January 22 – 28 2023

FEAR NOT Brave Investors

Where have we been and where are we going? Join our weekly market thread on Traders Community…

The Week That Was – What Lies Ahead?

Contents

Click on the links below to navigate to the relevant section.

• Part A: Stock markets
• Part B: Bonds
• Fed and Banks
• Part C: Commodities
• Energy – Oil and Gas
• Gold and Silver
• Part D: Foreign Exchange
• Geopolitics and Economics
• Economy Week ahead

Editorial

This week came under some heavy selling pressure which dissipated by Friday lunch as the put wall was crushed with VIX imploding. Initially, as with a tamer CPI last week we saw inflationary pressures continuing to show signs of receding with further falls in December Producer Price Index (PPI) (actual -0.5%; consensus -0.1%) and in German inflation rates in December and business survey price indicators pointing down. The Bank of Japan left monetary policy on hold, though as we with inflation well above target the market will continue speculating on further yield curve shifts.

Inflation a story of Japan versus Everywhere Else

• US Producer Price Inflation Fell More Than Expected in December
• Japan Inflation Hits 32 Year High in December

Housing and Real Estate Weakness Pervades – How far does the Fed want to Crush Main Street?

• US Existing Home Sales fell 1.5% In December, Down for Eleventh Straight Month
• Unaffordable Real Estate Pushes US Housing Starts Down 1.4% and Building Permits Down 1.6% in December
• NAHB Housing Market Index Finally Rises After Twelve Consecutive Monthly Falls

Central Banks Nearing a Peak in Hikes

• Norway Holds Interest Rate at 2.75 percent, Signaled More Hikes Ahead
• Turkey Central Bank Left Interest Rates Unchanged at 9% As Lira Hits New Lows
• Bank Indonesia Raised Rates Another 25 basis points to Highest Level Since 2009
• Bank Negara Malaysia Leaves Interest Rates Unchanged to Assess Previous Hikes Impact
• Federal Reserve Beige Book Highlights Housing Markets Continued to Weaken
• Dollar Yen Soars After Bank of Japan Keeps Monetary Policy Steady, No Change to JGB Yield Band

Poor economic data brought recession worries to the fore, retail sales fell 1.1% month-over-month in December (consensus -0.8%) after falling a revised 1.0% in November (from -0.6%) and industrial production decreased 0.7% month-over-month in December (consensus -0.1%) after decreasing a revised 0.6% in November (from -0.2%). With the Fed likely to remain on its rate hike path in spite of a weakening economic backdrop, the risk for a policy mistake to trigger a worsening economic scenario grows. The Fed’s Beige Book gave story of a worsening housing market and little growth elsewhere.

That said, other than Bullard, who doesn’t geta vote, there appears a somewhat less hawkish tone from most Fed speakers. They have been talking of downshifting further to 0.25% hikes and Fed Vice-Chair Brainard leaning incrementally dovish. The minutes from the last ECB meeting and comments by President Lagarde were hawkish, although it should be noted that the ECB joined the tightening cycle very late.

Amongst all the weak data, weekly initial claims decreased to their lowest level since late September (actual 190,000; consensus 212,000). This brought the sellers out given the Fed is watching the labor market to guide their hiking cycle we are being told. What we are seeing is a lot of bearish sentiment in markets, selling if too strong, selling if too weak but indices held on again, implying a short market. Bonds rallied again until Wednesday, giving back most of their gains by Friday.

In energy markets, oil threw off more huge builds in crude to rally, with signs that the surge in cases in China may have peaked with optimism about Chinese growth this year leading to some lessening in global recession risks. Natural gas meanwhile had another bad weak as did other commodities such as corn. Rational thought is being dictated to by positioning in illiquid markets.

A continuing decline in the $US which takes pressure off Asian and emerging countries and has also helped some commodities. Tensions with China appear to be easing with signs of an easing in China’s trade restrictions on Australian products. This helped coal bounce and iron ore to over 7 month highs.

