Morning 1-29

Per WSJ “About 24 billion shares changed hands in the U.S. equities market on Wednesday, a record, data from Rosenblatt Securities show. Volume in the options market also hit a record of 59 million contracts, Trade Alert data show.

 Yesterday Robin hood had to draw down Credit lines for at least $1billion From CEO Vlad tenev “Look it is not Negotiable for us to comply with our financial requirements and clearing house deposits” “We have to do that”-BBG    After yesterdays Forced liquidation or statements of Closing positions trades and outrage from Everyone from ted Cruz to AOC Robinhood allowing two sided trades in GameStop and other high Fliers, as are other Firms GameStop +100%  ,$150.

 Now GameStop went from the least weighted stocks in the Russell 2000 to the top of the list thus causing all sort of issues with Basket trades or ratio trades with Russell as one leg. This likely caused Funds to buy and sell GameStop and buy and sell Russell From Jack Farley at Real vision “always great stuff.

   “Briefly today, it was the biggest stock in the index. It went from about 0.02 as of a few months ago to 0.5%. As GameStop commanded a bigger and bigger presence within the index, it forced passive funds like BlackRock to buy more, because if GameStop increases in price, and you do not buy more, and you just have the Russell 2000, effectively your net short, GameStop. That is something that we have learned, you do not want to do. What do these three forces have in common? Forced buying. The short sellers had to buy back their stock in order to cover their short position, the market makers in the options markets, they had to buy the underlying GME in order to hedge their delta as the price went up, and then as the price went up, they had to hedge it more and more exponentially. Then third, and this is slightly more of a niche point, a less established fact, is that the indexes had to buy the stock back as it went up. What do these three forces have in common? Forced buying. What happened today? Forced selling, that is exactly what happened as accounts of retail traders were closed out as retail brokerages says, oh, we cannot handle the exposure anymore. It is too risky. The spreads are too wide. It is just too bad. We cannot do it. It is too risky. We are going from forced buying to force selling. I think that could be a harbinger of what is to come.”

  Other news less bad Eurozone

  • The German economy expanded 0.1% on quarter in Q4, beating market forecasts of a flat reading, and despite a coronavirus national lockdown imposed from mid-December.
  • The French GDP shrank 1.3 percent quarter-on-quarter in Q4 2020, compared with market consensus of a 4.0 percent fall and after a record growth of 18.5 percent in Q3, preliminary data showed.
·         Spain’s GDP grew by 0.4 percent on quarter in the three months to December 2020, following a record 16.4 percent advance in the previous period and compared to market expectations of a 1.5 percent contraction as the impact of tightening COVID-19 restrictions since November was less severe Trading Economics.
  • Bitcoin on the Bid as Elon Musk added #Bitcoin to His twitter page, Nothing else Futures +16%-BBG.
  • NOVAVAX SHARES UP 42.5% PREMARKET AFTER CO SAYS ITS COVID-19 VACCINE WAS 89.3% EFFECTIVE IN UK TRIAL-@deltaone
  • But bad news JnJ says 1 shot vaccine not as effective as 2 shot and less effective against new strains.
  • Johnson & Johnson says its one-dose Covid-19 vaccine has been 66% effective in global trials.
  • Also figuring into the mix, however, was a Bank of Japan announcement about cutting the size of shorter dated JGB purchases out to five years. Market participants are starting to wonder what is going on here following the Jiji Press story from last week suggesting the BoJ is considering widening the band for 10-year yields targeted under the Yield Curve Control program
  • Also figuring into the mix, however, was a Bank of Japan announcement about cutting the size of shorter dated JGB purchases out to five years. Market participants are starting to wonder what is going on here following the Jiji Press story from last week suggesting the BoJ is considering widening the band for 10-year yields targeted under the Yield Curve Control program

Markets:

 7:30 inflation Data from Canada and US (PCE core) running a bit hot Bonds on the offer buy commodities Stocks heavy   GameStop back trading +$100   sell the indices Gold and Silver Higher

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Most shorted

The GS most shorted Index touched all time highs with multi- year high in volume. This epitomizes The “throw in the towel and Cover the shorts ” of individual Stock names. We have all been there don’t cover, dont cover then you are forced to cover, next day then drops. i would then sell again and lose more money hence why I don’t trade anymore, to Quote Rod Stewert Every picture tells a story, dont it

30 year yields just because I was looking at this chart

Morning 1-28

Sell you Winners to Cover your losers The Theme of this week.

