Archives of “March 2021” month

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Inside the Mind

  
Analysis, Education

When I impulsively take the first type of countertrend trades (i.e. missed a good trend), here’s what is going through my mind:

  1. Woah, the move has already gone quite a distance.
  2. Sigh, I should’ve taken that entry earlier. I shouldn’t have followed my trading plan so strictly.
  3. Should I get in now? No, I cannot get in any more, I cannot chase the market, it’s too risky, I have no logical stop nearby, you don’t know when it might reverse down quickly.
  4. I have already missed the move. I need to wait to enter in the opposite direction when the trend ends.
  5. The trend has gone too far, it must turn soon
  6. Look! There’s a bit of resistance, the trend is about to turn, go short! (for an uptrend)

And the countertrend trade is made! Below are what I think are the psychological process at work:

  1. Observation
  2. Regret
    • Trading is always full of regrets. You always think you can do better.
  3. Indecision, uncertainty, anxiety
    • Fear of losing out starts to take hold.
    • When you don’t have a well-defined trading plan that caters for all scenarios, or if you don’t believe in your trading plan, you will face indecision and anxiety.
  4. Resignation
    • I  accepting that I can no longer enter in the direction of the trend.
  5. Synthesized happiness (sour grapes)
    • By cutting off that possibility (or imposing a self-restriction on my flexibility), my psychological immune system gets triggered to synthesize happiness.
    • My non-conscious processes immediately ‘downgraded’ the idea of trend continuation (if I can’t get on, the trend must be bad), and boosted the idea that the trend will end.
  6. “Makes sense” stopping rule, rose-tinted glasses (read this for more details)
    • My logical mind starts to look for evidence to support my subconscious mind’s assessment.
    • Once the logical mind sees any supporting evidence, e.g. momentum waning, some resistance, it will stop thinking and conclude that my subconscious mind’s assessment is right. Hence a countertrend trade is taken.

More from BOJ’s Kuroda – Bank likely to debate a ‘band’ for its 10-year JGB target

  
Analysis, Economy

The Bank of Japan Governor Kuroda is currently reviewing its policy and due to present on this at its March meeting announcement (March 19)

Bank of Japan Governor Kuroda sounding coy:

 

  •  says BOJ’s negative rate policy was able to push down yield curve, help prop up economy and output gap via lower real rates
  • says BOJ will likely debate whether to expand implicit band for its 10-yr JGB target, but more discussions needed before final decision
  • says whether to expand BOJ’s 10-yr JGB yield band is a difficult issue
  • BOJ sees need to enhance market functions but must also keep yields stably low as the pandemic impact on economy continues
  • BOJ must scrutinise the merits and costs of ETF buying
  • specifics on how the make the BOJ’s ETF buying more flexible, nimble will be discussed at the March review

Newswires reporting China has set its 2021 GDP growth target at over 6%

  
Analysis, Economy

There has been plenty of discussion over whether or not China would set a target at all.

Citing info in the Hong Kong Economic Times

Here we go …. China’s Premier Li says >6% is the target for GDP this year

  • 3% is the CPI target for 2021
Li is speaking at the National People’s Congress, delivering the ‘Work Report’
No change to the working on fiscal and monetary policy
  • fiscal policy to be proactive
  • monetary policy to be prudent

Everyone ready for the next OPEC+ meeting (on April Fools day)?

  
  Analysis
We are going to do this all over again really soon:
  • The next meetings of the JMMC and OPEC and non-OPEC Ministers are scheduled for 31 March and 1 April 2021, respectively.
Watch fro progress on vaccinations and economic recovery ahead of then for clues on this next meeting outcome – signs of demand heightening will enhance the prospect of an output hike next time around.

OPEC+ agreed to keep output steady through April. US shale recovery is still a divisive topic.

  
Analysis, Crude

A recap of the OPEC+ ‘no change’ meeting on March 4 via RBC (this is summary):

Saudi Arabia and OPEC announcing that they would forego any production increase for April.
Saudi Prince Abdulaziz continues to urge caution in the face of enduring uncertainties about the COVID-19 recovery, insisting that it is better to err on the side of prudence than opt for an ill-timed production increase.
On US shale:
  • Reviving shale production does not appear to be a principal concern for Prince Abdulaziz. When questioned about US production in the press conference, he first insisted that it was not a zero sum game but later suggested that the zenith of the shale revolution had already passed.
RBC say though:
  • We continue to contend that Russia remains concerned about giving yet another lifeline to US shale producers and bolstering a coercive US sanctions regime.
—
If you were following along during US time you’ll know oil prices rallid
A recap of the OPEC+ 'no change' meeting on March 4 via RBC (this is summary):

Major indices tumble with the NASDAQ/Russell index lead the declines

  
Analysis, US Market

Russell index falls -2.76%. The NASDAQ index was -2.11%

The major indices tumbled once again with the NASDAQ and Russell 2000 index leading the way to the downside. Feds Powell’s interview with the Wall Street Journal did not help hope that the Fed chair would look to talk down (or act on) the higher long-term rates. That did not happen.

  • The Dow industrial fell -722 point at the lows or -2.31%
  • The NASDAQ index turned down on the year (the 3 day decline has seen the index declined -6.506% That is the March 3 day decline since September 3)
  • The Nasdaq fell  -3.41% at the lows
  • The S&P fell -2.52% at the lows
  • The Russell 2000 index fell -4.42% the lows
At the close the major indices did recover some of the losses but still remains sharply lower on the day:
  • S&P index fell -51.25 points or -1.34% at 3768.47
  • NASDAQ index fell -274.27 points or -2.11% at 12723.47
  • Dow industrial fell -345.95 points or -1.11% at 30924.14
  • the Russell index fell -60.87 points or -2.76% at 2146.92

OPEC+ meeting summary is released. Saudi production cuts to remain. Russia and Kazakhstan allowed to increase production

  
Analysis, Crude

OPEC releases the meeting summary

The 14th Meeting of OPEC and non-OPEC Ministers took place via video conference on Thursday March 4, 2021, under the Chairmanship of HRH Prince Abdul Aziz bin Salman, Saudi Arabia’s Minister of Energy, and Co-Chair HE Alexander Novak, Deputy Prime Minister of the Russian Federation.

