Do you kids see that? Zero-thirty (approximately 3:30 am) New York time. Crude Oil has had a pretty good week already. Suddenly, the last sale for March West Texas Intermediate (WTI) crude oil futures surged from under $78 a barrel to over $80 a barrel in about half an hour. Brent futures moved from just over $84 to just under $87 over the same period.
Yes I understand. The recovery in demand in China and increased mobility in the other industrialized countries outweigh fears of a global recession for the time being. That was at least (mainly) why Crude Oil was higher the week before this pop, but that’s more than that.
There are several balls in play here…
1) It appears that a control room at the port of Ceyhan, Turkey, on the eastern end of the Mediterranean Sea, was too badly damaged by this week’s earthquakes to resume exporting crude oil any time soon. The port typically processes about 1 million barrels of crude oil from Azerbaijan and Iraq. BP PLC BP, which holds a 30.1% stake in the pipeline that runs from Azerbaijan to Ceyhan, has said a full assessment of the damage to the port is still ongoing.
2) Oil production from Kazakhstan has been constrained by the need for unplanned maintenance at that nation’s Tengiz field. This work has reduced that country’s production by about 200,000 barrels per day.
3) Most recently, and perhaps most spectacularly, Russia announced plans early Friday morning to cut production by 500,000 barrels per day in March. The cut comes in response to Western price caps imposed to hamper the Kremlin’s ability to fund its invasion of Ukraine and continued occupation of significant parts of that nation.
In addition, of course, there are the increased prices in Saudi Arabia for Asian customers and a production interruption in Norway’s largest production field in the North Sea, which we already knew about at the beginning of the week. This has caused most of the energy sector to trade higher overnight in an otherwise bearish (it’s still very early) band. The Energy SPDR ETF (XLE) ended Thursday up 1% for the week so far. This movement is likely to be extended here on Friday morning.
Bad mood
Stock index futures markets had attempted to recover from Thursday’s trading, where a bullish volume-based snack from Wednesday’s session led to a gap-up open for US equities, helped by a positive reaction to Disney’s DIS Profit and Reorganization Plan. It didn’t take long for investors to recognize this early morning bullishness as an opportunity to take profits in both Disney and the market at large.
For the second consecutive month, all 11 SPDR ETFs in the S&P sector ended lower, led by Communication Services (XLC). This fund fell 2.19% as the Dow Jones US Internet Index fell 3.71% over the session. The big losers here were Snap (SNAP) and Alphabet (GOOGL). Those two names gave up 5.02% and 4.39%, respectively. For GOOGL, this came on top of a 7.68% drop on Wednesday.
Interestingly, Technology (XLK) was not overly hurt, as the Dow Jones US Software Index was up 0.64% for the Thursday session, but the Philadelphia Semiconductor Index was actually up 0.13% for the day. This was the only index among the many I follow to close in the green. The Dow Transports, for example, fell 2.12% as the rails and the truckers got pushed around. Crude oil prices should help those rails today, one would think.
Breadth was again poor for the day as trading volume increased. This gives the night session a slightly more negative feeling than I thought I was feeling 24 hours ago writing this column. On Thursday, the losers beat the winners on the New York Stock Exchange 11-4 and on the Nasdaq 7-3. The rising volume took a 25% share of NYSE-listed composite trades and a 28.1% share of the same Key figure for Nasdaq listings. However, there is a difference to the previous day. Total trading volume for NYSE-listed securities increased 6% day-over-day and Nasdaq listings increased 9.6% day-over-day. Aggregate trading volume also increased in both the S&P 500 and Nasdaq Composite constituencies.
For the Nasdaq Composite, Thursday’s trading volume surpassed the 50-day simple moving average trading volume for the index and was also the first time we experienced a two-day losing streak, with total trading volume on the second day since December 27th and higher 28. What does that mean? Well, it’s hard to be positive about that as the Nasdaq 100 is still up 13.16% year to date and the Nasdaq Composite is up 12.64% for 2023.
In other news…
The U.S. State Department revealed Thursday night that the Chinese balloon, which was somehow allowed to traverse the entire North American continent for eight days before being treated, was in fact outfitted with multiple antennas and other equipment equipped with surveillance capabilities and information gathering were compatible. The state also revealed that Beijing had or has used a number of similar balloons to fly at high altitude across five continents and 40 countries.
