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(Bull) Market June 2021 (2 Viewers)

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Part quatre:

View attachment 125821 View attachment 125822


Mr flippe-floppe-flye:

View attachment 125823


So those are essentially the 2 arguments. Neither one mentions the DXY. Odd? Commodities are mentioned, as having no correlation to inflation at all, therefore, a non-event. I'll post up those charts later with some discussion.

Whichever way you lean, I think you'll need to decide as positioning for the longer term (short term traders don't really need to worry) could and probably will, make quite a difference. I'm thinking gold, silver, BTC, etc. as opposed to growth stocks, Tech et al.

More later, off to work!


jog on
duc
Well, mister Duc, this was quite a piece of (great )work again today and a lesson in french counting😊
Only missing part: btc jumping higher at +9%..yeap..9 years of term deposit returns overnight..no wonder the tiktok generation is not opening saving accounts😊
 
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Roundup:

Start with this: https://www.bloomberg.com/news/vide...bout-the-s-p-500-10-year-treasury-yield-video

Screen Shot 2021-06-10 at 2.48.07 PM.png

Screen Shot 2021-06-10 at 5.04.38 PM.png


So this is commodities charted against DXY:

Screen Shot 2021-06-10 at 5.11.32 PM.png


DXY:

Screen Shot 2021-06-10 at 5.12.21 PM.png


10yr

Screen Shot 2021-06-10 at 5.08.49 PM.png


So re. inflation, it is there. Commodities are rising faster than just the decline in DXY would suggest. Now that may well be 'speculation', but it doesn't really make any difference what the reason is: the fact is that input prices are pretty much rising across the board. That will eventually flow through to consumer prices either as higher prices or smaller serving sizes for the same price (grocery trick).

With yields falling (Operation Twist) and no buyers other than the Fed. money supply on the Fed Balance Sheet will continue to rise, driving if nothing else the continued speculation and falling DXY, which will drive PPI inflationary pressures.

The argument in this morning's post was essentially an argument about CPI inflation and whether it will catch fire as it did in the 1970's. The 1970's had both, CPI and PPI. If and it is an if, we catch a pernicious CPI inflation, then the market will have issues. ATM it seems willing enough to (for the most part) simply ignore the PPI issues.

VIX

Creeping higher. It is not at a critical point to explode higher, but neither is it falling. Therefore I would expect continued weakness in the indices.

Screen Shot 2021-06-10 at 5.14.20 PM.png


NYMO

Pretty much confirms the VIX. Weak to meh. No big bull rallies higher tomorrow. Just more chop.

Screen Shot 2021-06-10 at 5.14.49 PM.png


A catalyst is probably underway but simply isn't visible yet. Now that could be a catalyst in either direction. The thing with directionless markets is that when they make a move, it tends to be substantial. Given the macro conditions, that move is likely to be higher, but not tomorrow methinks.

Screen Shot 2021-06-10 at 6.07.50 PM.png


jog on
duc
 
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So the market at time of posting +/-

Screen Shot 2021-06-11 at 4.41.24 AM.png
Screen Shot 2021-06-11 at 4.39.22 AM.png
Screen Shot 2021-06-11 at 4.37.52 AM.png
Screen Shot 2021-06-11 at 4.38.38 AM.png


Today was the CPI data. First the % month change.


Screen Shot 2021-06-11 at 5.12.55 AM.png


And less relevant due to COVID, the YoY:

Screen Shot 2021-06-11 at 5.13.21 AM.png


Commodities (PPI inflation) with falling yields, moving higher:

Screen Shot 2021-06-11 at 5.14.13 AM.png


So we have increasing PPI & CPI inflation. We also have rising wages. Nothing outrageous currently, but they can never be taken back. So the situation is on all fronts inflationary. Debt is at all time highs. The leverage inherent in debt, the money multiplier effect, is not working as it once did and GDP growth is not sufficient to grow out of the debt load.

DXY is stalled atm:

Screen Shot 2021-06-11 at 5.24.21 AM.png


But only a matter of time before it breaks lower. A weaker DXY, obviously accelerates PPI inflationary pressures, which will at some point impact on companies COG reducing cash-flow and profits. The impact on cash-flow is actually more important as highly leveraged companies can write down depreciation and lower profits, but as depreciation is a non-cash cost, cash-flow is unaffected. Rising COG however are a cash cost and reduce cash-flow, which, makes debt servicing and coverage higher risk.

