MAGGIE LAKE: Hello and welcome to the Real Vision Daily Briefing. It's Thursday, January 20th, 2022. I'm Maggie Lake, here with Tony Greer, editor of The Morning Navigator newsletter. Hi, Tony. How are you?

TONYGREER: Maggie, how are you doing today?

MAGGIE LAKE: I'm doing okay, but the market's not. We really saw stocks deteriorate here at the end of the day after what was looking like a rebound, or at least some stability in US equities. What do you make of this late day selloff?

TONYGREER: Yeah, we're adjusting to a higher yield regime. It looks like today is a day where we're getting a lot more widespread participation on the downside. We've been in the first two weeks of the year in a really aggressive rotation where technology has been backing off with higher yields, that higher beta stuff, the high liquidity, highfliers and momentum names have backed off and we've seen natural resources rally quite smartly in this same period of time that the NASDAQ has backed off, the Bloomberg Commodities Index has climbed to a new high for the recent move.

That's part of the rotation that we've really been expecting. It looks like you've got a little bit nasty today with metals and mining on the downside, cannabis on the downside, retail got clobbered today. These are all the two-sigma of the big moves today on the downside, but we've got some strength in things like Bitcoin and social media and the commodities complex.

For me, this is exactly what we've been expecting in terms of a little bit more volatility heading into the year where everybody's still turning the ship, and trying to get ready for four rate cuts, or something along those lines that the market is pricing in right now. That's where we are.

MAGGIE LAKE: Yeah. It feels like the rotation, it doesn't feel like something else is going on. Because it was pretty rapid toward the end of the day. You saw the games start to fade. We're talking about an asset that was up 2% at the start of the session. And it was drifting, but you saw it really accelerate here in the last hour, last half hour even.

TONYGREER: Yeah, that's how it goes. We get closer to MOC selling, and everybody's getting their book ready. With technology coming apart today, we've got the NASDAQ and the QQQs below the 200-day moving average, which is an average that they haven't seen in the entire rally from the lockdown lows of March 2020. This is where the difference between a meaningless move and a very meaningful move really presents itself to a trader.

The tape has been off a couple percent here and there, but as you can see, as you spill through moving averages, you start to run into new layers of stop levels where you've got long sellers selling out on various different levels. And for a little while, we're just going to be under pressure here until the boat rebalances itself. And I think that we'll find that level probably it'll take a little bit longer this time, because we are dealing with a much more serious rate of change regime than we have been in the past.

This is something that I'm going to expect reemerge into the picture, tech weakness, natural resources, strength, a lot of rotation going on. And we're going to sort it out and figure out how to get on our secular bull at some point this quarter.

MAGGIE LAKE: Yeah, I'm glad you mentioned that, some of the technical things that are going on. I know that you look at that really closely. And for folks who may be listening to this and can't see or have another screen up, when you're talking about the 200-day moving average, you're talking about a pretty significant level. And it's a channel that's been moving higher as the NASDAQ has had this tremendous rally.

When you see something like that either tested or break, what kind of follow through could we see? We actually have a question from Daniel on YouTube saying, Mr. Dale, I think he's referring to Darius Dale, who as you know is a frequent guest on the Daily Briefing, said selling continues into next week. What are your thoughts on a short-term bottom in the NASDAQ? When will it stop bleeding?

TONYGREER: Don't buy the first day of a breakdown, my friend I would hold off on looking for a NASDAQ bottom at the moment. It feels like this is something that is going to pick up a little bit of momentum along the way here especially if the US 2 Year yields continue to march higher and break shit, excuse my French, but this is the stuff that--

MAGGIE LAKE: It feels like that's what's happening.

TONYGREER: Well, that's exactly what's happening here. They're finally breaking the will of long tech trader and we're going to have to see-- there's going to be some brands of "come to Jesus" moment in that sector, which has likely had it coming for quite a while. And this is the time that you've got to expect it when the Federal Reserve is being extremely vocal about tackling this inflation issue and you see yields spiking higher, the dollar falling over a little bit with that lack of buying power theme in the data that we've been seeing.

Like I said, Maggie, we're going to figure out where this goes but I would advise that first question from that subscriber not to buy the first day of a breakdown. Because I would give this sometime. If the Qs traded from the March lockdown low of call it 160 to a peak at 400, and there's a 50% pullback of that move due to this rate of change regime, which would not shock me at all, that probably puts the QQQ back at a price of around 275, 300, and that's a good 20% or so from here.

I'm not going to say that it doesn't find its points and rally. But I'm going to say that I'm going to bet that after several weeks, you're going to find the NASDAQ at a lower place, and probably the Bloomberg Commodities Index at a higher price.

MAGGIE LAKE: Yeah. Are we in a situation now where we moved away from what was that really persistent trend of buying the dip, and now people who may be still in those high beta trades or still longer technology than they'd like to be, just looking for the opportunity to sell any rally, does that feel like that's the right instinct now?