 Spx, Nasdaq and Dow closed yesterday with the biggest losses since late October, SPX now down a smidge for the Year .14%. Gamestop flirting with $500. The short Squeeze not just a U.S. phenomenon Bloomberg reporting squeezes happening Worldwide from Poland to India. This morning Sundial Growers a Canadian Weed company being discussed as a Squeeze target.

 How does this affect the big Boys? Well, they are slashing their Equity exposure at fastest rate since 2014 as they sell the winners and buy the losers one of the reasons for the brisk sell off yesterday From Bloomberg. 

 “Heavily shorted companies across the globe are seeing their shares jump as traders race to bet on where the flood of retail money might head next. There is a long list of potential targets – companies that have short-interest levels above 30% of their share float – which have seen rallies in recent days. Shares in GameStop Corp. surged again in premarket trading, moving above $500 at one point. For hedge funds, the attack on their short positions is proving painful, and moving the wider market as they slash their equity exposure at the fastest rate since 2014.   And to some the trading environment this week from … @PriapusIQ We are at that stage where just the fear of a rumor that #WSB may target a stock or asset is enough to put a bid into it.

 Big tech Earnings tesla reported Lower than expected profit -5%, Apple’s Quarterly revenue topped $100B   but stocks still traded lower by 1-3% post earnings warned of Significant uncertainty for 2021 stock off a bit.  What isn’t off a bit is Vix   highest close in a few weeks but what is getting everyone’s attention is the Upside calla activity that took place yesterday per IFR news open interest in 55 calls +84k   60 calls +80k.

 Hmmm Stocks in China taking on the china as Rumblings and pricing of possible policy tightening causing a bit of angst and profit taking CSI 300 -2.7%, Shaghai comp -1.9% Hang Seng -2.5% and iron ore lowest close in 6 weeks per Mizuho “The PBOC is playing a big part in the stock market jitters. China stocks slumped on Thursday hit by investor concerns about policy tightening. Shanghai Composite fell 1.9% to 3,505.18, its lowest closing since Jan 4 and biggest intraday fall since Jul 24. The blue-chip CSI300 index was down 2.7%, its biggest drop since Jul 24. One-year interest-rate swaps, a gauge of trader expectations for future liquidity, rose 5 basis points to 2.64%, in line for the highest since Dec. 7. The rate has surged 17 in the past five sessions, the longest stretch since July last year. The overnight repo rate increased to 3.05%, the highest since March 2015.

Markets

 Nasdaq still offered down 100 handles but rallying a bit post GDP number Russell in the green today tour market leader, Spoos sideways to higher. Crude small bid, Bitcoin steady Robinhood not allowing new purchases in all the high-flying short squeeze names   so spoos and Nasdaq running.

Reflation trade

A bit of Hiccup but Graphs below hint that reflation or Expectations of a bit higher Inflation still in uptrend. Below ratios are Log Charts

materials/utilities

SPX/Gold

CRB all Commodity/Bond futures continuation chart Reflation trade still okay

Dollar still the Driver

A smart rally in the dollar pressed all risky assets lower as it approached some significant levels, Inverse head and Shoulders pattern if you believe in that breaks neck line right around 91 ish and portends further gains. The sideway pattern in all markets seems contingent on what Dollar index wants to do, Lower Dollar =more reflation trades= higher commodities and vice versa. Short term trend dollar sideways but a break above aforementioned levels and that trend may turn higher. We saw what occurred today when the ECB took another verbal shot at Euro Strength saying people underestimate possibility of ECB rate cut, so keep that in mind on any Firm Dollar move higher. Start of new Currency war plenty of Experts discussing this. Stronger currency=lower inflation and as all Developed Central banks want to see a bit of Inflation no one wants to be the “Strong Currency”

A great point from mizuho today players selling reflation trades to Cover losses elsewhere