The Biden administration also separately revealed that there are additional details about this balloon linking it to the Chinese military and suggesting it was not used for weather research. Beijing had claimed that this was a civilian ship used for this type of research. The Financial Times also reports that US Secretary of Defense Lloyd Austin apparently tried to reach his Chinese counterpart last weekend, but was unsuccessful. hmm This is not good.
Just the beginning?
According to the Wall Street Journal, Payward Inc.’s Kraken platform on Thursday reached an agreement to end its practice of offering “crypto staking services” in the U.S. and pay $30 million in penalties to the Securities and Exchange Commission to pay. We all know that SEC Chairman Gary Gensler has been trying to crack down on what he sees as widespread non-compliance by crypto platforms with laws governing securities in the US. Much of the argument revolves around whether crypto assets are securities at all.
For those who don’t know, staking is the practice of offering investors a return by temporarily lending those assets to intermediaries. A federal judge must approve this deal for it to be effective.
Is the SEC coming for the rest of the industry? On Thursday, Coinbase Global (COIN) announced that its staking program, part of its Blockchain Rewards product, will remain in place.
Yummy
Believe me. I am always looking for good nutritional supplements. A bad case of Covid in 2020 permanently (so far) robbed me of my ability to tolerate anything dairy related. Not just lactose, but all dairy products. This case of Covid also left me with blood pressure volatility issues that I didn’t have before. So I also try to watch my sodium intake. No ice. no pizza No to many things. I will live. I actually prefer oat milk over cow’s milk, or at least what I remember of cow’s milk. I now prefer cashew milk yoghurt to conventional yoghurt. I find. Luckily I have a vegan niece who has helped a great deal in this area, although she doesn’t know it.
Am I ready for this? I don’t know. You may have noticed that shares of Beyond Meat (BYND) are down more than 8% on Thursday. After four years, the Chick-fil-A kitchen team has developed a plant-based sandwich that doesn’t pretend to be meat. Apparently a breaded marinated cauliflower sandwich on a pickle bun is on the way. I don’t know about you, but I know I’ll try. Maybe they have a grilled version. Three grams of cauliflower provides 77% of your recommended daily intake of vitamin C. No scurvy for you.
Come in…
The water is fine. Perhaps. Another prominent activist investor has jumped on the Salesforce (CRM) bandwagon. Dan Loeb’s Third Point Management is known to have invested in Salesforce, according to The Wall Street Journal. Third Point Management joins Elliott Management, ValueAct Capital, Starboard Value and Inclusive Capital to target Salesforce, which has been held back by both slow growth and C-suite revenue.
You kids know I love it when activist investors get into a name I’m already in. I was almost disappointed when I heard Nelson Peltz call a truce with Bob Iger. Apparently, many other investors felt the same way. Thank goodness I did this Disney partial night sale early Thursday morning. Should have sold more. No shoulda, woulda, coulda. You already know where I see support for Disney (DIS). Now let’s look at CRM.
Readers already knew that CRM broke out of my pitchfork model in early January. Now the stock is technically overbought with a daily moving average convergence divergence (MACD) crying out for profit taking. Let’s zoom in…
It has already started. Thursday was just a headline inspired break in my opinion. Here CRM develops a handle to attach this cup pattern that lasted from early August to early February. I need a little more discount to generate interest in adding. With a pivot of $179. I would like to see a depth approaching the intersection of the 21-day exponential moving average (EMA) and the 200-day simple moving average (SMA) in the $160-$161 range. That would be the sweet spot for me. If I get that I can see a technical case for $205.
Business (All Times Eastern)
10:00 – U of M Consumer Sentiment (Mar-F): Expected 65, last 64.9.
13:00 – Baker Hughes Total Rigs (Weekly): Last 759.
13:00 – Baker Hughes Oil Rig Count (weekly): Last 599.
14:00 – Federal Budget Statement (Jan): Last $-85B.
the fed (All Times Eastern)
12:30 – Speaker: Reserve Board Governor Christopher Waller.
16:00 – Speaker: Philadelphia Fed Pres. Patrick Harker.
Today’s result highlights (consensus EPS expectations)
Before the opening: (ENB) (0.73), (ESNT) (1.49), (MGA) (1.08), (NWL) (0.11)
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