European indices close higher for the third consecutive day

The major European indices are closing higher for the third consecutive day. The Spain’s Ibex may be the exception as it waffles up and down above and below unchanged.

The provisional closes are showing:

  • German DAX, +0.7%
  • France’s CAC, +0.9%
  • UK’s FTSE 100 +0.2%
  • Spain’s Ibex unchanged
  • Italy’s FTSE MIB, +0.7%

Looking around other markets as London/European traders look to exit:

  • Spot gold is up $10.30 or 0.56% $1824.30
  • Spot silver is up six cents or 0.3% $23.10
  • WTI crude oil is up $1.21 at $78.20
  • The price of bitcoin is trading fairly steady at $46,400

The US stock market continues to see rotation out of the tech sector and into the cyclical sector.

  • Dow industrial average is up 79.2 points or 0.21% at 36877.23. The Dow has closed at a record level for each of the first two sessions of the calendar year.
  • S&P index is down 10 points or -0.22% at 4783.13
  • NASDAQ index is down -148 points or -0.95% 15473.42. That is near the low for the day at 15471.53
  • Russell 2000 is down 8.5 points or -0.37% at 2260.28

In the US debt market, the yield curve is flatter today with the two year up while the 30 year is down marginally.

US yields
US yield curve

Protect Your Profits, Cut Your Losses

  • In my experience, when a new position goes against you, it usually keeps going down. Good trades start making you money right away.
  • You can always get back in if you exit too soon.
  • The takeaway is that you can never let a single losing trade wipe out any of your gains — they’re hard enough to get in the first place.
  • If you don’t take the small loss today, you risk total loss of your capital or career tomorrow.
  • Gains look like gains only to the extent that you keep your losses small.
  • “Win it right back” is a death spiral. Keep your losses small, and you’ll never be in one.
  • If you do not take action, you are choosing a more likely chance of feeling despondent when you lose a larger portion of your capital, compared to taking a guaranteed small loss. All the while you had the power to get out of a losing position, but you chose not to. You chose not to do the right thing because you were afraid to feel certain feelings.Cut Your Losses Short and Let Your Winners Run Stock Trading | Etsy

Listen to Your Inner Voice to Learn About Your Internal Debates

  • Your inner voice needs to decide on the tradeoffs to be made on the trading system.
  • Accessing your inner voice comes with quieting your mind.
  • Meditation can be defined as a process of quieting your mind through breathing techniques.
  • Your mind controls your overall attitude.
  • Your attitude affects your behavior and your persistent behavior predicts where you end up in life.

Eurozone December final services PMI 53.1 vs 53.3 prelim

Euro area economic growth stumbled in December as the pandemic flares up, largely weighed down by Germany. The region’s biggest economy saw activity slump to its lowest in 18 months amid a surge of COVID-19 infections and tighter restrictions.

The downturn in the services sector is what stands out last month, with price pressures continuing to stay more elevated heading into the new year. On the latter, that reaffirms the notion that inflation is not likely to abate any time soon. Markit notes that:

“The accelerated expansion in output we saw in November unfortunately turned out to be brief. Amid a resurgence of COVID-19 infections across the euro area, growth slowed to the weakest since March in December. In Germany, where measures to combat COVID-19 have been more stringent than other monitored euro area countries, levels of economic activity broadly stagnated in December. Nonetheless, slower growth was seen across the board.

“The spread of the Omicron variant had a particularly profound impact on the services sector, reflecting renewed hesitancy among customers due to the novel strain of the virus. Looser travel restrictions in recent months had facilitated greater levels of tourism, which in turn provided additional support to the eurozone service sector. However, this was withdrawn in December as overseas demand declined for the first time since May.

“There was also little to cheer with regards to inflation. Although there was a marginal easing of price pressures, we’re still in excessively hot territory – increases in both input and output costs were the second-quickest on record.

“As euro area nations deal with the latest developments in the pandemic, it’s clear that risks to the economy are now greater as tighter restrictions to curb the spread of COVID-19 are more likely than they have been recently.”

EU PMI 12-2021
  • Bloomberg with the report that the world’s two biggest commodities indexes — the S&P GSCI Index and the Bloomberg Commodities Index — are due to ‘reset’, which will trigger selling of futures contracts.

Here is the link to the piece from Bloomberg, main point being:

S&P GSCI Index and the Bloomberg Commodities Index reset

  • For WTI, that means investments tracking both benchmarks could be ready to pull almost 60 million barrels worth of futures contracts from the market, according to Societe Generale estimates.
  • The dollar value of those flows is significant — the French bank estimated in November it would be the equivalent of about $4.6 billion. Citigroup Inc. expects about $3.1 billion of selling, according to a December report.

Something to keep top of mind is that these flows are widely known and it would be bizarre if some, if not all, has been hedged into prices already. the Citi note, for example, was published in December.

Still, a heads up.

Fear the global semiconductor chip shortage could get even worse – fire in key factory

Beginning with:

  • “At this point it is too early to make any statement on the damage or whether the incident will have any impact on the output plan for this year,” ASML said, adding that it would take several days to assess the damage and it would update markets as soon as it can.

So, not hitting panic buttons just yet.

ASML Holding has reported a fire at a manufacturing plant

  • ASML Holding is a Dutch company, the world’s largest supplier of photolithography systems and the only source of extreme ultraviolet (EUV) lithography machines, which are more advanced. These devices are used to etch circuits onto silicon wafers and create computer chips used by Apple, IBM and Samsung.

A technology analyst:

  • “We’re entering 2022 with a lot of pent-up demand,” he says. “If the fire is severe and if ASML struggles to recover quickly, we might need to get used to a tough semiconductor supply situation for the next two years.”

More at Reuters here and even more at this link here.

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