US economic data releases over the last week were mostly weak. Industrial production fell slightly in December, manufacturing conditions rose in the Philadelphia region but remain weak and they fell sharply in the New York region and retail sales fell another 1.1% after falling 1% in November. NAHB home builder conditions rose slightly but remain very weak and housing starts fell further.

Initial jobless claims fell but continuing claims rose suggesting its taking longer for laid off workers to find jobs and anecdotes of job layoffs continue to build. Easing inflation pressures were evident in a further fall in capacity utilization, further falls in most price pressure indicators in business surveys and another fall in producer price inflation to 5.5%yoy.

We saw the debt ceiling reached on January 19, prompting the Treasury to begin employing extraordinary measures that should prevent a technical default until early June. The expectation this is all political showboating, but what if it more than that?

Some things never change, when you think Greed is Good

Swirling greed and know it all came home to roost. FOMO (fear of missing out) and TINA (there is no alternative) ended how they always do. The company made one of US banking world’s biggest bets on crypto. after the company’s announcement, Silvergate shares cratered a record 49%.

Where to from here? It’s also okay to acknowledge and process any difficult emotions or experiences that you may have had during the past year. Looking back on the past year with perspective can help you to gain a greater understanding of what you have been through and how you have coped. I hope that you are able to find ways to manage any challenges that come your way and that you continue to feel fine moving forward. Embrace the chaos that is headed your way in 2023!

The Credit cycle downturn is coming to the surface.

“Moody’s… raised its forecast for speculative-grade corporate defaults in 2023, warning they could more than quadruple under its most pessimistic scenario. The agency predicts the default rate will climb to 4.9% by November of next year under its baseline scenario, from a forecast of 2.9% for the end of 2022. Last month’s year-ahead projection was 4.5%.”

December 16 – Bloomberg (Finbarr Flynn):

China; Behind the Iron Curtain

A big shift in 2022, China’s population is now falling and below that of India. China’s population fell for the first time since 1961 as births have steadily fallen in recent years despite the removal of the “one child policy”. The stalling working age population and its likely decline ahead means that potential growth in China is down from around 10% or so in the 2000s to around 4-5% now.

• “China is likely to see 36,000 Covid deaths a day during the Lunar New Year holidays, making it one of the most deadly periods of the pandemic, according to an updated analysis of the largest outbreak the world has yet experienced. The revised figures from the independent forecasting firm Airfinity Ltd. added 11,000 deaths a day to its Dec. 29 estimate… The update is based on data from China’s regional provinces combined with rates seen in other Covid Zero countries after they first lifted restrictions, the… firm said.” January 16 – Bloomberg (Jinshan Hong):

• “They left after the government cracked down on the private sector. They ran away from a harsh ‘zero Covid’ policy. They searched for safe havens for their wealth and their families. They went to Singapore, Dubai, Malta, London, Tokyo and New York — anywhere but their home country of China, where they felt that their assets, and their personal safety, were increasingly at the mercy of the authoritarian government. In 2022… many Chinese businesspeople moved abroad, temporarily or for good. They were part of a wave of emigration that led to one of the year’s top online catchphrases, ‘runxue,’ understood to mean running away from China. A consequential, if privileged, piece of China’s economic puzzle, these people are pulling their wealth and businesses out when growth is at its lowest point in decades.” January 19 – New York Times (Li Yuan)

Lunar New Year Holidays

China has a week-long public holiday for Lunar New Year. Non-essential markets, banks, offices, factories, and shops remain closed during this time. Schools are also shut for four weeks. Holidays in Asian countries like Hong Kong, Macao, Malaysia, Singapore, Vietnam, and Korea range from 1 to 3 days. It is celebrated as Tet in Vietnam and as Seollal in Korea.

The market rupture tripod of destruction.

