Weekly Market Review & Analysis For February 21, 2022

The market experienced an incredible comeback this week (Read: Plunge Protection Team intervention) after initially selling off over a deteriorating Russia-Ukraine conflict and then gaining on the belief that the current situation will not have any significant negative impact on economic growth.

The S&P 500 closed the week on an 0.8% increase after falling as high as 5.4% from the previous Friday's closing. The Nasdaq Composite with +1.1% and the small-cap Russell 2000 with +1.6% were the indices closing above 1% after falling up to 7.1% and 5.7%, respectively. The granddaddy of them all index Dow Jones Industrial Average, lost 0.1% after falling as much as 5.3%.

After receiving a variety of sanctions from the U.S., and their vassals, the U.K., and the European Union were not as detrimental to Russia's economy following Shock and Awe's intervention on Ukraine as they initially seemed to be. Also, the U.S. did not sanction Russia's oil and gas exports or restrict Russia's access to the SWIFT banking system for fear of destabilizing the whole financial system.

The Russian RTS Index might have tanked 33% despite all the scaremongering and sanctions; however, there was no doubt that the U.S. market acknowledged that inflation might not be as bad as first feared - will see about that.

Eight of the eleven S&P 500 sectors ended up closing higher lead by the health care sector with +2.7% real estate sector and +2.7% and utilities sector with +2%. The consumer discretionary sector posted -2.2% Consumer staples sector print -0.3% and financials sector also posted -0.3% closings.

The price retracement in the commodities market confirmed the inflation expectations. In particular, West Texas Intermediate (WTI) crude oil futures settled up just 0.4%, posting $91.59/bbl closing after briefly reaching $100/bbl following intervention news by Russia.

It's not that the market is right about inflation direction. It is true that the PCE Price Index, which is the Fed's most popular inflation measure, increased in January 0.6% m/m, putting at 6.1% on a year-over-year basis.

The yield on the Two-year note climbed 12 basis points and reached closure at 1.59% on the expectation that the Fed will raise rates in the near future at least six times. The yield on the Ten-year note rose by six basis points to close at 1.99%. The U.S. Dollar Index climbed 0.5% to close the week at 96.54. The Eurodollar completed our Inner Currency Dip 1.1100 for net loss 48 pips for the week.

Asia-Pacific region stock market mainly finished higher after the heavy action in the U.S. on Thursday's session. At the same time, Europe largely rebounded, partway aided by the news out of Russia regarding possible talks with Ukraine. The markets continued to wrestle with the Russia Shock and Awe intervention implications, especially on the energy sector, which Europe depends heavily on Russia's supply. 

Metal market

European market awakened on Thursday morning to Russia Shock and Awe intervention news, and gold and silver speared headed higher before tumbling back into net losses for the session; gold was down $9 on the week, closing at $1,889; however, silver managed up 35 cents closing at $24.25 for the same period.

Gold slowly rose until the Wednesday night trading session before pushing sharply higher on Thursday morning, touching $1,974. After U.S. trade on the Comex exchange began, there was no follow-through, and profit-taking mode took over, driving the yellow metal price down for a net loss of $5 at the closing session. Comex exchange volume was very high, though not overly so.

Analyzing this price action, it is worth keeping in mind that OI (Open Interest) on Comex had earlier climbed to 618,186 contracts, revealing a much-overbought market condition. The chart below places this in a historical context never the less.


Gross domestic product (GDP) in El Salvador is seeing unprecedented growth! Never before has its GDP grown so fast as this year, rising by 10.3% in 2021. Coincidentally, El Salvador adopted bitcoin as legal tender last year.

While it can't be proven if the adoption of the famous coin has much to do with the considerable growth, it hasn't held El Salvador back either! The country currently holds at least 1,801 bitcoins.

The whole world seems to be following the news of the Russian Shock and Awe on Ukraine. In the crypto world, this news led to sharp price drops and a lot of uncertainty. However, the prices of bitcoin and altcoins seem to be recovering at this writing. How will this continue? We'll wait and see.

With the Russian Shock and Awe and currency controls making people uncertain about their money, the Ukrainian crypto exchange Kuna is seeing unprecedented growth (volume increases by more than 370%). It seems that many Ukrainian citizens want to secure their funds now that the grivna, their national currency, has hit an all-time low.

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This article was printed from TradingSig.com

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