The alarm bells in stocks are obviously on mute:

Screen Shot 2021-06-11 at 5.29.40 AM.png


Junk continues to sell-off and move into Treasury, which is a guaranteed loss. Why? Because of the risks to cash-flow. This, unless it reverses, will become an issue at some point. The 'when' is the question.

Energy, one of the really big PPI components.

Screen Shot 2021-06-11 at 4.18.15 AM.png


Oil continues to move higher, 3 steps higher 1 step lower. Currently the Arabs & Russia seem to have things under control. As yesterday's chart demonstrated, green energy, the market is not yet a believer.

Mr flippe-floppe-flye:

Screen Shot 2021-06-11 at 4.19.47 AM.png


On cryptos and meme stocks...

Screen Shot 2021-06-11 at 4.33.57 AM.png


As yesterday's video amply evidenced.


jog on
duc
 
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Week end.

Another meh day.

Screen Shot 2021-06-12 at 6.13.55 AM.png


Sectors:

Screen Shot 2021-06-12 at 6.08.24 AM.png


For the week.


Screen Shot 2021-06-12 at 6.08.51 AM.png



Doesn't really require too much comment.

DXY:

Still fighting the breakdown. I remain steadfastly short.

Screen Shot 2021-06-12 at 6.14.22 AM.png


BTC:

Another fighting the same war to stay above lower levels. Technically, an equilateral triangle is developing, especially when you look at the weekly chart. Technically, it could break either way. When it arrives, vol. will pick up significantly again and the move (higher/lower) will be substantial.

You don't want to be on the wrong side of it.

Screen Shot 2021-06-12 at 6.16.42 AM.png

Screen Shot 2021-06-12 at 6.17.07 AM.png


Mr flippe-floppe-flye:

Screen Shot 2021-06-11 at 9.03.54 AM.png

Junk Bonds.

Apart from being an 'indicator' for risk-on/risk-off, as an asset class:

They (Junk Bonds) correlate reasonably closely to stocks (risk on).


Screen Shot 2021-06-12 at 6.22.40 AM.png


Lower vol. than stocks, which, can be a good thing.

Screen Shot 2021-06-12 at 6.23.07 AM.png


Especially when you talk about drawdowns:

Screen Shot 2021-06-12 at 6.23.23 AM.png


Of course you give up some of the upside.

Screen Shot 2021-06-12 at 6.23.39 AM.png


to be continued....

jog on
duc
 
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Part deux:


Some historical returns:
Screen Shot 2021-06-12 at 6.23.50 AM.png


The next chart is interesting because it demonstrates that Junk can be up when stocks are down (55%) and when stocks are up, Junk is also up (88%).

Screen Shot 2021-06-12 at 6.24.04 AM.png


Last but not least: Junk in an environment of increasing yield, do not fall as much as Treasury paper. Essentially a higher coupon and shorter maturity, provides a lower duration which makes them less sensitive to rising rates.



Screen Shot 2021-06-12 at 6.57.50 AM.png


So how would you play the Junk market?

First you have to hold a lot of them. Individual issues are very risky and can blow-up. You hold them as an ETF (HYG) or some-such. A ladder structure would be even better and further mitigate the risk of rising rates. HYG might already do this (not sure).


Energy:

Will likely remain a hot sector (but volatile) for a while. OPEC does not seem to be flooding the market having achieved the (pretty much) destruction of the US shale industry (certainly in the short term) they are now manipulating prices higher. I (way back) speculated mid-70's was about it. That may turn out to be too conservative. We may see $100 oil again.

Screen Shot 2021-06-12 at 6.27.04 AM.png


The low wage group are all day trading. Not interested (as long as UBI persists) in going back to work.

Screen Shot 2021-06-12 at 6.26.17 AM.png


Inflation hurting small businesses.

Screen Shot 2021-06-12 at 6.26.46 AM.png


Some inflation quotes:

Screen Shot 2021-06-12 at 6.25.46 AM.png


Looking forward to next week:



Screen Shot 2021-06-12 at 7.05.32 AM.png


Screen Shot 2021-06-12 at 7.05.48 AM.png
Screen Shot 2021-06-12 at 7.06.11 AM.png
Screen Shot 2021-06-12 at 7.06.26 AM.png
Screen Shot 2021-06-12 at 7.06.54 AM.png


Not overly optimistic.

