Weeks Review into W/C 11th July 2022

Weeks Review into W/C 11th July 2022

July 10, 2022 0 By The Balanced Trader
Weeks Review

A busy week sees the release of a series of GDP data for the UK, China and Singapore, which will no doubt take centre stage. At the same time, industrial production data for Japan, Eurozone, India, China and the UK will be eyed for clues as to whether growth rates have slowed. The week will end with retail sales and sentiment data for the US.

The global trend of aggressive monetary policy tightening meanwhile looks set to continue, with Bank of Canada widely expected to deliver a 75 basis point rate hike this week, following two consecutive 50 basis point rises.

The spotlight however likely lays with China, which has seen lockdowns persist into the second quarter, for which GDP data are released. While the latest PMI revealed a return to growth following some recent relaxations of COVID-19 restrictions, demand growth remains weak amid the ongoing zero-COVID policy. Our forecasts currently see China (mainland) contracting in Q2 at an annualised quarterly rate of 0.17%, taking the year-on-year growth rate to 0.8%, the weakest since the pandemic lockdowns of Q1 2020.

The UK will also issue Q2 GDP estimates on Wednesday, alongside services and industrial output data, which are also likely to show an economy in decline. Although recent PMI data for the UK pointed to business activity growth, the surveys also show the cost of living crisis having hit demand growth, adding to the risk of a further UK economic contraction, and technical recession, in Q3.

A relatively quiet week for the US with only retail sales and sentiment data due on Friday. That said, retail sales figures will be watched intently to assess whether surging fuel costs have added to price pressures and forced consumers to cut back on spending, as hinted by the latest PMI data.

Elsewhere, industrial production data for the Eurozone, Japan and India will be closely watched. The former two have seen industrial production contract in recent months which is expected to be the case yet again. Meanwhile, India’s manufacturing sector continues to perform strongly.

Source:IHS MARKET click here for the full economic Preview

11th July Holiday leading into CPI and Retail Sales

The labour market will be in the spotlight next week, with the release of the Labor Department’s June nonfarm payrolls report on Friday. Other labour market reports, such as the Job Openings and Labor Turnover Survey (JOLTS) and ADP’s National Employment Report, which tracks private-sector payroll growth, will provide additional information about the labour market. On Tuesday, international PMI surveys tracking business sentiment in the United Kingdom and the eurozone will be released. The minutes of the FOMC’s most recent policy meeting, held in mid-June, will be available on Wednesday. It will be a quiet week for corporate earnings before the second-quarter earnings season kicks off in mid-July.

KEY TAKEAWAYS

  • Corporate earnings season kicks off next week, with second-quarter earnings expected from some of the largest banks and financial institutions, including JPMorgan Chase, Wells Fargo, Citibank, Morgan Stanley, and BlackRock, among others.
  • The latest inflation readings, tracking the month of June, are expected as the Bureau of Labor Statistics (BLS) is set to release CPI and PPI figures on Wednesday and Thursday, respectively.
  • June retail sales data will be released Friday, providing valuable insight on consumer spending and overall confidence.
  • The preliminary July reading of the University of Michigan’s Consumer Sentiment Index will also be released Friday, after the consumer sentiment indicator plunged to a record low in June.

Events Calendar:

Events Calendar:

Monday, July 11

  • New York Fed President John Williams gives a speech

Tuesday, July 12

  • PepsiCo (PEP) reports earnings
  • NFIB Business Optimism Index (July)
  • IBD/TIPP Economic Optimism Index (July)
  • Consumer Inflation Expectations (June)

Wednesday, July 13

  • Delta Air Lines (DAL) reports earnings
  • Consumer Price Index (CPI) Inflation Rate (June)
  • Fed Beige Book Release

Thursday, July 14

  • Taiwan Semiconductor Manufacturing Company (TSM), JPMorgan Chase (JPM), Morgan Stanley (MS), Cintas (CTAS), First Republic Bank (FRC), and ConAgra Brands (CAG) report earnings
  • Producer Price Index (PPI) Inflation Rate (June)
  • Fed Board of Governors Member Christopher Waller gives a speech

