The US stock market collapsed, commodity assets went into deep minus, crypto, of course, fell. Tellingly, nothing fundamentally new has happened. It's just that the Fed was reminded that 2022 will be the year of tightening of monetary policy in the United States. Although everyone knew about it. The minutes of the last meeting of the FRS Open Market Committee were published yesterday, which were extremely aggressive. To begin with, FOMC members believe the labor market is approaching full employment, while inflation is a major concern. That is, they made it clear what part of the Fed's dual mandate is now a priority. Recall that at the last meeting of the FOMC, it was decided to accelerate the reduction of the asset repurchase program, as well as updated forecasts for the FRS rates, which suggest up to 3 rate hikes in 2022. In addition to all this, in the text of the protocols, there was a mention of the reduction in the Fed's balance sheet, which finished off buyers. All in all, the worst news for the US stock market is hard to imagine. The central bank is clearly embarking on a warpath. The US stock market bubble was inflated mainly by the Fed by injecting trillions of cheap money. So the texts of the last FOMC meeting show that in 2022 the Fed will carry out the opposite processes - to withdraw money, with all the ensuing consequences for the stock market. The protocol texts that the US labor market is approaching full employment are in very good sync with yesterday's ADP employment data, which turned out to be the best since May 2021. The growth in the number of jobs in the private sector amounted to 807,000 per month, which significantly exceeded the forecasts of experts (375,000) and the November increase of 505,000. The main generator of new jobs was the leisure and hospitality sector (246,000 new vacancies). And finally, we note that the pandemic continues to break records. The number of new cases of diseases worldwide has exceeded 2.5 million per day. But even a couple of weeks ago, the number did not exceed 1 million. Since the data from ADP did not take into account the last couple of weeks of December, a very unpleasant surprise may await the markets next month.
FOREXCOM:NAS100Short
by Trade24Fx
2
OPEC + and Oil Surplus, Omicron's Six Zeros in the USThe main event of yesterday was the OPEC + meeting. But this time there was very little intrigue. Unlike a couple of previous meetings, when the markets were not sure about an increase in production by 400K (either because of the fall in oil prices, or because of the pandemic), this week everything went very casual. An additional 400K b / d will appear on the oil market in February. Recall that, according to many experts, including OPEC, at the start of 2022 the oil market will go into a surplus (according to OPEC, in the first three months of the year, production will exceed world demand by 1.4 million barrels per day). But the participants in the financial markets are not particularly worried about this and are in no hurry to sell oil. Rather, on the contrary, neither risky assets continue to buy oil amid growing demand. The US stock market closed mixed yesterday. On the one hand, going against a furious bull is a bad idea. But, on the other hand, buying at current prices is still crazy. In general, Buffett, with his strategy of sitting on a bag of cash and waiting for a crash, looks like a kind of "golden" and risk-free mean. Even the 6-zeros figure for the number of new coronavirus cases in the United States could not shake faith in the bright future of the markets. The United States reported a record number of new Covid cases on Monday, with more than 1 million new infections, according to Johns Hopkins University. Yesterday was published data on the number of open vacancies in the United States. More than 10.5 million jobs are waiting to be filled. So there is a shortage of labor. The fact that people do not really want to work is evidenced by the fact that in November a record 4.5 million Americans quit their jobs. Today, with the help of ADP, it will be possible to see how the supply is able to meet the existing demand.
FOREXCOM:NAS100Short
by Trade24Fx