Market breadth

Below Find the percent of Stocks trading above 200 D MA ,From Morgan Stanley “A back test of forward returns after the % of S&P 500 stocks above 200-day moving averages reached current levels or higher shows that forward returns on a 5-day, 1-month, and 3-month basis all tend to be lower than in other periods and in each case with high statistical significance (p = 0.00). To be clear, absolute returns do not have to be negative, and in about half of cases across the different return periods they are not, but returns do tend to be lower than normal when this indicator gets as extended as it currently is. “

one of the culprits for todays unwind of the reflation trade is fact that real rates are moving higher in fact over last 5 days they are UP 15.9%. short term bottom in place? Daily chart 10 year real rates

Market update

May Rbob crack Spread Showing a bit of Life

markets today not following much of a narrative precious metals sold off which I believe more technical in nature. Very little movement in Dollar index adds confidence to idea of technical move lower precious metals. After a good start to the year maybe the Reflation narrative, buy hard assets got a bit ahead of Itself and the bearish techs forced some players hands. very narrow range in Spoos overnight and post payrolls goes to show you how little markets care about Economic Data. A note over 490 K leisure and hospitality jobs were lost last month due to tighter lockdown restrictions, This should raise some alarm bells in congress and possibly be a reason for more stimulus. With a Loss in these jobs wages Increased smartly a bit of sticker shock, but once details were known Wage increases were not caused by demand for labor it was the lower paying jobs dropping out of equation. 10 year yields moved above the 1.10% level that some experts circled as an area of Concern, they were right some action or further selling did occur on a break.

March-Nov beans Crop report next week

Morning 1-7

  Run out of Words to describe the resilience of the Stock market after yesterday’s Actions on Capitol hill, also Vix closed lower yesterday by 1%. Bitcoin on the other hand Continued to rally as lack of Confidence in the Government =Buy bitcoin.  This morning Currently trading +5%. After all the chaos yesterday, Congress did confirm the Electoral votes and declared Biden as the next president.

  So far this morning Stocks Higher Spoos +15 handles, Nasdaq on the Bid +.7% but Russell lower today as the rotation trade takes a pause, Dollar higher so far today helping the rotation pause. European Stocks Mixed, Crude small bid and a bit of a surprise both gold and Silver also trading higher.  Bigger picture view does the Dollar start to find a bottom as the   Expectations of higher inflation start to push a bid into Dollar??  Treasuries sideways so far today but 10 year yields still above 1% lost in yesterday’s chaos Dems did win both Senate Seats in Georgia run off.

News.

  • Goldman lifted US growth Expectations due to Dem senate control and went on to say that the rotation into value stocks has more room to run. -BBG
  • Citi cut US stocks to neutral another common theme for 2021 from the big banks.
  • Tokyo still struggling to slow Virus spread.
  • Average food prices for 2020 at a three-year high… United nations pro farmer
  • Moderna expects vaccine to offer two years of protection…
  • Tyson reopens Iowa pork plant after a three-week closure.

Yesterday’s Minutes revealed zero urgency to change anything. Given that for the last arrow in the quiver, “all participants” favored continuing the current pace of purchases. “Regarding the decisions on the pace and composition of the Committee’s asset purchases, all participants judged that it would be appropriate to continue those purchases at least at the current pace, and nearly all favored maintaining the current composition of purchases, although a couple of participants indicated that they were open to weighting purchases of Treasury securities toward longer maturities.” IFr

Morning 1-6

 Reflation!! 

   One of the Georgia Senate seats goes to Dem Warnock and the other too close to call. Results may not be known for a few days and if close a recount could be in order. Now even if Dems take both seats A liberal agenda is not assured too many moderates in Dem caucus to result in Socialist outlook, but spending will be higher Taxes higher and Tougher Regulation on tech, Possible.

  Nasdaq out to Woodshed. Down over 2 % at one time this morning, currently -1.3%. Russell higher, Dow higher as material Stocks, Small caps outperform a reflation trade an increase in Commodity prices may lead, may lead to   rate hikes sooner rather them later, More growth vs less growth thus higher Russell, spoos  vs Nasdaq.

 Dollar lower but not a collapse, Gold sideways to lower precious metals not participating in reflation today as Gold has rallied for 5 consecutive days  .

Grains:

Nearby corn futures poked a few cents above the $5.00 threshold overnight and the market is currently up 4 to 5 cents. The last time we saw front-month corn futures with a $5 handle was May 2014. Soybeans are at their highest prices since July 2014, with futures up 18 to 23 cents.