We are in a bit (indices) of a holding pattern. Meh. As such, we need to be very careful moving forward. Chop and short trends will likely continue to dominate until they don't.


jog on
duc
 
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From what I have seen yesterday it looked a like like the smarties shorted the bond market at opening punting the the Fed would buy up big. And they did and they made a lot on money. Where would the Fed be at now 10 Trillion?
And how do they stop QE? China looks like it has a handle on inflation while the US?
Not looking good ATM for US in my opinion.
 
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Oil news:

Friday, June 11th, 2021

Oil prices showed modest gains on Friday, after a selloff on Thursday.

Oil prices drop after U.S. lifting sanctions on Iranian officials. The U.S. Department of the Treasury said on Thursday it is removing several Iranian officials from its list of designated persons, including three directors of the National Iranian Oil Company (NIOC). Oil prices declined on the news.

Rystad: OPEC+ will have to loosen output limits. In early trading Friday, oil was back up, on positive economic news in the U.S. and accelerating global vaccination campaigns, according to Rystad Energy. But the firm warned that there is going to be rising pressure on OPEC+ to loosen production constraints in order to avoid the oil market overheating.

IEA: OPEC+ should “open the taps.” The IEA said that global oil demand will rebound past pre-pandemic levels by the end of 2022. After declining by 8.6 mb/d in 2020, oil demand will rebound by 5.4 mb/d this year, and by another 3.1 mb/d next year. The agency reiterated that OPEC and its allies needed to “open the taps” to boost oil production and keep the world well supplied.

High-profile EV SPAC running out of cash. Lordstown Motors (NASDAQ: RIDE), a SPAC aimed at manufacturing EV pickups out of an old GE plant in Ohio, disclosed that it does not have sufficient cash to start commercial production and issued a going concern warning through the end of the year. Lordstown was one of several EV SPACs that went public in the last year.

Biden looks at offshore wind in Gulf of Mexico. The Interior Department said on Tuesday that it will examine potential areas of the Gulf of Mexico that are suitable for offshore wind.

Solar industry’s costs are rising. Rising costs for labor, freight, steel and aluminum are pushing up the cost of solar power, ending more than a decade of steady cost declines, at least temporarily. Contract prices for solar were already up 15% in the United States in the first quarter compared with last year due to higher interconnection and permitting costs. There is uncertainty over how long the cost increase will last.

First Solar to build Ohio plant. First Solar (NASDAQ: FSLR) said it would build a $680 million factory in Ohio to manufacture solar panels. The move is highly significant as the U.S. has largely ceded manufacturing capabilities to China – the U.S. relies on imports for 85% of the panels used in domestic projects.

U.S. LNG set for export record. U.S. exports of liquefied natural gas (LNG) are set to surge this year from the already record levels in 2020 as demand in Asia and Europe is high, even in the off-peak season.

ExxonMobil announces another Guyana discovery. Exxon has made yet another in a long string of discoveries offshore Guyana in the Stabroek block, the company said this week.

Can oil sands be banned? The oil sands of Athabasca seem to be at an especially vulnerable crossroads – just when oil sands production could finally surge unimpeded with new pipelines allowing for higher exports abroad.

Oil could hit $80 this summer, but there’s a catch. There is more room to run for oil. “There's an incredible case where the oil price could get to $80, but there would be a reaction to that. That would start to affect demand, and also there would be a political reaction to that.”

Board shakeup could result in capex changes for Exxon. Investors want a “fundamental rethink on strategy,” Anne Simpson, investment director at shareholder California Public Employees' Retirement System, told Reuters “The big measure” being its $16 billion-$19 billion annual project spending, she added.

European banks face huge financial threats from energy transition. A rapid and chaotic energy transition would leave Europe’s biggest banks in financial peril comparable to the subprime crisis that U.S. lenders faced in 2008, according to Bloomberg.

RBC downgrades Callon Petroleum, upgrades Marathon. RBC downgraded Callon Petroleum (NYSE: CPE) and Continental Resources (NYSE: CLR), saying their stock has strengthened far enough. The bank upgraded Marathon Oil (NYSE: MRO) and Range Resources (NYSE: RRC) on a more bullish outlook for crude oil and natural gas, respectively.

Gas pipeline building spree at an end. The years-long building spree of long distance natural gas pipelines in the U.S. is coming to an end, as political and financial barriers turn against the industry, according to S&P Global Platts.

Biden considers relief for refiners on biofuels. Under pressure from labor unions, the Biden administration is considering providing relief to oil refiners related to their biofuels blending requirements.

Permian basin gas pipeline connections increase. The recent completion of a handful of gas pipelines has connected Permian basin gas to the Gulf Coast, and also to Mexico, boosting Waha Hub prices.

LNG prices see upside. LNG prices could continue to rise due to strong demand in China. Spot prices have already posted strong gains in recent weeks. We believe this has been driven by a tightening of Asian LNG balances led by strong generation demand in southern China at the same time that South Korea reached peak nuclear maintenance, while Covid-hit India LNG demand has stabilized,” analysts from Goldman Sachs said in a note earlier this week.

Market roundup:

Screen Shot 2021-06-12 at 2.31.46 PM.png
Screen Shot 2021-06-12 at 2.44.21 PM.png


ARKK short:

Screen Shot 2021-06-12 at 2.43.47 PM.png


BTC in VWAP squeeze:


jog on
duc
 
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Odds and Sods:

Inflation:

Screen Shot 2021-06-14 at 6.08.50 AM.png



A guaranteed loss currently.
Screen Shot 2021-06-14 at 6.08.17 AM.png


Meme stocks other than the other 2:

Screen Shot 2021-06-14 at 6.09.30 AM.png
Screen Shot 2021-06-14 at 6.09.41 AM.png


VIX at lows:

Just makes everything that little more dangerous.

Screen Shot 2021-06-14 at 6.21.30 AM.png


The generations:

Screen Shot 2021-06-14 at 6.26.32 AM.png


How they think:

Screen Shot 2021-06-14 at 6.26.49 AM.png



Oil Reserves in Billions/barrels and as a % of world reserves:

Screen Shot 2021-06-14 at 6.29.27 AM.png


Steel production:

Screen Shot 2021-06-14 at 6.31.30 AM.png


Its uses:

Screen Shot 2021-06-14 at 6.32.24 AM.png


Screen Shot 2021-06-14 at 6.33.05 AM.png


And Art:

Screen Shot 2021-06-14 at 6.05.46 AM.png


With the VIX at lows and the market at highs, the risk of entering new positions becomes much increased. Shorter term trades have to have this increased risk factored into the strategy. Either position size, iSL, target profit taking or all of the above.

Advancing issues are at 74% which is sufficient to move the market higher, but it has been, like the index, stuck at that level for several days. Consolidations can move in either direction.

NYMO is now showing a divergence, which is or should be cautionary. NYSI is bullish and quite strongly so.

Therefore the overall message is bullish...but be prepared to bail out very quickly.


jog on
duc
 
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Start of the new week, pretty much the same as last week, meh.

Screen Shot 2021-06-15 at 5.39.46 AM.png
Screen Shot 2021-06-15 at 5.40.22 AM.png
Screen Shot 2021-06-15 at 5.33.14 AM.png


Tech. continues its run higher or rather bounce higher. The 'commodities' areas have come off the boil, XLB, XLE, along with XLF (Financials) reflecting the weakening (although bouncing) yields from Operation Twist.

All the indices are (pretty much) in the overbought range. Hence we have a chop sideways while they correct in time rather than a price correction, although that cannot be ruled out as VIX is very low, but again threatening to have a bit of a bounce itself.

Screen Shot 2021-06-15 at 5.11.01 AM.png


Sectors:

XLRE is (currently) a beast. Relentless. Shrugging off everything.

Screen Shot 2021-06-15 at 5.11.19 AM.png


So breaking down XLRE:

Screen Shot 2021-06-15 at 5.49.27 AM.png


The top handful weekly and intraday:

Screen Shot 2021-06-15 at 5.50.41 AM.png

Screen Shot 2021-06-15 at 5.51.01 AM.png




The bottom handful:

Screen Shot 2021-06-15 at 5.51.48 AM.png


Screen Shot 2021-06-15 at 5.51.24 AM.png



VIX:

Screen Shot 2021-06-15 at 5.36.00 AM.png



Mr flippe-floppe-flye:

Screen Shot 2021-06-15 at 5.18.05 AM.png


Which brings me nicely onto BTC.

