Weeks Review into W/C 18th July 2022

U.S. equity markets rallied late in the week following a report showing retail sales rose more than economists anticipated onOvernight Session More resilient consumer demand despite higher prices. However, markets still posted losses for the week due to earlier declines after disappointing earnings reports from big banks and the latest reading of the Consumer Price Index (CPI) showed prices rose at a faster-than-expected annual rate of 9.1% in June. For the week, the Dow lost 0.2%, the S&P 500 shed 0.9%, and the Nasdaq declined 1.6%. 

Bond prices rallied this week, with the yield onOvernight Session More the 10-year U.S. Treasury note declining to 2.93% at the end of the week as demand for safe-haven assets continued to rise. The yield curve inversion also deepened, with the yield onOvernight Session More the two-year Treasury note at 3.12% exceeding that of the 10-year note. Oil prices fell steeply amid lingering concerns about a potential global recession and slowing demand for fuel in the U.S. market. The price of West Texas Intermediate (WTI) crude fell from $104 per barrel at the start of the week to just over $97 per barrel onOvernight Session More Friday.

KEY Events

• Earnings season continues, with more financial firms due to report onOvernight Session More Monday, including Bank of America, Goldman Sachs, and Charles Schwab.
• Johnson & Johnson, Novartis, and Netflix report onOvernight Session More Tuesday.
• Tesla, Abbott Laboratories, Baker Hughes, Discover Financial Services, United Airlines, Harley Davidson, and others report onOvernight Session More Wednesday.
• June housing starts and building permits will be released onOvernight Session More Tuesday, followed by existing home sales onOvernight Session More Wednesday.
• The European Central Bank (ECB) is expected to raise its benchmark interest rate for the first time since 2011.

Events Calendar:

Monday, July 18

• Bank of America (BAC), IBM (IBM), Charles Schwab (SCHW), Goldman Sachs (GS), and Prologis (PLD) report earnings
• NAHB Housing Market Index (July)

Tuesday, July 19

• Johnson & Johnson (JNJ), Novartis (NVS), Lockheed Martin (LMT), Netflix (NFLX), Halliburton (HAL), Citizens Financial (CFG), and J.B. Hunt (JBHT) report earnings
• Housing Starts (June)
• Building Permits (June)
• U.K. Employment Growth (April)

Wednesday, July 20

• Tesla (TSLA), Abbott Laboratories (ABT), Crown Castle (CCI), CSX Corp. (CSX), Kinder Morgan (KMI), Biogen (BIIB), Discover (DFS), Baker Hughes (BKR), Nasdaq Inc. (NDAQ), Las Vegas Sands (LVS), Equifax (EFX), Northern Trust (NTRS), United Airlines (UAL), and Harley Davidson (HOG) report earnings
• Existing Home Sales (June)
• U.K. Inflation Rate (June)

Thursday, July 21

• Danaher (DHR), AT&T (T), Phillip Morris (PM), Union Pacific (UNP), Marsh & McLennan (MMC), Blackstone (BX), Capital One Financial (COF), IQVIA (IQV), Travelers (TRV), Freeport-McMoran (FCX), Dow Inc. (DOW), Snap Inc. (SNAP), Tractor Supply Co. (TSCO), Quest Diagnostics (DGX), Domino’s Pizza (DPZ), American Airlines (AAL), and Mattel (MAT) report earnings
• Philadelphia Fed Manufacturing Index (July)
• Conference Board Leading Index (June)
• ECB Policy Meeting/Interest Rate Decision
• Japan Inflation Rate (June)

Friday, July 22

• Verizon (VZ), NextEra Energy (NEE), American Express (AXP), and Schlumberger (SLB) report earnings
• S&P Global Composite
  In addition to monitoring the previous day's Market prof... More PMI – Flash Estimate (July)
• U.K. Retail Sales (June)