The Meeting welcomed the appointment of HE Mohammed Al-Fares, Minister of Petroleum of Kuwait and the return of HE Mohamed Arkab, Energy Minister of Algeria.

The Meeting emphasized the ongoing positive contributions of the Declaration of Cooperation (DoC) in supporting a rebalancing of the global oil market in line with the historic decisions taken at the 10th (Extraordinary) OPEC and non-OPEC Ministerial Meeting on 12 April 2020 to adjust downwards overall crude oil production and subsequent decisions.

The Ministers noted, with gratitude, the significant voluntary extra supply reduction made by Saudi Arabia, which took effect on 1 February for two months, which supported the stability of the market.

The Ministers also commended Saudi Arabia for the extension of the additional voluntary adjustments of 1 mb/d for the month of April 2021, exemplifying its leadership, and demonstrating its flexible and pre-emptive approach.

The Ministers approved a continuation of the production levels of March for the month of April, with the exception of Russia and Kazakhstan, which will be allowed to increase production by 130 and 20 thousand barrels per day respectively, due to continued seasonal consumption patterns.

The Meeting reviewed the monthly report prepared by the Joint Technical Committee (JTC), including the crude oil production data for the month of February.

It welcomed the positive performance of participating countries. Overall conformity with the original decision was 103 per cent, reinforcing the trend of aggregate high compliance by participating countries.

The Meeting noted that since the April 2020 meeting, OPEC and non-OPEC countries had withheld 2.3bn barrels of oil by end of January 2021, accelerating the oil market rebalancing.

The Meeting Extended special thanks to Nigeria for achieving full conformity in January 2021, and compensating its entire overproduced volumes.

The ministers thanked HE Timipre Sylva, Minister of State for Petroleum Resources of Nigeria, for his shuttle diplomacy as Special Envoy of the JMMC to Congo, Equatorial Guinea, Gabon and South Sudan to discuss matters pertaining to conformity levels with the voluntary production adjustments and compensation of over-produced volumes.

In this regards the Ministers agreed to the request by several countries, which have not yet completed their compensation, for an extension of the compensation period until end of July 2021.

It urged all participants to achieve full conformity and make up for pervious compensation shortfalls, to reach the objective of market rebalancing and avoid undue delay in the process.

The Meeting observed that in December, stocks in OECD countries had fallen for the fifth consecutive month.

The Meeting recognized the recent improvement in the market sentiment by the acceptance and the rollout of vaccine programs and additional stimulus packages in key economies, but cautioned all participating countries to remain vigilant and flexible given the uncertain market conditions, and to remain on the course which had been voluntarily decided and which had hitherto reaped rewards.

The Ministers thanked the JTC and the OPEC Secretariat for their contributions to the meeting. The next meetings of the JMMC and OPEC and non-OPEC Ministers are scheduled for 31 March and 1 April 2021, respectively.

———————————————–

The Saudi energy minister is on the wires saying:
  • Country to that is voluntary cut gradually
  • we are not in a hurry to bring back voluntary oil cut
  • will bring back voluntary cut over longer then one month

Russia to be allowed modest oil output increase – report

  
  Analysis

More OPEC headlines

Russia and Kazakhstan will be allowed to modestly increase oil output in April, according to a report. Further reports also say that existing quotas will be rolled over.
One report says Saudis will keep their voluntary 1mbpd cut through April. That was not the baseline at all but it’s still murky.
Assuming this really is a small increase and everything comes to fruition, it will be all about the voluntary cut from here.
Update: A report says Saudi Arabia will gradually start bringing back its voluntary cut in May. How gradually is obviously the question, but the baseline heading into this meeting was that they would bring it all back in April, so this is undoubtedly bullish.
Update 2: OPEC will meet again on April 7 to decide what to do for May. There had been some talk of a two-month rollover so this adds a bit of uncertainty. I highlighted earlier that it’s a good idea for OPEC to keep other producers guessing because if they commit for longer timeframes, it might incentivize other producers to invest in new production. The ever-looming threat that OPEC could come in with the production hammer will keep them cautious.

European shares close the day with mixed results

  
Analysis, Global Indices

German DAX, +0.2%. France’s CAC unchanged,

The major European shares are closing the day with mixed results.  The provisional closes are showing:

  • German DAX, -0.2%
  • France’s CAC unchanged
  • UK’s FTSE 100, -0.4%
  • Spain’s Ibex, +0.2%
  • Italy’s FTSE MIB, +0.1%
in the European debt market, the benchmark 10 year yields are lower with the UK 10 year down -4.5 basis points.
European yields are lower
A snapshot of the US stock market as traders prepare for Fed chair Powell speaking at the top of the hour:
  • S&P index +5 points or 0.13% at 3824.91
  • NASDAQ index -25 points or -0.17% at 12970
  • Dow industrial average up 76 points or 0.24% at 31347
In the US debt market, yields are marginally lower, with the 30 year bond yield is down -2.1 basis points:
US yields are lower
In the forex market, the CAD has moved to the strongest of the majors. The CHF remains the weakest followed closely by the JPY. The USD remains mixed but has shifted a little more to the weaker bias. Nevertheless it remains higher vs. a CHF, JPY and EUR, and lower worsening CAD, AUD, NZD and GBP.
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