TONYGREER: Maggie, that's a great interpretation of it, because that's exactly what I see when I look at the chart. You went through what I see as a distribution towards the highs as the call of the Qs tested 400 just because it's a big round number in technology. We tested that number four, five, six, seven times. There was a lot of stock changing hands on that rally. There was very low volatility with the VIX at the lows and the S&P at the highs, and the market push toward the highs three or four times before failing.

And in those three or four times are going to be several bull traps where excessively bullish momentum traders say, okay, we just broke out. This is an add, and they turned around a week later, and they are stopping out below moving averages on the downside. Yeah, that jives with what I'm seeing in price action. That makes a lot of sense to me.

MAGGIE LAKE: Yeah. And this is also I think, where you're going to see the difference between people who have a shorter-term horizon, and then people who may be do have a longer-term horizon, and those shorter-term horizons are going to be very nimble. And they're going to be using a lot of tools in the option market when they make those moves. You're going to have to be careful and figure out which one of those you are.

We're going to dive into commodities and all that stuff in a moment, I do want to just touch on one more question because it's related, I think, to the selloff we saw here late in the day. And this is from Goncalo on The Exchange. Tony, I saw some weakness in XOP and energy producers, could this be a new trend where energy trades with yields, yields down, energy down, or could this be a pre-OPEC day move? Also, historically, was there ever a period when general indices went down and commodity producers up?

TONYGREER: Oh, yeah, I have seen that take place. Let's get to the question the way you asked because it's an excellent question. If you are positioned long in the natural resources space, which I am, and my subscribers are, you've got to look at this and certainly, respect a 3.5% move lower in XOP when you're long oil and gas stocks, but you have to call up the charts and notice the difference. And this is what I'm talking about, about the significance of a move versus a pure magnitude of a move.

Today's just one of the days that the selling across the tech space and the broad markets got to the energy space also. You look at the chart and you say, oh, my goodness, it's off 3.5%, is that damaging the chart? And you notice that no, it's not. What it is, is pulling back from the highs of the move, and adjusting back into the middle of the channel that it's been following higher.

Why? Because there's all this risk-off going on around us, and so that just makes sense to me that eventually, it's going to get to the latest of the oil and gas longs and players. What I think we're going to see is as technology comes apart, call it something like NASDAQ down 10%, XOP down 5% over the next couple of weeks, and then should that be the end of the selling round for now, you might see XOP up 15% and the NASDAQ going up 5% sent in a couple of weeks that follow that.

This is where you're going to get that ratcheting effect, the back and forth of big tech being a huge weight across the indices, pulling the indices lower, collateral damage all over the tape. And then you're going to see the ship right itself. And we're going to get back into natural resources-led bull market.

MAGGIE LAKE: Such a great point, Tony, in the fact that they would respond differently and more aggressively on the upside to the one where the fundamentals match up a little bit more. Excellent, excellent point. One of the difficult things happening, I think, right now is that we have so many crosscurrents to pay attention to, so many things going on both from a trading perspective and technical perspective, and also from a macro perspective.

I just want to point out with all that happened today, including the Econ data dump, which we haven't even gotten to from the US, there was also a rate cut by China. Thankfully, Weston Nakamura is all over for us. And he sent this report from Tokyo. Let's have a listen.

WESTON NAKAMURA: Hey, guys. I just want to quickly go over the PBOC policy cuts that happened this week, including today. The PBOC made cuts to its loan prime rates today, LPRs, and this is following an unexpected 10 basis point cut off of the medium-term lending facility or MLF loans from Monday as China had reported a weak GDP of 4% in Q4, and then also as about 500 billion RMB in loans were due to mature. This MLF rate acts as guidance for the benchmark LPR, lending rates. And indeed, today, we saw cuts on those benchmark LPRs.

Now, the PBOC already made a cut to one-year LPR in late December, but at that time, my reading of this December move was symbolic, and not symbolic of easing but rather the opposite. The December one-year LPR cut of five basis points, or basically the lowering of rate from 3.5% to 3.8%. That's materially meaningless to the corporate borrowers that this rate targets. My take at that time wasn't that PBOC was signaling easing that they're doing, but it was to underscore what they're not doing or avoiding doing, which was the five-year LPR, which is what mortgages reference.

And the five-year LPR remained untouched in December, so the message wasn't easing. The message was we are not lending a hand to the property and real estate sector. And that's why in December when they cut one-year LPR and left five-year LPR alone, the market sold off. Well, today, the PBOC made that cut in five-year LPR for the first time since April 2020 and signaling potentially the start of a policy turnaround from the ongoing property and real estate deleveraging drive.

And indeed, this time, markets will spot it positively even in the face of a NASDAQ correction. Hang Seng Index rallied in closed off 3.5% on the day, with the property sector leading the way. Some of the most beaten-up names of late surging, [?] up 12%, Country Garden holdings up 15%, and then what else rallied? The other Beijing crackdown victims, big tech, so Alibaba, Tencent, JD up 6%, [?] up 11%.