News:

Treasury has sent out two-thirds of the latest round of stimulus checks… The Treasury Department has sent out more than $112 billion in stimulus payments electronically, meaning that about two-thirds of the second round of payments approved by Congress Dec. 21 is already in households’ bank accounts, according to data released Tuesday. The payments 

  •   PBOC: Sets USDCNY ref at 6.4604 vs 6.4760 prev
  • -CHI Dec Caixin Services PMI: 56.3 vs 57.9 cons
  • -JPN Dec Services PMI: 47.7 vs 47.8 prior
  • -JPN Dec Consumer Conf: 31.8 vs 33.7 prior
  • -Japanese MoF Officials: FX stability is important; closely watching mkt movements; will continue close communication with the BoJ & the FSA ITC markets

Back to Business slowly

  New year new Job

 Stocks sideways a bit as Virus worries, Lockdown Worries in Europe and japan weigh a bit . Dollar still a bit heavy trading below 90 level. Yesterday was the worst start for stocks since 2016 per

The post-holiday rush of tightening restrictions is in full swing in Europe, with the U.K. going into a lockdown, while Italy and Germany look at lengthening curbs. The U.S. Food and Drug Administration warned health officials to stick to its guidelines on administering vaccines after one officer suggested cutting the dosage levels of Moderna Inc.’s shot as a way to immunize more people. The current trajectory of cases in the U.S. could break records again soon as the number of infections rises. BBG

 With UK Experiencing another round of Lockdowns A bit more stimulus of 4.6 B pounds being added, In a flip  NYSE will not delist   3 Chinese  telecom companies  hmmm. Everything bullish Soybeans higher export  tax from Argentina

Once I get settled, I will be back to a more extensive morning outlook

Happy New Year!

 Happy new year!  Onward and upwards for 2021

…..More than six in 10 Americans are hopeful about 2021, managing editor David Nather writes from a new Axios/SurveyMonkey poll.

63% of respondents to the poll (Dec. 14-20; 3,561 U.S. adults) said they are more hopeful than fearful about what 2021 holds in store for the world, while 36% said they’re more fearful.

  • That is a jump in optimism compared to the same poll heading into 2019, when just 51% said they were hopeful and 48% said they were fearful.
  • The only group that was not optimistic about 2021 was Republicans: 41% said they were more hopeful, while 58% said they were more fearful.

Between the lines: Americans were even more optimistic about the year ahead for them personally — mostly driven by the hopes of young adults, people of color and Democrats. (AXIOS)

Some facts in no order of importance.

The BSE Sensex index (INDIA) ended the last trading day of the year at an all-time high of 47,751, booking a 15.8% yearly gain in 2020. Trading economics (TE)

London’s FTSE 100 closed 1.5% lower at 6,460 on the final trading day of the year and the last day of the post-Brexit transition period, bringing the annual loss to 14% and suffering its worst year since 2008 (TE)

It has been a year since China reported the first cases of coronavirus to the World Health Organization. Meanwhile, more than 82 million cases have been identified, of which 19.7 million in the US, 10.2 million in India, 7.6 million in Brazil and over 3 million in Russia. At least 1.8 million deaths have been attributed to the pandemic, including 342 thousand in the US, 193 thousand in Brazil, 148 thousand in India and 124 thousand in Mexico. (TE)

Brent crude traded above $51 per barrel on the last trading day of 2020 but was on course for a 20% yearly loss as strict coronavirus lockdowns throughout the year sent oil prices to negative territory for the first time on record. (TA)

The Shanghai Composite added 1.7% to 3,473 on the last trading day of 2020, its highest level since February 2018. The index also gained 14% for the year as investors pushed risk assets including stocks to sky-high valuations on expectations that widespread vaccine distribution in 2021 will reignite economic growth (TA)

YTD % changes in USD

Dow +6.5, SPX +15.5, NDX +43, Russell +18, stoxx +4. Dax +13, NKy +22.China CSi 300 +35, South Korea Kospi +39 Losers Hang Seng -2.9, CAC unchanged, Spain -15, Austria -12

Commodities:

 Winners YTD; Lumber +115% LME copper +27%, Iron ore 65%. Nickel 19%, Spot Silver 48%, Spot Gold 24%, Spot platinum 11%, palladium 23%Steel 18% Corn 23%, Soybeans 39%, Soymeal +44% Soy oil +24%Sugar +13,wheat +13%,Nat Gas +14%  and UK Nat Gas +86%!,Rubber +57% palm oil(Malaysia) +30%

 Losers: YTD CL -21%, gasoil -31%, gasoline -17% heating oil -27%, Live cattle -10% Coffee -1.6%, feeder -5%, Hogs -5% Livestock not a group faring well this year compared to almost all other commodities

Semis

Volkswagen overnight said “they were adjusting output due to bottlenecks in Semi industry” and saying that Chip shortage threatens car production BBG So supply issues along with an increase in Demand obviously could raise prices for the end users. News also Overnight that US will sanction or blacklist dozens of Chinese including the country’s top Chip maker SMIC. Taiwan Semiconductor reported to be ending volume discounts for its Chips and increase prices in 2021. Higher input costs for everything from TVs,smart phones and gaming consoles. but no Inflation I guess