{"id":91197,"date":"2021-01-28T09:04:30","date_gmt":"2021-01-27T22:04:30","guid":{"rendered":"https:\/\/www.fnarena.com\/?p=91197"},"modified":"2021-01-28T13:35:14","modified_gmt":"2021-01-28T02:35:14","slug":"the-overnight-report-squeezed-to-death","status":"publish","type":"post","link":"https:\/\/staging.fnarena.com\/index.php\/2021\/01\/28\/the-overnight-report-squeezed-to-death\/","title":{"rendered":"The Overnight Report: Squeezed To Death"},"content":{"rendered":"\n\n\n\n\n\n\n\n\n\n\n\n\n
World Overnight<\/strong><\/span><\/td>\n<\/tr>\n
SPI Overnight (Mar)<\/strong><\/span><\/td>\n6632.00<\/strong><\/span><\/td>\n– 73.00<\/strong><\/span><\/td>\n– 1.09%<\/strong><\/span><\/td>\n<\/tr>\n
S&P ASX 200<\/strong><\/span><\/td>\n6780.60<\/strong><\/span><\/td>\n– 44.10<\/strong><\/span><\/td>\n– 0.65%<\/strong><\/span><\/td>\n<\/tr>\n
S&P500<\/strong><\/span><\/td>\n3750.77<\/strong><\/span><\/td>\n– 98.85<\/strong><\/span><\/td>\n– 2.57%<\/strong><\/span><\/td>\n<\/tr>\n
Nasdaq Comp<\/strong><\/span><\/td>\n13270.60<\/strong><\/span><\/td>\n– 355.47<\/strong><\/span><\/td>\n– 2.61%<\/strong><\/span><\/td>\n<\/tr>\n
DJIA<\/strong><\/span><\/td>\n30303.17<\/strong><\/span><\/td>\n– 633.87<\/strong><\/span><\/td>\n– 2.05%<\/strong><\/span><\/td>\n<\/tr>\n
S&P500 VIX<\/strong><\/span><\/td>\n37.21<\/strong><\/span><\/td>\n+ 14.19<\/strong><\/span><\/td>\n61.64%<\/strong><\/span><\/td>\n<\/tr>\n
US 10-year yield<\/strong><\/span><\/td>\n1.01<\/strong><\/span><\/td>\n– 0.03<\/strong><\/span><\/td>\n– 2.50%<\/strong><\/span><\/td>\n<\/tr>\n
USD Index<\/strong><\/span><\/td>\n90.65<\/strong><\/span><\/td>\n+ 0.58<\/strong><\/span><\/td>\n0.64%<\/strong><\/span><\/td>\n<\/tr>\n
FTSE100<\/strong><\/span><\/td>\n6567.37<\/strong><\/span><\/td>\n– 86.64<\/strong><\/span><\/td>\n– 1.30%<\/strong><\/span><\/td>\n<\/tr>\n
DAX30<\/strong><\/span><\/td>\n13620.46<\/strong><\/span><\/td>\n– 250.53<\/strong><\/span><\/td>\n– 1.81%<\/strong><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

By Greg Peel<\/p>\n

Under Resourced<\/u><\/p>\n

The -44 point drop in the ASX200 yesterday seemed somewhat against the run of play so far in 2021, but at the end of the day it was all about two sectors – materials and energy.<\/p>\n

The materials sector fell -3.0% in line with a big fall overnight in the iron ore price (notwithstanding just how far it's run in recent months) on news Beijing may reduce Chinese steel production as part of its upcoming fourteenth Five Year Plan. Chinese mills have already been reducing capacity on the basis they are unprofitable with iron ore and coal prices where they are.<\/p>\n

Fortescue Metals ((FMG)) topped the index losers’ board yesterday with a -6.4% drop. BHP Group ((BHP)) fell -3.4% and Rio Tinto ((RIO)) -3.9%, while smaller player Mt Gibson Iron ((MGX)) copped -7.1%.<\/p>\n

The energy sector fell -3.4% after ratings agency Standard & Poor’s placed thirteen global oil & gas companies on negative credit watch due to the global transition away from hydrocarbons to renewable energy sources accelerated by covid. Included on the list were names such as Exxon, Chevron and ConocoPhillips in the US, Shell in the UK, Total in France and CNOOC in China.<\/p>\n

In Australia, Woodside Petroleum ((WPL)) was most in focus but fell only -2.9% compared to some much bigger falls across the O&G names despite not actually being mentioned by S&P. Beach Energy ((BPT)) fell -5.1%.   <\/p>\n

Elsewhere in the market, nothing much happened. Technology (+1.4%) and consumer staples (+1.2%) provided some counter while telcos (-0.8%) didn’t much help. Other sector moves were mixed and smaller.<\/p>\n