Currency Grid showing FX off worse levels of Day but still lower

Morning 1-27

  • Gamma games. The most-shorted shares in the Russell 3000
    witnessed a 6.77% rally yesterday and is up a robust 40% since
    the beginning of the year, and a whopping 303.46% higher from
    the March 18th low. -Mizuho
  • ECB’s Knot and Said that “ECB could lower rates to counter Euro Strength.”
  • Microsoft Upgraded post Earnings by Citi and Morgan Stanley
  • A Big bearish treasury play being executed overnight via Options which pays off if 10-year yields move above 1.27%- BBG.
  • *EU CONSIDERING STRICTER HEALTH BORDER CONTROLS: FRENCH GOVT
  • AMC   SHARES MORE THAN TRIPLE PREMARKET ON OVER 100M SHRS TRADED.
  • Hit by both the grounding of the 737 MAX and then by the global pandemic that paralyzed its airline customers, Boeing suffered a massive net loss last year of $11.9 billion, the largest in its history. St. news/39kn
  • Dr Scott gotlieb said to wear Double masks as the new Virus strain spreading in US.

 Risk Off Why?

Frankfurt’s DAX 30 falling more than 1.5% after the EU said AstraZeneca pulled out of a call with governments over rollout plans while the drug maker said it still planned to take part. Traders remain concerned about the slow pace of vaccination across the continent while infections continue to rise. -Trading Economics

French Gov’t spokesman Attal: Various scenarios being examined, including keeping current COVID-19 curfew system, as well as harder measures.

*EU CONSIDERING STRICTER HEALTH BORDER CONTROLS: FRENCH GOVT

Markets:

Dollar Bid today as well +.3% not good for risk so Copper -1.3% (even as GS says buy Now) Silver -1.4% platinum -2% Gold -.7% Zinc 2 -month lows, iron ore -.86% but not grains ..Soy  +1.45 Corn +1.8% Demand continues to surge from China, Palm oil closed overnight +3.89%,Canola touched limit bid  yesterday +1.38% So far today .Aussie dollar down .7% fits with the risk Off Sell commodities theme. Treasuries small Bid not playing the Risk Off game to full extant.  More rumblings of Currency wars no one wants currency to strengthen.

Big earnings after close Apple, tesla and FB Fed decision a nonevent today look at for any comments regarding Asset bubble, Fed will not hint at an early taper.

In case you missed the Comments from ADM

BN 01/26 15:05 *ADM EARNINGS CALL ENDS
BFW 01/26 15:02 *WORLD NEEDS 140M TONS OF BRAZIL SOY, THAT’S NOT HAPPENING: ADM
BFW 01/26 14:50 *ADM EXPECTS MULTI-YEAR INCREASES FOR CHINA APPETITE FOR CROPS
BFW 01/26 14:50 *ADM SAYS CHINA CORN STOCKS ARE MUCH LOWER THAN REPORTED
BFW 01/26 14:50 *ADM CEO EXPECTS CHINA TO IMPORT 25M TONS OF CORN

Not due these comments per se buy canola touched limit up trading at 10+ year highs on A continuation Chart. I have not noticed this chart a slip on my part But never the less it is just as impressive as Any of the Soy Products. Weekly chart below

The run up in Grain prices helped today by a hefty Corn order from China of some 1.36 Million tons this is roughly 10%of the total china has bought from the U.S. this crop year. Current totals is 11,768,700 tons per Food business news . Front month corn traded up some 80 ticks putting the 100 tick limit move back in the discussion

ETF’s

Bloomberg was flagging this up, the Run up in XRT, retail ETF due to the Run up in GameStop. I was surprised at which sector is at top of the list of gains so far this week, utilities. The recession proof sector and the one to turn to when growth outlook in doubt. Plenty of talk about a pause in the Reflation trade and or the Rotation trade, A bit of Evidence here backing up that point. Further down the list is another Sector that is in play on the possibility of a slowdown, Consumer staples that too doing well so far this week. I think reflation narrative still in play just need a bit more evidence to back up the aggressive pricing so far, Watch US yields to see if they are still believers. All the bubble talk and a pause in this theme set the stage for some type of Pullback in Risk, but we shall see.