Eoin Treacy's view

A link to today's video commentary is posted in the Subscriber's Area. 

Some of the topics discussed include: Wall Street short-term overbought, bonds steady, gold steadies from intraday lows, oil remains firm, governance questions in China and US focusing on companies and who is liable in a default, India, Vietnam, Mexico firm. 

The S&P 500 has advanced 5% since JPMorgan Chase & Co. kicked off the earnings season nine days ago, in the best start to a reporting cycle since the dot-com mayhem 88 quarters ago. Along the way, the index slipped only once, with a 0.1% drop on Friday doing little to derail the benchmark from its best month since the election.

Now institutional investors with large stock and bond holdings will need to balance out their positions, buying dips on losers and taking profits on winners. How big will the impact be? A regression analysis done by strategists at BNP Paribas SA shows that the outflow needed to compensate for a divergence between this month’s drop in the bond market and rally in stocks could translate into a 2.6% decline in the S&P 500 when the rebalancing takes place.

Eoin Treacy's view

End of month reweighting of portfolios is a predictable event and represents a solid rationale for the recent bounce in Treasury futures. It’s unlikely to contribute to more than temporary strength because none of the underlying factors have changed.

Although uranium mining is a global activity, only a handful of companies account for the majority of production.

The top 10 uranium mining companies accounted for 85% of global production in 2020.

The demand for this uranium come from nuclear reactors around the world.

Eoin Treacy's view

There is no groundswell of support for a new massive round of reactor building. At least, not yet. The anti-nuclear lobby has been incredibly successful in pushing their agenda, over the last sixty years, and not least because of the Cold War and the threat of mutually assured destruction.

Chinese authorities told billionaire Hui Ka Yan to use his personal wealth to alleviate China Evergrande
Group’s deepening debt crisis, according to people familiar with the matter.

Beijing’s directive to the Evergrande founder came after his company missed an initial Sept. 23 deadline for a coupon payment on a dollar bond, said the people, asking not to be identified discussing a private matter. Local governments across China are monitoring Evergrande’s bank accounts to ensure company cash is used to complete unfinished housing projects and not diverted to pay creditors, the people said.

The demand that Hui tap his own fortune to pay Evergrande’s debt adds to signs that Beijing is reluctant to orchestrate a government rescue, even as the property giant’s crisis spreads to other developers and sours sentiment in the real estate market. Chinese President Xi Jinping has been cracking down on the billionaire class as part of his “common prosperity” campaign to reduce the country’s yawning wealth gap.

It’s unclear whether Hui’s fortune is big and liquid enough to make a sizable dent in Evergrande’s liabilities, which swelled to more than $300 billion as of June. The developer’s dollar bonds are trading at deep discounts to par value as investors brace for what could be one of China’s largest-ever
debt restructurings.

Eoin Treacy's view

Bailing out troubled lenders during the credit crisis and letting their senior management walk away with golden handshakes helped to seed a populist backlash against the status quo in the USA. That was exacerbated by a foreclosure crisis that saw millions of people kicked out of their homes. China appears to have learned from that mistake and Hui Ka Yan is unlikely to escape Evergrande’s dissolution unscathed.

Robusta coffee futures rallied to the highest in more than a decade driven by dwindling stockpiles for the beans favored for instant-coffee brands such as Nestle SA’s Nescafe. 

January futures in London jumped as much as 3.8% to $2,278 a ton, the highest for a most-active contract since September 2011. Arabica coffee also rose in New York. 

Both varieties have climbed more than 60% this year after drought and frosts damaged the arabica crop in Brazil, the No. 1 coffee producer, boosting demand for the cheaper robustas. The January-March spread in London surged to record premium. 

At the same time, soaring shipping costs are hindering a draw down of hefty stockpiles in robusta giant Vietnam. Exchange-monitored stockpiles for both varieties have continued to slide as roasters tap stored reserves.  

Technical-trading indicators are “very positive” and that attracted more buying, plus “there’s concern that flows have been paralyzed out of Vietnam because of the lack of container and elevated freights,” said Hernando de la Roche, senior vice president at StoneX Financial in Miami.

Eoin Treacy's view

The Baltic Dry Index is currently unwinding a short-term overbought condition so that will take some of the pressure off of exporters of just about everything. Nevertheless, it will be quite some time before the port bottlenecks are eliminated.

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. To make it easier I will simply repost the latest summary daily until there is a change.

Eoin Treacy's view

With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022. Please drop [email protected] a line if you would be interested in attending an event next year, as well as your preferred location.