Australia’s headline CPI inflation jumped 0.9% in the December quarter compared to expectations of 0.7%, but don’t panic. It was all about the government.<\/p>\n

The end of covid-based child care subsidies and an increase in the tobacco excise were culprits. Take those out and inflation remained subdued. Core inflation (ex food & energy) rose only 0.4% to an annualised 1.2% — way below the RBA’s 2% target.<\/p>\n

While yesterday’s news was a bit out of the blue, last night’s tumble on Wall Street, sending the Dow down over -600 points, has our market spooked today for no connecting reason. The futures are down -73 this morning.<\/p>\n

Stop the Game<\/u><\/p>\n

GameStop rose another 120% last night. But that was not even the biggest move among stocks being targeted by the social media-connected young retail investors. Cinema chain AMC Entertainment rose 300%, albeit from near bankruptcy, and headphone manufacturer Koss Group rose 480%.<\/p>\n

Koss I’m not familiar with, other than to note it was a US$3 share up until Monday. AMC is a clear covid victim, saved only be a recent capital raise. Other names targeted include a surprising array of “last century” stocks – Blackberry, Nokia, even Eastman Kodak.<\/p>\n

And these extraordinary gains were all posted on a day the S&P500 fell -2.6%. The reason being, they were the cause.<\/p>\n

The young punters have, via social media organisation, targeted the stocks most shorted by hedge funds. The hedge funds have been squeezed to the point they simply have to cover, but to offset losses they need to sell their long stock positions – and in particular those names that have performed very well for them in recent times.<\/p>\n

That would explain why, for example, Microsoft (Dow) jumped 5% in the aftermarket on Tuesday night on its result but posted a small loss last night. And why Netflix, which had jumped 17% on its earnings result fell -7%. And why the Nasdaq in general lost -2.6%.<\/p>\n

It could not have simply been selling from long-short hedge funds moving the indices so sharply. Momentum played its part, along with the recent build-up of fear in the market that the rally from April 2020 must soon meet a correction, given overvaluation. Is this it?<\/p>\n

Let’s not wait to find out.<\/p>\n

All S&P500 sectors closed in the red, led by communication services and consumer discretionary.<\/p>\n

But the question now is: exactly when does it end? There are only a finite number of short positions, and it has been noted that compared to average, current net short interest is to the low side.<\/p>\n

At some point the music will stop, and there’ll be a lot of star-struck millennials stuck without a chair.<\/p>\n

Incidentally, Wall Street hit its lows last night during Fed chair Powell’s press conference. But with no change to policy, no blame can be directed at the Fed on the day.<\/p>\n

Powell did suggest stock market froth was all about vaccines and fiscal policy hopes, and not loose monetary policy, but he’s a bit Robinson Crusoe on that one.<\/p>\n

Commodities<\/u><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n
Spot Metals,Minerals & Energy Futures<\/strong><\/span><\/td>\n<\/tr>\n
Gold (oz)<\/strong><\/span><\/td>\n1841.00<\/strong><\/span><\/td>\n– 29.30<\/strong><\/span><\/td>\n– 1.57%<\/strong><\/span><\/td>\n<\/tr>\n
Silver (oz)<\/strong><\/span><\/td>\n25.15<\/strong><\/span><\/td>\n– 0.80<\/strong><\/span><\/td>\n– 3.08%<\/strong><\/span><\/td>\n<\/tr>\n
Copper (lb)<\/strong><\/span><\/td>\n3.57<\/strong><\/span><\/td>\n– 0.07<\/strong><\/span><\/td>\n– 1.99%<\/strong><\/span><\/td>\n<\/tr>\n
Aluminium (lb)<\/strong><\/span><\/td>\n0.91<\/strong><\/span><\/td>\n+ 0.01<\/strong><\/span><\/td>\n1.11%<\/strong><\/span><\/td>\n<\/tr>\n
Lead (lb)<\/strong><\/span><\/td>\n0.91<\/strong><\/span><\/td>\n– 0.01<\/strong><\/span><\/td>\n– 0.60%<\/strong><\/span><\/td>\n<\/tr>\n
Nickel (lb)<\/strong><\/span><\/td>\n8.10<\/strong><\/span><\/td>\n– 0.19<\/strong><\/span><\/td>\n– 2.25%<\/strong><\/span><\/td>\n<\/tr>\n
Zinc (lb)<\/strong><\/span><\/td>\n1.17<\/strong><\/span><\/td>\n– 0.05<\/strong><\/span><\/td>\n– 4.22%<\/strong><\/span><\/td>\n<\/tr>\n
West Texas Crude <\/strong><\/span><\/td>\n52.62<\/strong><\/span><\/td>\n– 0.38<\/strong><\/span><\/td>\n– 0.72%<\/strong><\/span><\/td>\n<\/tr>\n
Brent Crude<\/strong><\/span><\/td>\n55.60<\/strong><\/span><\/td>\n– 0.41<\/strong><\/span><\/td>\n– 0.73%<\/strong><\/span><\/td>\n<\/tr>\n
Iron Ore (t)<\/strong><\/span><\/td>\n165.55<\/strong><\/span><\/td>\n+ 0.90<\/strong><\/span><\/td>\n0.55%<\/strong><\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Iron ore steadied yesterday but it appears there has been a spill-over into most base metal prices. The US dollar index rising 0.4% would have added to the pressure.<\/p>\n

