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Is the Dollar in Trouble?

Oiling Up for Summer

Macrosynthesis

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Last Week's Recap

The U.S. inflation rate rose rose 3%year over year in June, as measured by the CPI report. The report showed inflation down from a 4% rate in May, while core inflation - which excludes food and energy prices - only grew 0.2% month over month, after climbing 0.4%+ for the past six months. And the market celebrated on the notion the Fed rate hikes have done their job and should end soon. Over the week, the Dow Jones, S&P 500, and Nasdaq rose by 1.7%, 2.3%, and 3.7%, respectively, with the latter having its best week since March 17.

Despite higher-than-expected earnings, JPMorgan, Wells Fargo, and Citigroup experienced varied share performances. UnitedHealth's shares skyrocketed by 7.2% following impressive earnings and revenue. On the other hand, State Street and BlackRock saw their shares decrease by 12% and 1.6%, respectively, after their revenues failed to meet analysts' predictions, despite strong earnings.

BRICS in the Wall

During the 1970s the U.S. forged an arrangement with Saudi Arabia which involved the U.S. providing protection to Saudi Arabia in exchange for oil being traded in U.S. dollars. The evolving relations between Saudi Arabia, China, and Iran, as well as Saudi Arabia's openness to transacting in other currencies, may pose a significant, underappreciated risk to the U.S. dollar's dominance.

Rumblings about a digital 'Petroyuan' are intensifying, suggesting that the advent of digital currencies could dramatically overhaul the current financial landscape. Given the deep-seated connection between energy and the world's financial structure, alterations in energy transactions could lead to drastic transformations in the financial system.

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BRICS nations are expected to announce a new currency, backed by Gold, at their summit next month

The Dollar In Trouble?

On Friday, the dollar index (DXY) fell to a 15-month low amid signs of a possible decrease in US inflation and uncertainty over the Federal Reserve's monetary policy. Despite a healthy labor market, there are concerns that the current monetary tightening might strain the economy.

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The Treasury Department said Thursday that the budget gap from October through June was nearly $1.4 trillion — a 170% increase year over year.

Oiling Up

‍WTI crude futures remained around $77 per barrel on Friday and were set to increase for the third consecutive week, driven by supply disruptions and a tighter global market. Protest-led shutdowns in Libya's second-largest oil field and a production halt in Nigeria, along with declining Russian flows, have contributed to these disruptions.

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The global market is expected to tighten further in the latter half due to supply cuts from Saudi Arabia and Russia.

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June saw China's crude oil imports surge by 45.3% compared to the previous year.

The Week Ahead

Next week, earnings reports from notable companies like Bank of America, Morgan Stanley, Goldman Sachs,  Netflix, Tesla, Johnson & Johnson, and American Express will be the key focus. US retail sales are anticipated to rise moderately by 0.4% in June, while industrial production may see a 0.1% contraction for the second consecutive month.

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Commodity Movers

Crude Oil

-2.2% (1D chg)

+6.2% (1M Chg)

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UK Gas

-3.7% (1D Chg)

-24.2% (1W Chg)

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Silver

+8.1% (1W Chg)

+33.4% (1 YR Chg)

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Salmon

+10.3% (1W Chg)

+24.5% (1M Chg)

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Last Week's Top Events

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LevelFields_event_driven_winners_10Jun2022

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Noteworthy Events  

UnitedHealth Pops

‍After exceeding second-quarter expectations on both revenue and earnings, shares of the healthcare giant UnitedHealth surged by 7.2%. The company also raised the lower end of its full-year guidance, leading to a rise in other healthcare stocks.

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We sent a buy alert noting the stock will likely rise to 500 as it is loved on Wall Street. Cigna and Elevance Health also saw an increase of over 4%.

The Jet Blues

JetBlue Airways and American Airlines saw their shares decline by 3.8% and 1.7%, respectively. This follows the termination of their two-year partnership, wherein they ceased selling seats on each other's flights after a court ruling in May.

 

State Street Drops

State Street's shares dropped by 12.1% after its second-quarter revenue of $3.11 billion fell short of the analysts' expectations of $3.14 billion.

XRP Victory

The long-standing legal dispute between Ripple Labs, the developer of the Ripple blockchain, and the Securities and Exchange Commission (SEC), experienced a significant development when a federal judge ruled that Ripple's XRP token was not considered a security when sold to the general public and thus its sale breaks no laws. The ruling is significant for the entire crypto industry.

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CASE STUDY: HP Up +6%

June 5th, our bullish Quick Sprints scenario picked up that HP stock was moving pre-market and broke out of its trading pattern.

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HP initially sold off, as the market sentiment that day turned negative on some macro news. This can happen any day regardless of how strong the company events are. It's just part of the trading risks.

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What's important to note is that the pattern continued once the macro news dissipated, as shown in the chart below. HP went up +6% from the time we sent the alert.

 

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LEVEL 2 TRADE UPDATES

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Our Level 2 members saw 1-day gains of 190% on UNH options, following an alert we sent last week.

JP Morgan (JPM) shares were also up after its earnings report Friday. We flagged the entry point for JPM a few weeks back at 137/share. It's trading at 150 now.

This week, we introduced a new play in the education space following major partnership announcements between  two U.S. and Chinese companies.

 

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Tool TIPS: Trends

On the header menu, there's a link to the Trends section which shows statistical events and/or patterns which are affected by events.

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The Negative Sentiment trend is a useful one for identifying companies that have a high amount of negative sentiment against them based on the number of asset managers running put options against them.

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For example, Carvana is on the list and displays that 35 different asset management shops are shorting the stock with options. Interestingly, the stock is currently in the midst of a short squeeze due to the high % of its stock being shorted.

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Generally, stocks on this list are either ones to avoid or ones where a short squeeze is possible.

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Upcoming Catalysts:

Notable Earnings

Monday

  • Equity Lifestyle Properties (ELS)

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Tuesday

  • Bank of America (BAC)
  • Hasbro (HAS)
  • Morgan Stanley (MS)

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Wednesday

  • Netflix (NFLX)
  • Tesla (TSLA)

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Thursday

  • American Airlines (AAL)

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Friday

  • American Express (AXP)
  • AutoNation (AN)
  • Comerica (CMA)

Economic Reports

Tuesday

  • Homebuilder Confidence
  • U.S Retail Sales

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Thursday

  • Jobless Claims
  • Existing Home Sales

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This is not financial advice. All information represent opinions only for informational purposes.

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The LevelFields Team

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