But we do have to keep in mind two things. One, there's a difference between short covering and the opening of new longs, and today was vastly the former. And then number two, it's still too early to call any major policy pivot and we need to keep eyes on Beijing as anything can come out and negate a single policy rate cut. But having said that, five-year LPR today was the most significant among the other rate cuts in recent weeks out of China. And that's it for me. Thanks a lot, and back to you, guys.

MAGGIE LAKE: That was such a great explainer from Weston, such a significant development that we need to be paying close attention to. China is so critical to the global economy. For more, be sure to check out Wes on trading on our YouTube channel. Tony, how much are interest rates and the Fed outlook here influencing your decision making here? We've priced in an awful lot of aggressive action from the Fed.

TONYGREER: It's a great point, Maggie. 2 Year yields have been calling a bad signal, and as they continue to raise higher through 1% now, you're probably getting close to the levels where you match up with the Fed rate hikes and we're getting close to the levels where they should find some resistance in yields. The Treasury market has been extremely influential in my decision-making trading my natural resources book, but as I've mentioned before, I use the bond market in the dollar as my speedometers to tell me how much risk I can afford to have on in the natural resources space.

It's the kind of thing where at some point, 2 Year yields are going to find a peak, and we're going to run into a bad piece of economic data that's a big miss, and that boat's going to turn around and Treasurys are going to start rallying in a retracement rally format, and yields are going to back off and when yields back off, the inflation trade is likely to back off with it. I'm very carefully trying to make sales into breakaway rallies as they get away from their moving averages in commodities and scrub the highs so that I'll have the chance to buy them back when that move in yields happens and reverses and the commodity trade falls back in my lap.

But right now, as you can see, the selloff in technology is not bothering anybody in the commodity space. You still got oil pinned to the highs for a number of good reasons. LME copper retesting 10k, retaking 10k on the upside, I should say, another sign of strength. You've got aluminum pressing the highs again out of the blue. Nickel carving an all-time high for the move. Grains just join the rally because if gasoline is going to be this priced for an extended period of time, the price of grains and fertilizer and ammonia is going to have to go much higher. That's why the commodities index right now does not care about derisking in the QQQ. That's another world right now.

MAGGIE LAKE: Yeah, it's actually incredible when you see all of these moves happening. I think we need to roll back and let's start with oil. We've been talking about commodities. You've been bullish on them and clear about how you feel about them. But let's just remind viewers who may not have watched, back in early December, you and Tracy Shuchart actually made the call on the prices we are seeing. Let's have a listen.

TONYGREER: For the second time. Are we going to go with, Trace, your call on the next $15 from last sale in WTI at $67.50 is what?

TRACY SHUCHART: Alright, so if I have to say, I'm going with up again.

TONYGREER: Yeah, that's totally fair and I respect it.

TRACY SHUCHART: That doesn't mean that oil can't go a bit lower. It definitely can, but really, I feel like we're nearing a near term bottom, at least, and all my technical indicators are indicating that as well. We may go a few bucks lower, but I think ultimately heading into, especially heading into next year, that we're headed higher. January tends to be a very, very bullish month. I think this is just a perfect storm. So many things happened at the same time and that's why we're getting such a huge, huge move.

TONYGREER: Yeah. All right, we'll go with the next $15 being up, so we'll call it from $68, we're looking for $83 before we see, 68 minus 15 is what, $53.

TRACY SHUCHART: Yes.

MAGGIE LAKE: And that entire interview, if you care to watch, on the Essential Plus and Pro tiers. And Tony, I think it's worth just taking a minute because we rock and roll through all these asset classes every day on this show. But that was completely accurate, and I think maybe begs the question what are you seeing now? Why are we holding up so well on that price?

TONYGREER: Well, we could go over all the reasons, but we would have to make this a 90-minute show. Can you get clearance with the producers real quick?

MAGGIE LAKE: Not sure about that, I don't think I have that call.

TONYGREER: Start going over, we'll have the crude oil prices and backed off. Yeah, Tracy Shuchart mentioned a number of good reasons in that video. She is a sharp cookie. And that's the second time we nailed that call, so that's something to be proud of.

If you asked me, Maggie, we've got a confluence of headlines that are supporting the story of a great supply/demand story in the energy markets once again. We've got the drone terrorists, first of all, are unfortunately back in business. We just saw the Houthi rebels from Yemen attack Abu Dhabi, basically the United Arab Emirates national oil company. That tends to take a little bit of production offline and make traders worry about the next potential drone attack.

Now, that we've got that in the flywheel of the energy markets, that's important. The IEA just came out and said that demand is now going to exceed pre-COVID levels. We're going to go to nearly 100 million barrels per day of global oil demand. That's a big reason behind why the energy markets aren't backing off.

The