Source: Investopedia

US Flash PMIs in focus. Canada releases inflation and retail sales figures

This week will see US flash PMI in focus after last month’s data pointed to a US demand falling as inflation rates hit 40-year highs, but leading indicators of inflation fell. Growth is expected to slow in July.
Meanwhile, after Canadian policymakers surprised the market with a larger than expected 100bp rate hike, this week’s inflation data will be in focus with the CPI predicted to remain high around the 8.8% mark.

https://cdn.ihsmarkit.com/www/pdf/0722/Week-Ahead-22-07-18.pdf

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 onOvernight Session More Thursday, followed by Wells Fargo, BlackRock, Citigroup, U.S. Bancorp, PNC Bank, BNY Mellon, and State Street onOvernight Session More Friday. Other companies scheduled to report include PepsiCo, DeltaDelta hedging seeks to mitigate, or hedge, the directional r... More 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 onOvernight Session More Friday.

https://www.earningswhispers.com/calendar

ECB Interest Rate Decision

OnOvernight Session More Thursday, the European Central Bank (ECB) is expected to raise its benchmark interest rate, the deposit facility rate, by 25 basis points (bps) at the conclusion of its July policy meeting. The rate hike will be the ECB’s first in over ten years, raising the benchmark interest rate to -0.25% from -0.5%, a level it has held since 2014. Surging inflation in the eurozone, currently running at a record high annual rate of 8.6%, has prompted the ECB to abandon its accommodative monetary policy stance of the past decade and prepare to raise interest rates for the first time since 2011.

In recent months, a growing disconnect has emerged in the monetary policy trajectories of the ECB and the U.S. Federal Reserve, which has raised interest rates more aggressively by a cumulative 150 bps since March. By contrast, the ECB has yet to raise rates in 2022, and is significantly behind its U.S. counterpart in addressing rising inflation. The divergence and growing concerns about recession risks have caused the euro to depreciate considerably relative to the U.S. dollar, with the euro falling below dollar parity for the first time since 2002 this week.

https://research.danskebank.com/research/#/Research/article/ac3a6ed9-a62c-47f9-b722-52fd029d28ae/EN

https://think.ing.com/articles/rates-3-questions-into-the-july-ecb-meeting/

https://think.ing.com/articles/ecb-gets-ready-for-rate-lift-off/#a3

NFP Week Debrief 

Weekly Debrief

Some key takeaways from the week’s profiles. Early in the week, anaemic demand from buyers as successive opening gaps More to the downside (Tuesday opened 1 point inside Monday’s range) into Thursday’s auction which also opened with a true gapAn open where the price is above or below the previous day's... More below the prior range. 

The failed breakout of the inside week to the downside onOvernight Session More Thursday was an important event, early open weakness and a drop below prior two-week lows 3741 failed to draw in stronger sellers and the early imbalance reversed closing back inside Wednesday range and crucially back inside weekly balance. 

This resulted in a short squeeze into the OPEX  and Friday’s close, ending in a daily and weekly ‘p’-profile.  OPEXOptions typically have monthly expirations, but CME has rece... More and month end usually highlight a turning point and the weekly auction and daily candles seem to illustrate this cyclical anomaly.  Too early to read too much into this and the lows were not the most convincing, typical summer activity. Into this week we have some key fundamental macro events with all eyes onOvernight Session More Lagarde, the PMIs, and all important corporate earnings/fwd guidance.

‘P’ Distribution Week 

H: 3884 L: 3721 VPOCThe POC or Point-of-control is the price where the most amou... More 3856 MID 3803 VWAP 3821 SETTLE: 3866.75

MONITORING: 3884- High  | 3856-POC and   MID Area  3800 |

Why look at the Weekly and Monthly?

Using the composite
In addition to monitoring the previous day's Market prof... More profiles gives me a lot of clarity in understanding the market. Understanding the story and the basic mechanics of what is going onOvernight Session More 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.

Interesting monthly VPOCThe POC or Point-of-control is the price where the most amou... More was between two HVNHigh volume node, or peak. An area that has been well traded... More 3744 and 3922 areas and this week the auction has firmly established value at 3856. Beautiful.

Monthly Multi Distribution,

H 4922 L 3721 VPOCThe POC or Point-of-control is the price where the most amou... More 3856