Ignoring Mr Musk, Mr Saylor has issued another $400M in debt via MSTR and bought more BTC. Essentially he is treating MSTR as a perpetual, which in theory a company actually is. In reality, companies go bust all of the time and disappear from the firmament. The issue for MSTR will be: will the volatility and potential drawdown coincide (at some point in the future) with a loss of cash-flow (earnings) of MSTR? If yes, then, to service the debt, currently at $1B (in BTC) MSTR would have to sell some BTC in a falling market. MSTR is now pretty much a Hedge Fund holding BTC, its capitalisation is based on BTC.

El Salvador. These guys.

So, they have a domestic currency but also use a tremendous amount of DXY. They are buying BTC and making it legal tender, which one must suppose becomes exchangeable into currency. This is essentially a true GOLD STANDARD, which governments abolished finally with the watered down version being closed by Nixon in 1971. These chaps have unilaterally chosen to go back on. It is fairly unimportant given the size (small) of their economy, but odd nonetheless.

Needless to say, with all of the recent machinations, BTC is and by extension all of the junk, having a good day and bouncing back into a $40 handle.

PPI Inflation continues to move higher as measured by $TNX & DXY. This is the dangerous one for the market. CPI inflation, which if it starts to change consumer behaviour, could also become dangerous. Asset price inflation is resting near all-time highs to see how the other 2 make out.

Commodities are having a sell-off today. It is mostly in the agricultural sector. Energy, the big one, is pretty much unchanged. Now the Arabs & Russia are unlikely to turn on the taps to bring price down. After destroying the US shale production, which cost them significant money, they are looking to recoup. Russia for all intents and purposes is probably at war with the US and is applying the economic squeeze. Meanwhile the West has gone all 'green'. BP, Shell, Exxon, etc are all cutting back on oil everything and investing in green. The result being that the ability going forward, is an inability to cover an energy war with the East.

With the Fed. 'Twisting' the 10yr lower, I don't see commodities lower over time. Hence inflation could be far stickier than expected. If it is, psychologically the consumer will be conditioned and even CPI inflation could become a real issue. I see that Bill Gates has put huge sums into farmland.

Here is Rosenberg arguing that it will be transitory:



jog on
duc
 
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Monday round-up:

So markets rallied into the close. All about the Fed.? Possibly, although if the Fed. starts talking about tapering, the Bond market could well have a spazzie, which does not bode well for stocks.

Stocks are in a funny position:

Screen Shot 2021-06-15 at 2.36.02 PM.png


Screen Shot 2021-06-15 at 2.44.45 PM.png


With as you can see weakness in and around that 50 EMA.

NYMO is diverging. New entries will be at risk from chop.

Screen Shot 2021-06-15 at 2.45.14 PM.png


Tech. was the leading sector earlier today. ARKK moving higher.



Screen Shot 2021-06-15 at 2.36.38 PM.png


And AAPL:

Screen Shot 2021-06-15 at 2.38.40 PM.png




Lots on BTC:

Screen Shot 2021-06-15 at 2.37.00 PM.png


Screen Shot 2021-06-15 at 2.37.55 PM.png
Screen Shot 2021-06-15 at 2.37.35 PM.png


Screen Shot 2021-06-15 at 2.38.17 PM.png



Mr flippe-floppe-flye:

Screen Shot 2021-06-15 at 2.54.42 PM.png


So the Fed. will be sitting again tomorrow. Therefore we can probably expect a bullish day. The issue will be on Wednesday when the Fed. speaks. That could turn into a really volatile day as if markets are pricing in 'nothing changes' and something changes, positions could flippe-floppe faster than Mr flye.

If the message is 'nothing changes' commodities, gold and probably BTC will likely move higher as the 'inflation' trade is back on. The question is what will stocks do? I guess we'll find out Wednesday. It will likely be one of the more interesting Fed. announcements for a while, they have been pretty dull recently.


jog on
duc
 

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