(Bull) Market Feb. 2021

[ducati916]

So I'll start with the seasonality chart:

Re. the GME story:

Mr flippe-floppe-flye

Liquidity is going to be an issue:

Illiquid stocks (small caps) always make for the best targets in any sort of manipulation.

So what actually happened is that a big Fundie (Scion) started soaking up shares in a small illiquid name. Some other fundies came on board, then some technical traders and the icing on the cake, the mob aided and abetted by Hedge Funds.

Forget the Reddit crowd. Non-issue.

And lose them they will. If they truly believe their own press, the market will teach them an expensive lesson.

Already highlighted is the VaR issue: if triggered, this can generate selling from serious players, which will move the mega-caps, never mind the small and micro-caps. The issue as highlighted is that the market is a complex system linked by oooodles of leverage. Leverage amplifies vol. Vol. has jumped by 50% over last day or two x leverage of X. De-leveraging means selling stuff that you are long and/or adding to your short book. Either way, selling pressure will outstrip buying pressure.

The 'buy-the-dip' will be back, but probably not on Monday. I think we see another 5%-10% decline before the BTD players step-up. The Bull is far from dead, but even Bull markets can have nasty dips.

jog on
duc

 

[ducati916]

So markets open with some interesting rotations:

Natural Gas and PMs/Miners all higher, Silver more so than Gold. GME is a dead in the water trade, unless you want to short it. And SPY bounces. The issue for me is that the VIX, while off its highs, still looks dodgy.

Natural Gas has been signalling bullish for a while now and looks to be breaking higher. NG is famous for blowing shorts up. Trouble is, it can be so weather dependent. However, with the blow-up in oil and its producers, there seems to be a legitimate supply issue. It looks as if this could run a lot further to the upside.

Gold/Silver seems more of a gamble. On the chart, it looks great. 50/200 crossover, long consolidation period. The only thing is the interest from the Reddit crowd, not a + in my book.

If you want potential short squeeze stocks:

Bull to continue? I think so:

And Mr flippe-floppe-flye:

With vol. higher again, moves in various markets are going to come back to life for a while at least. In today's early trade it is still far too early to tell whether the impact of last week is going to bleed into other markets. ATM, it looks like it might. I don't think today's early bounce is salvation for the bulls. We have a run back to Treasuries, PMs and the DXY.

These do not suggest that the market is currently bullish stocks. This is a run to safety atm. The current bounce is the buy-the-dip crowd. There will be a time to buy-the-dip, I'm just not convinced that it is today.

jog on
duc

 

[Smurf1976]

NG is famous for blowing shorts up. Trouble is, it can be so weather dependent. However, with the blow-up in oil and its producers, there seems to be a legitimate supply issue. It looks as if this could run a lot further to the upside.

In the context of North America, a lot of NG production is associated gas. That is, gas from wells that also produce oil.

Long story short = the collapse in oil drilling and wells not being drilled also means the gas won't be coming out of those wells either. From there it's simple supply and demand economics.

Some wells do produce gas only, some oil only, some both. Even within the same broad geographic area some individual wells may flow oil only, gas only, or both.

Australia's a completely separate gas market from that of North America, there's only extremely limited linkage between the two, but the same basic phenomenon has occurred. Some drilling that was to produce gas was postponed by the relevant companies once the oil price crashed - they're looking at the economics of the project overall and the prospect of the oil component being close to worthless, and perhaps fears of gas going the same way, lead to them postponing the project.

 

[ducati916]

Late post after an early start:

10yr yields continue to rise, not good for Gold.

VIX is dropping, but will it find support at 50EMA? It might.

Big bounce in NYMO, but, the trend is lower currently.

Market close to highs, but breadth is waaaaaaay off.

Lots from Mr flippe-floppe-flye.

10yr heading higher. Still looking +/- 1.3%

AAPL news.

And oil news:

- Global oil demand fell to 92.2 mb/d in 2020, a 9% decline from the year before, according to a new EIA estimate.

- Demand rebounded rapidly after hitting a low point in April 2020, but demand was stagnant and even contracted slightly in late 2020.

- The EIA expects a sharp rebound in demand this year, although two massive unknowns – the pace of vaccinations and the pace of infections from new covid variants – throw most forecasts into a deep state of uncertainty.

Market Movers

- Imperial Oil (NYSEMKT: IMO) was down 2.9% in early trading after posting a larger loss than expected. The company took a C$1.17 billion impairment on shale gas assets that it believes won’t be developed.

- ConocoPhillips (NYSE: COP) was up in early trading after posting a smaller-than-expected fourth-quarter loss at $800 million.

- Marathon Petroleum (NYSE: MPC) reported a fourth-quarter profit of $192 million, compared to $443 million in the same quarter a year earlier.

Tuesday, February 2, 2021

Oil shot up to a one-year high on Tuesday, with WTI topping $55 per barrel. The oil market is “supported by the combination of tightening fundamentals, as seen through the rising backwardation and the renewed risk appetite in the U.S. stock market,” said Ole Hansen, head of commodities research at Saxo Bank A/S.

ExxonMobil posts first annual loss in decades. ExxonMobil (NYSE: XOM) reported a loss of $20.1 billion in 2020, the first annual loss in at least 40 years, and also the fourth consecutive quarterly loss. The loss included a $19.3 billion write-down. At the same time, Exxon vowed to defend its dividend, stating that it would cut spending rather than the dividend if oil prices drop below $50 per barrel.

ExxonMobil announces carbon capture effort. ExxonMobil (NYSE: XOM) pledged to spend $3 billion on low-emissions technologies through 2025, mostly related to carbon capture. Bloomberg notes that much of the effort is old news and depends on not-yet-enacted government subsidies.

Exxon announces board shakeup. Exxon announced changes to its board amid investor pressure to cut spending. The changes came as D.E. Shaw, which owns a sizable position in Exxon. Reuters reported last week that more than 135 investors managing more than $2 trillion in assets formed a coalition to pressure the oil giant. Engine No. 1, a San Francisco-based investment firm, said Exxon needs independent board members “to ensure a clean break from a strategy and mindset that have led to years of value destruction.”

Exxon discussed a possible Chevron merger last year. Exxon and Chevron, were in talks to merge amid the pandemic crisis last year, the Wall Street Journal has reported, citing unnamed sources in the know. Such a tie-up would be one of the biggest corporate mergers ever and create a company that could be worth more than $350 billion based on Exxon’s and Chevron’s current valuations.

BP lost $5.7 billion. BP (NYSE: BP) lost $5.7 billion in 2020, the first loss in a decade. The company said it would ramp up renewable energy capacity to 50 gigawatts by 2030, up from 3.3 GW currently.

Glimmers of hope for crude oil prices. Oil was off to a reasonably good start this year thanks to the start of a vaccination push and a Saudi commitment to cut more production. The continued surge in Covid-19 infections and a new flare-up in China shook optimism and weighed on prices, but now things appear to be looking up based on the latest supply and demand data and forecasts.

Goldman Sachs: Oil market tightening. The oil market rebalancing “continues to beat our above-consensus expectations,” Goldman Sachs said in a January 31 note to clients. “Our base-case remains for a demand-led rebalancing of the oil market,” the bank said.

Total outperforms peers in 2020. French oil company Total (NYSE: TOT) outperformed other oil majors last year. According to Rystad Energy, Total reduced costs on a per-barrel basis by the most compared to its peers. It also discovered 1 billion boe in 2020, allowing it to be the only major able to replace more than 100% of what it produced.

Biden admin revokes drilling permits. Biden’s Interior Department approved drilling permits in the first few days in office, despite an executive order putting a freeze on them. On Friday, Interior said 70 permits were improperly issued, and they rescinded them.

Iran won’t return to the nuclear deal unless sanctions lifted. Iran said it would not simply return to the terms of the 2015 nuclear deal until American sanctions – implemented after the U.S. pulled out of the deal in 2018 – are removed.

Shell ordered to pay compensation for Nigeria oil spills. Royal Dutch Shell (NYSE: RDS.A) was ordered by a Dutch court to pay compensation to two Nigerian villages in a case that stretches back more than a decade. Importantly, the case establishes a precedent of parent companies being held responsible for pollution abroad.

Shell bets on power trading and hydrogen. Royal Dutch Shell (NYSE: RDS.A) is making big bets on expanding its power trading and hydrogen units as part of its energy transition plans.

Offshore wind turbine market heating up. Competition is heating up in the market for offshore wind turbine manufacturing, with incumbent Siemens Gamesa Renewable Energy (BME: SGRE) seeing a rising challenge from GE (NYSE: GE) and Vestas Wind Systems (CPH: VWS). Meanwhile, Siemens said it would eliminate 7,800 jobs by the end of 2025, mainly from its gas and power division.

Natural gas prices rise on winter weather. On Monday, natural gas prices shot up by more than 11% as colder weather swept over the northeast.

Goldman: Gas markets tight in summer. Goldman reiterated its view that natural gas markets look increasingly tight heading into next winter. The bank sees U.S. natural gas prices averaging $3.25/MMBtu in the summer.

Automakers abandon Trump's effort to stop California fuel economy rules. A group of automakers abandoned their support for the Trump administration’s efforts to bar California from setting tighter fuel economy standards. The companies include Toyota, Fiat Chrysler, Hyundai Motor, Kia Motors, Mitsubishi Motors, and Subaru Corp. An auto industry trade group also proposed opening talks with the Biden administration on tightening federal standards.

jog on
duc

 

[gartley]

 

[gartley]

EURUSD has met weekly upside projection and reversed. The DXY is on the verge of giving a weekly buy signal. Let's see how the broader market reacts to that. A lot of pundits saying EURUSD will only be a brief pullback but I am not convinced......

 

[ducati916]

Some interesting data re. earnings:

That is an issue. When earnings are good, the small rise and later sell-off do not bode well.

VIX is down, but still at this long standing support area, with stocks near their highs. Yesterday's chart re. breadth, which is falling away, is also a cause for concern.

Arabs obviously want higher prices. Now that fracking and US supply is broken, with Biden set to reduce supply further, oil can move higher still.

Natural Gas is still looking bullish.

jog on
duc

 

[ducati916]

EURUSD has met weekly upside projection and reversed. The DXY is on the verge of giving a weekly buy signal. Let's see how the broader market reacts to that. A lot of pundits saying EURUSD will only be a brief pullback but I am not convinced......View attachment 119503

I already have DXY signalling long.

jog on
duc

 

[gartley]

I already have DXY signalling long.

View attachment 119523

jog on
duc

I'm with you brother got a long on the daily about 2 weeks and sold the EURUSD and longed USDCAD. Weekly which obviously lags a bit only just starting to give the signal. Did it that way on purpose so reduce the number of duds.

 

[ducati916]

Today we have some VIX data:

This chart is essentially correct: after big VIX spikes, it pays to be long. So far so good. The reasoning is then that as we have just had a significant spike, long and strong, is the way forward.

Maybe.

I agree generally (most of the time) long after a big spike is the correct position. Except that last year, we had a spike, which was followed by an even bigger spike (circled).

How this was differentiated was on breadth and market level. We had a new all time high, with falling breadth. Today we almost have an all time new high and falling market breadth.

That should at least provide a cautionary position.

Interest rates world wide are on the rise.

Why?

Stocks are far more resistant to rising rates than is gold (as an example) but they (stocks) are not immune to rising rates.

For Gold, it looks grim atm:

Rates are going to 1.3%. Whether they stop there, continue to rise or the Fed. steps in, we'll just have to wait and see.

Dodgy coin: POS. Worth speculating on? Of course, why not.

SPACS are generally speaking doomed, much like the dot.com junk. There may well be some survivors down the road, but sifting the wheat from the chaff will take place at some point.

Not much from my main man, Mr flippe-floppe-flye

jog on
duc

 

[gartley]

Really starting to look like an important month........

 

[gartley]

Some thoughts on short term wave count. Wall street crooks and banksters like clockwork again pumping up the futures....

 

[qldfrog]

I have had a couple of expensive too early bear move lately, just hope i will not miss the real one

 

[gartley]

I have had a couple of expensive too early bear move lately, just hope i will not miss the real one

I always take partial profits (50% of investment) when the market I trade moves the equivalent of a 14 day average True Range and then move my stop to break even. Leant that the hard way. If the move does work out you will sacrifice some profits but it's much less stressfull.
Re the big one, I missed the Covid crash as was on holiday in Tassie but that's life. However always hard to pick a top, always better to wait for that initial sell off and look to position on the first reaction.

But can't complain too much this week EURUSD, Gold sell worked out as planned and USDCAD long I suspect ready to rock an roll soon

 

[ducati916]

First week of Feb. almost completed:

Energy and Financials leading the way this week.

With the market bouncing hard and back to or exceeding the previous high, the bulls are back in command, for the moment. Adding to the divergence in breadth, there are a couple of other warning signs:

Low short interest. A high short interest is better for a bull market as it adds a further buying demand. A low interest means that there is no squeeze play (nothing as a dramatic as GME) to push prices higher.

A second consequence is that in any initial decline, the decline is brought on by closing long positions rather than short selling. Short sellers to profit (from their short selling) at some point will (have) to buy their shorts back in, creating a (temporary) bottom/bounce. If the decline is from (primarily) closing longs, this natural pause, bounce, is absent.

Short selling rather occurs into an already falling market, amplifying the move lower.

See next chart.

Margin:

Now this is an issue: when selling hits, it is amplified as margin evaporates and so does liquidity, amplifying a further contraction in margin and so on.

The market (while making new highs) is unstable. Ironically, there is more risk at market highs, than at market lows, particularly in a sell-off as we had last year.

If you look at the divergence in breadth chart, you'll see that there can occur a time interval that defies measurement, between a stealth decline and an actual market decline, which is a function of construction and capitalisation weighting.

Article from Rosie:

https://money.usnews.com/financial-advisors/articles/q-a-david-rosenberg-on-economic-recovery-and-a-stock-market-bubble

And Mr flippe-floppe-flye:

And Energy news:

Friday, February 5th, 2021

Brent is closing in on $60 per barrel for the first time since January 2020. Crude inventories in both China and the U.S. declined this week, offering more evidence of a tightening market. “The physical market is also looking increasingly tight,” said Eugen Weinberg, head of commodities research at Commerzbank AG.

Shell profits drop, but boosts dividend. Royal Dutch Shell (NYSE: RDS.A) reported a $4.8 billion profit for 2020, down 71% from the year before. The oil major hiked its dividend for the first quarter, following a sharp cut last year. “We are coming out of 2020 with a stronger balance sheet,” Chief Executive Ben van Beurden said in a statement.

Shell sees oil demand back to “normal” in 2022. “I believe 2022 is going to be sort of back to normal” regarding global oil demand, CEO Ben van Beurden said. However, that depends on the aviation sector experiencing a full recovery.

Oil surges as OPEC+ keep cuts in place. Saudi Arabia kept oil shipments to Asia unchanged even as the market has tightened, sending oil prices higher this week. “It looks like, at every turn, Saudi seems to want to support the market,” Michael Hiley, energy trader with LPS Futures, told Bloomberg. “If demand really picks up, we could be short oil pretty quickly, because U.S. production isn’t going to come back fast.” At the same time, division may increase between OPEC+ members as prices continue to rise.

Engine No.1 pans Exxon strategy. Engine No.1, an investment firm that has taken a large stake in ExxonMobil (NYSE: XOM) and has sought changes to the board and to corporate strategy, criticized the oil giant’s leadership and issued a statement lambasting the company’s latest moves as insufficient. “A Board that has underperformed this dramatically and defied shareholder sentiment for this long has not earned the right to choose its own new members or pack itself in the face of calls for change,” Engine No. 1 said. The firm said that Exxon’s current course ensures “continued value destruction.”

Supreme Court to hear pipeline case. The U.S. Supreme Court will hear a high-profile case involving the use of eminent domain. The PennEast Pipeline Co. LLC is looking to condemn land in Pennsylvania from private citizens in order to build the project that would carry shale gas to refineries on the east coast. The case could have broad repercussions over how energy companies can use eminent domain.

Biden restarts Vineyard wind. The Biden administration said on Wednesday it would restart permitting for the first major U.S. offshore wind farm, after the Trump administration froze the process.

Biden DOE nominee advances. Jennifer Granholm, nominated to head the Department of Energy, easily cleared a committee vote, suggesting she will have little trouble earning confirmation. She voiced support for U.S. LNG exports even as she championed climate action.

Ford to double EV investment. Ford (NYSE: F) said it would spend $22 billion on EVs through 2025, twice its earlier plan.

Apple to invest $3.6 billion into Kia Motors. Kia Motors (KRX: 000270) surged nearly 15% after local media reported that Apple (NASDAQ: AAPL) would invest $3.6 billion in the company to build out EVs.

Chesapeake Energy cuts 15% of staff. Chesapeake Energy (NYSE: CHK) said it would cut 15% of its staff as it prepares to exit bankruptcy.

China’s coal plants 3x more than rest of world. China added 38.4 GW of new coal capacity in 2020, more than three times built in all of the rest of the world.

The COVID-19 pandemic has upended global energy investment trends. The pandemic has not broken but intensified global energy trends that emerged on the eve of COVID-19, whether it be the collapse of coal-fired power generation, the growing surplus of oil production, or the booming interest in renewables.

The green industries minting billionaires. Want to get rich quick while playing a part in fighting climate change? Here are the clean energy sectors that have been creating billionaires.

$1 trillion in stranded assets for pipelines. A new report from Global Energy Monitor finds that 212,000 kilometers worth of pipeline is under construction or on the drawing board, roughly equivalent to the entire length of the U.S. highway system. The report says that could result in $1 trillion getting stranded as the energy transition accelerates.

Chevron bids $1.13 billion for Noble Midstream Partners. Chevron (NYSE: CVX) said on Friday it had offered to buy Noble Midstream Partners LP in a deal valuing the company at $1.13 billion. The decision comes just a few months after Chevron bought the upstream operator, Noble Energy.

Interior cancels offshore Alaska lease sale. The U.S. Department of Interior canceled work on a propose lease sale off Alaska’s southcentral coast, following President Biden’s executive order pausing leasing on federal lands.

South Korea to build $43 billion offshore wind. South Korea unveiled $43.2 billion plan to build the world’s largest wind power plant by 2030.

Canada oil and gas deals surge 468%. M&A transactions in Canada in the fourth quarter last year were worth US$10.01 billion, up by 468.3 percent from the previous quarter and a surge of 504.2 percent compared to the last four quarter average of US$1.66 billion, according to data from GlobalData cited by World Pipelines.


jog on
duc

 

[ducati916]

Some quotes:

Pullbacks from OB to below 50MA are more numerous. I have no data on other markets, but might be worth investigating.

We have had rotating leadership throughout. A healthy sign.

Housing running hot:

Commodities running hot:

Both are inflationary. Both are excluded from CPI numbers. But both will drive an increase in the yield on the 10yr. Check out the TIPS also.

The DXY. Has (currently) buying support from the Commercials:

Gold does not:

The signal from the COT is a strong signal when the Commercials and price direction align, as they have here. The Commercials are counter-trend the majority of the time.

No help in NG.

But not heavy selling in SPY, indicating what exactly? I'm still defensive re. stocks given (a) the divergences that are cropping up everywhere, (b) the lack of follow through re. earnings, (c) the rise in 10yr yields, (d) rise in margin, (e) the number of speculative bubbles in various stocks and asset classes and (f) the speed/depth of pullbacks when they occur. All of the above indicate an unstable market which will correct/reverse very quickly under minor conditions.

I also have the weeks data charts, but these will have to constitute a further post as the 11 chart limit kicks in.

jog on
duc

 

[ducati916]

Part deux:

Margin debt up +/- 50% over the period of a year.

Pretty much all SPACS

Bit of a premium in the physical prices. Nothing outrageous.

More SPACS

History doesn't repeat, but it rhymes:

And from the present day GME fiasco:

jog on
duc

 

[qldfrog]

Part deux:

Margin debt up +/- 50% over the period of a year.

View attachment 119736

Pretty much all SPACS

View attachment 119737

View attachment 119738

Bit of a premium in the physical prices. Nothing outrageous.

View attachment 119739

View attachment 119740

More SPACS

View attachment 119741

History doesn't repeat, but it rhymes:

View attachment 119742

And from the present day GME fiasco:

View attachment 119743

View attachment 119744

jog on
duc

Amazing that one can think that holding on gameshop, it might recover...

 

[Warr87]

its a little surprising given that there were articles and talk about it coming back down at some point. but who knows what was going through their minds.

 

[qldfrog]

its a little surprising given that there were articles and talk about it coming back down at some point. but who knows what was going through their minds.

I understand (a bit) jumping on the wagon but at the very least be realistic and once it started plunging, it was really a case of get the Fxx out ASAP.you could hang onto Afterpay or even Tesla after a crash, but that was really a play against the short so with an expiring date even if it worked..which it did in a way, then the funds got the final laugh on the late (re) tarded suckers jumping onto what was just a wagon to oblivion
Not sure if we should laugh or cry.The enthousiasm and stupidity of youth I think

Not a good sign for the so called background in finance, am I the only one to have a smile when my eye caught this?