The US dollar has also sent the Aussie lower, but a -1.4% fall to US$0.7652 lends itself more to the abovementioned resource sector upheaval.<\/p>\n

Today<\/u><\/p>\n

The SPI Overnight closed down -73 points or -1.1%. A short squeeze in the US has absolutely nothing to do with us directly, unless US hedge funds are holding Aussie stocks they may want to ditch. But you know, sneeze-cold etc.<\/p>\n

Today’s local economic data release is December quarter import\/export prices.<\/p>\n

The first estimate of December quarter GDP will be revealed in the US.<\/p>\n

Fortescue Metals and Galaxy Resources ((GXY)) report production today while IOOF Holdings ((IFL)) provides an update.<\/p>\n

The Australian share market over the past thirty days…<\/strong><\/p>\n

<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
BROKER RECOMMENDATION CHANGES PAST THREE TRADING DAYS<\/span><\/td>\n<\/tr>\n
ASX<\/td>\nASX Ltd<\/td>\nUpgrade to Equal-weight from Underweight<\/td>\nMorgan Stanley<\/td>\n<\/tr>\n
BWP<\/td>\nBWP Trust<\/td>\nInitiation of coverage with Underweight<\/td>\nMorgan Stanley<\/td>\n<\/tr>\n
CQR<\/td>\nCharter Hall Retail<\/td>\nUpgrade to Accumulate from Hold<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
CSL<\/td>\nCSL<\/td>\nDowngrade to Hold from Accumulate<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
CTD<\/td>\nCorporate Travel<\/td>\nUpgrade to Outperform from Neutral<\/td>\nCredit Suisse<\/td>\n<\/tr>\n
HVN<\/td>\nHarvey Norman Holdings<\/td>\nUpgrade to Overweight from Equal-weight<\/td>\nMorgan Stanley<\/td>\n<\/tr>\n
MGR<\/td>\nMirvac<\/td>\nDowngrade to Hold from Accumulate<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
MGX<\/td>\nMount Gibson Iron<\/td>\nDowngrade to Neutral from Buy<\/td>\nCiti<\/td>\n<\/tr>\n
NAB<\/td>\nNational Australia Bank<\/td>\nUpgrade to Neutral from Underperform<\/td>\nMacquarie<\/td>\n<\/tr>\n
REH<\/td>\nReece<\/td>\nDowngrade to Reduce from Hold<\/td>\nMorgans<\/td>\n<\/tr>\n
SCP<\/td>\nShopping Centres Aus<\/td>\nDowngrade to Hold from Accumulate<\/td>\nOrd Minnett<\/td>\n<\/tr>\n
SYR<\/td>\nSyrah Resources<\/td>\nDowngrade to Neutral from Outperform<\/td>\nCredit Suisse<\/td>\n<\/tr>\n
WEB<\/td>\nWebjet<\/td>\nUpgrade to Outperform from Neutral<\/td>\nCredit Suisse<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

For more detail go to FNArena's Australian Broker Call Report<\/a>, which is updated each morning, Mon-Fri.<\/p>\n

All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available on the FNArena website.  Click here<\/a>. (Subscribers can access prices on the website.)<\/em><\/p>\n

(Readers should note that all commentary, observations, names and calculations are provided for informative and educational purposes only. Investors should always consult with their licensed investment advisor first, before making any decisions. All views expressed are the author's and not by association FNArena's – see disclaimer on the website)<\/strong><\/em><\/p>\n

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FNArena is proud about its track record and past achievements: Ten Years On<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

The Wall Street short squeeze reached a crescendo last night as hedge funds desperately sold long stocks to cover short losses and momentum did the rest. Dow down -633. (Available for non-subscribers after 10am)<\/p>\n","protected":false},"author":8,"featured_media":91224,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[84],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/91197"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=91197"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/91197\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media\/91224"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=91197"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=91197"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=91197"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}