Friday, July 15

  • UnitedHealth Group (UNH), Wells Fargo (WFC), BlackRock (BLK), Citigroup (C), U.S. Bancorp (USB), PNC Financial Services (PNC), BNY Mellon (BK), State Street (STT), and First Horizon (FHN) report earnings
  • Retail Sales (June)
  • Import Prices (June)
  • Export Prices (June)
  • Industrial Production (June)
  • Michigan Consumer Sentiment Index – Preliminary (July)
  • Business Inventories (May)
  • Retail Inventories (May)
  • Atlanta Fed President Raphael Bostic gives a speech

Source: Investopedia

Earnings Season Kicks Off with Bank Earnings

The corporate earnings season kicks off next week, with some of the largest U.S. banks and financial institutions scheduled to report. JPMorgan Chase, Morgan Stanley, and First Republic Bank will report on Thursday, followed by Wells Fargo, BlackRock, Citigroup, U.S. Bancorp, PNC Bank, BNY Mellon, and State Street on Friday. Other companies scheduled to report include PepsiCo, Delta Air Lines, TSMC, and UnitedHealth.

Bank earnings are expected to take a hit from the sharp decline in mortgage refinancing applications as rates have soared in recent months. Big banks account for some of the largest mortgage lenders, and some, including JPMorgan Chase and Wells Fargo, have begun laying off workers in response to market losses. Wells Fargo previously reported a 33% year-over-year decline in mortgage revenue for the first quarter, a decline that is expected to accelerate as the bank reports earnings on Friday.

Weekend Reading:

Is A Global Recession Coming?

Here is Macro Alf who talks about the global economy and the possibility of a recession. He is a top analyst and recommends to all who want to follow the latest economic developments.

Here is his Twitter feed: https://twitter.com/MacroAlf https://themacrocompass.substack.com/p/recession#details

And here is a short video explaining some macro: How housing and durable goods are important leading indicators and something to be closely monitored.

Oil’s Latest Slump: Goodbye Inflation Trade, Hello Recession

  • US crude futures fell below $100 for the first time since May
  • The market remains vulnerable to big moves amid liquidity crunch

And finally, I am often commenting on the price of oil, its importance as a primary cost inflator to almost everything in the global economy makes it an important market to monitor every day. We are seeing high correlations between WTI and inflation-sensitive markets. We are at a critical moment regarding pricing on the one hand Putin/War inflationary pressures and the emerging recession narrative.

Here is an alternative piece looking at the emergence of the recessionary narrative in oil. Please also look at the GFC crisis and see what happened to oil during that period. I won’t spoil it, look for yourself:)

https://www.bloomberg.com/news/articles/2022-07-06/oil-s-latest-slump-goodbye-inflation-trade-hello-recession

Notable tweets

Weekly Review

Weekly review

NFP Week Debrief 

Inside a week, early on the auction tested the prior week’s low area, the auction failed to break below to leave a non-excess low of 3744. The auction moved higher to test the other side of the previous weekly extreme, leaving an equally non-excess high.

Multiple Distribution Week 

H: 3922 L: 3744  VPOC 3905 MID 3830 VWAP 3846 SETTLE: 3906

MONITORING: 3922- High  | 3830  MID Area  |

Why look at the Weekly and Monthly?

Using the composite profiles gives me a lot of clarity in understanding the market. Understanding the story and the basic mechanics of what is going on simplifies almost every other aspect of my trading, especially timing.

By identifying areas of balance/ acceptance in the auction I have a natural edge. I can identify value and the pivots of change. In balance I look to fade the extremes, when activity leaves an area of acceptance, I monitor for strength and conviction of the move. For this, I use volume and value as a guide. As a general rule, if a move is genuine, volume and value will move in away from prior acceptance to a new area.

Monthly Profiles

Something that was noted in the weekly and daily profiles was the lack of time being spent auctioning between the HVN > looking at these on the monthly it’s clear to see the magnetic attraction to the HVN areas. Inside the HVN expect Choppy Price action.

Monthly Multi Distribution,

H 4922 L 3744 VPOC 3905/3774

3 Month Profile References
3 Month Profile April To Current

All images can be found on my Twitter feed in high resolution. Please let me know if you have issues much appreciated.

UPDATE: