Mar 1, 2022
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“One doesn’t recognize the really important moments in one’s life until it’s too late.” – Agatha Christie
It was a pretty quiet night in markets, but things have taken a turn for the worse since Europe opened for trading. What was looking like a flat open for the markets about four hours ago is now looking more like a decline of close to 1%. In yesterday’s post, we noted that despite the big moves following the weekend’s events neither crude oil nor gold managed to take out their prior highs from last week. Well, this morning both are rallying again, and while gold has yet to take out its recent intraday high, WTI is trading above $100 per barrel and at new multi-year highs. Bottom line is that no one knows where this is all going, so it’s probably best to avoid making a big stand in one way or the other but use extreme market moves (in either direction) to your advantage.
In economic news today, investors will be watching Markit Manufacturing at 9:45 and then Construction Spending and the ISM Manufacturing report at 10 AM.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Yesterday was the 39th trading day of the year, and it was also the 39th straight day where the intraday range of the Nasdaq 100 ETF (QQQ) was more than 1%. Seems like a lot, right? Looking back over the last ten years, 39 straight trading days of 1% ranges on an intraday basis ranks as one of the longer streaks we have seen. The longest streak during this period was 46 trading days coinciding with the COVID crash, and besides that, the only one that was longer was the 41 trading days ending 1/10/19.
While the current streak ranks as one of the longest of the last ten years, it is nowhere near the longest on record. In the chart below, we show streaks of 1% intraday ranges in QQQ going back to its inception in early 1999. Notice anything in the chart? From early 1999 through October 2003 – a period encompassing more than four and a half years – QQQ traded in an intraday range of more than 1% every single day! How’s that for volatile? The current streak of 39 trading days also pales in comparison to streaks of more than 100 trading days that QQQ experienced during the financial crisis, but in the chart, those streaks barely even register to the 1999 to 2003 period. As volatile and hectic as the last eight weeks have been for markets, it’s still nothing compared to the ‘old days’.
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Feb 28, 2022
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“The two most powerful warriors are patience and time.” – Leo Tolstoy
Some periods of time or more eventful than others, and this past weekend was one of the more news-jammed weekends we have seen in years as nearly the entire world has unified against Russia’s actions in Ukraine. Futures are lower this morning in reaction to the continued hostilities, but there are a ton of moving parts to contend with. Make sure to read this morning’s full recap of all the events in today’s Morning Lineup.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Despite the weak picture in the futures market, equity prices still remain well above their lows from last week, and within the commodity space, we’ve seen a similar picture play out. For both gold and WTI crude oil, last night saw early moves higher at the open, but neither commodity was able to rally enough to take out the intraday highs from last week. Besides the fact that they weren’t able to take out those highs, both commodities have also given up much of their early gains. Gold is now 3.4% off last week’s high of 1,976.5 per ounce while WTI is down 4.72% from its high of 100.54 per barrel. Those highs from last week will be key levels to watch. Nobody knows how things are will play out from here, but last week’s highs in gold and crude oil are important milestones to watch. As long as they are able to remain in place, the better sign it is that the worse of this crisis could be behind us.
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Feb 25, 2022
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“Don’t blindly follow someone, follow market and try to hear what it is telling you.” – Jaymin Shah
After trading lower most of the night, futures have seen a significant turnaround leading up to the opening bell. Although not nearly as dramatic as Thursday’s intraday reversal, major US indices are currently looking at steady gains. Whether that holds into the closing bell ahead of the weekend remains to be seen. The catalyst behind this morning’s strength has been calls for diplomacy from China in settling the Ukraine conflict and apparent signals from Russia that they too are ready to have diplomatic talks. At the same time, though, the Russian military says it has seized control of a key airport outside of Kyiv.
Economic news this morning was generally positive Durable Goods, Personal Income, and Personal Spending all surpassing expectations while inflation data was mostly inline with expectations.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Yesterday, we noted that the Nasdaq 100 ETF’s (QQQ) positive reversal was just the third time in its history that the ETF gapped down more than 3% at the open and finished the day more than 3% higher. The other two days were in April 2000 and May 2001. Neither of those two prior days were followed by positive returns for US stocks. Widening out the criteria a little more, yesterday was only the 14th time that QQQ gapped down 2% at the open and finished the day higher. Once again, the vast majority of prior instances occurred during the dot-com bust, but they weren’t exclusively confined to that period, and there have also been a handful of prior occurrences since the end of the financial crisis that occurred late in market selll-offs as well. In other words, the jury is still out, and given the catalyst behind yesterday’s downside gap (a major geopolitical conflict) it’s probably not a good idea not to read too much into one day’s action.
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Feb 24, 2022
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“Do not try to make circumstances fit your plans. Make plans that fit the circumstances”. – George S. Patton
It’s setting up to be a painful morning for investors in the US and around the world as financial markets are reeling in every corner of the world. It’s safe to say that markets weren’t expecting such a rapid escalation and Russian airstrikes throughout Ukraine, so the negative reaction is warranted. That being said, it’s not as though markets were anywhere near their highs heading into today. The Russell 2000 was already in a bear market, the Nasdaq was knocking on the door, and the S&P 500 was in correction territory.
Economic data this morning was mixed with jobless claims coming in lower than expected, but inflation-related indices like the GDP Price Index and Core PCE both came in higher than expected. Given the macro headlines, though, futures have seen little in the way of an impact.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Based on where futures stand now, the Nasdaq will open for trading with a decline of about 3%, putting the index down 21% from its record high back in November. In the history of the index dating back to 1971, this will be the 12th drawdown of 20%+ from a record high. What’s also worth highlighting is that the current drawdown represents the 3rd 20%+ drawdown from a record high in the last 3.5 years.
On a related note, today could mark the fifth straight 1%+ decline for the Nasdaq which would be the longest streak of 1% daily declines since October 2008.
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Feb 23, 2022
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“Shut your eyes and see.” – James Joyce
Futures are trading higher heading into the opening bell…for now. It used to be that a positive tone in the futures market would suggest a positive tone to the upcoming trading day, but lately, futures are indicative of the market’s present tone and nothing else. Close your eyes or step away from the desk for a minute and the picture may look completely different when you get back. Along with futures in the green, bitcoin is trading up 3% and back near or above $39K (depending on when you look), crude oil is down slightly, and the 10-year yield is back up to 1.98%.
The only economic data point on the calendar was weekly mortgage applications which showed a decline of 13.1% compared to last week’s drop of 5.4%. Mortgage applications can be volatile, but last week’s drop was the steepest since April 2020 at the heart of the COVID lockdowns.
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
If the S&P 500 was going to bounce one of these days, current levels provide a logical starting point as the S&P 500 closed yesterday just above 4,300 which is a level that has acted as support in the past eight months. How long that support holds in the current environment remains to be seen.
While YTD performance has essentially been a bloodbath for most stocks in the S&P 500 this year, stocks in the Energy sector have been living in an alternate reality. With an average YTD gain of 20.2%, stocks in the Energy sector are leading every other sector’s average YTD change by at least 20 percentage points! Stocks in the Financials sector have managed an average YTD gain of 0.2% this year, but every other sector’s average YTD change is negative. Sectors that have been the biggest laggards include Technology, Consumer Discretionary, and Real Estate where the average YTD change of each one’s components has been a decline of over 10%. Even in a traditionally defensive sector like Utilities, its components have already declined an average of 5.7% YTD.
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Feb 22, 2022
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“Do you believe in miracles?” – Al Michaels
Today marks the 42nd anniversary of the ‘Miracle on Ice’ when the US men’s Olympic ice hockey team stunned the world with an upset over Russia and Al Michaels uttered the now-famous question “Do you believe in miracles?” The investment community is hoping for its own miracle in Ukraine this morning as geopolitical concerns regarding a potential Russian invasion roil markets. Futures have been lower ever since they opened for trading and Putin’s speech yesterday that recognized separatist Ukrainian regions. Things could be worse, though, as futures currently trade well off their overnight lows as conditions remain fluid.
It’s a busy morning for data as we’ve already had a decent amount of earnings reports, including Home Depot (HD), which is trading down over 2.5%. On the economic calendar, later this morning we’ll get flash readings on Manufacturing and Non-Manufacturing PMIs from Markit along with Consumer Confidence and the Richmond Fed
Read today’s Morning Lineup for a recap of all the major market news and events from around the world, including the latest US and international COVID trends.
Taking a look at where the major indices stand heading into the week, the picture isn’t pretty. Starting off with the Russell 2000 (IWM), which has been the weakest of the major indices, it is actually the least in danger of making an imminent lower low relative to January, even as it is down more than any of the other three. The Nasdaq 100 (QQQ) will likely open below its closing low from January this morning, and whether it takes out its intraday low remains to be seen. Lastly, the S&P 500 (SPY) will likely manage to open above its closing January low this morning, and we’ll see how things play out from there. One question you may be asking yourself this morning is why the futures aren’t trading even lower this morning. To help answer that question look no further than the charts below. As shown, stocks have already been selling off sharply heading into this weekend’s events, and while we wouldn’t go as far as to say that a Russian move into Ukraine is fully priced in, markets have been anticipating this for the last several weeks.
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