• Firstly, financial asset overvaluation has swung way past any sound underlying economic wealth structure.
• Secondly over-leverage in crowded bets.
• Thirdly we have greed enthused, as always in these cycles, risk engineering, transfer and management that ignores or understands bifurcation and contagion outcomes.

Leverage has become toxic, a development that if not addressed will have deep and with far-reaching sequels. It’s not too farfetched to suggest that the markets are on the verge of a rupture that would be difficult to contain. Should the crisis of confidence dynamics that hit Britain feed into other markets a powerful global contagion could be unleashed. The markets are dislocated, and financial stability is at risk. A sobering thought is the UK is just the initial first world pension system in this cycle facing the harsh reality of a steep devaluation of assets and the prospect of widespread insolvencies and debilitating negative sentiment.

Inflation Matters

Inflation with Henry Kaufman

Kaufman is the legendary chief economist and head of bond market research at Salomon Brothers is someone who knows Inflation.  Henry Kaufman in an interview with Bloomberg’s Erik Schatzker Jan 14, 2022:

 “I don’t think this Federal Reserve and this leadership has the stamina to act decisively. They’ll act incrementally. In order to turn the market around to a more non-inflationary attitude, you have to shock the market. You can’t raise interest rates bit-by-bit.”

“The longer the Fed takes to tackle a high rate of inflation, the more inflationary psychology is embedded in the private sector — and the more it will have to shock the system.”

“‘It’s dangerous to use the word transitory,’ Kaufman said. ‘The minute you say transitory, it means you’re willing to tolerate some inflation.’ That, he said, undermines the Fed’s role of maintaining economic and financial stability to achieve ‘reasonable non-inflationary growth.’”

Ahead is Tech Earnings, BOC and PCE

Eyes will be on global flash PMI data from S&P for January, especially for the US, UK, Japan, Australia and Euro Area countries. Central bank action is highlighted by the BoC Interest Rate Decision.

For the US we get a preliminary reading of the US Q4 GDP growth and the Fed favorite, the PCE price index. Durable goods orders, inflation expectations and new and pending home sales. Other key data points include Germany IFO business climate and GFK consumer confidence, GDP growth rates for South Korea and the Philippines, and the inflation rate for Australia. 

Earnings include several big tech names Microsoft, IBM, Tesla, and Intel.

Click here to see the Full Week Ahead List Below

Independence – Never Take It for Granted Traders

“In aggregate, the market goes from order to disorder, and on that journey little pockets of order can form, including in commodities, bonds, stocks, currencies that circle back and reorder disorder. Then there is us the market player that reflects through order and disorder in an ever-evolving loop towards independence. It all starts with gravity and ends with equilibrium and back we go.” KnovaWave “The rules of market flux”

The Fed has kicked off its first real tightening campaign since 1994, with securities markets already at the brink of illiquidity and dislocation. Markets could soon be screaming for assurances of the Fed’s “buyer of last resort” liquidity backstop, while the Fed is prepared to begin withdrawing liquidity by selling Treasuries and MBS.

Another important aspect is the Fed doesn’t Control corporate pricing or wage decisions. Let us be clear geopolitical, climate change developments and what an out of depth, politically motivated administration are outside the Fed’s sphere of influence. There has been over $5.1 Trillion new “money” in 126 weeks, it’s a reasonable conclusion the Fed has lost control of Inflation.

Volatility

The VOLX`s underlying instrument is the Mini VIX™ Future. The CBOE Volatility Index (VIX) is an up-to-the-minute market estimate of expected volatility. The VIX is calculated using a formula to derive expected volatility by averaging the weighted prices of out-of-the-money puts and calls (options) on the S&P 500.

When the VIX is highly reactive, VIX related products can serve as potentially effective hedging tools, when the VIX is not very reactive, traditional hedging techniques may be a better choice.

We need to grasp all the risks to be wary off and received plenty of flak from it. We always talk here about expect the unexpected and now that is front and center, gage the market’s reaction, the market is always right and that’s why we focused on the crowd psychology aspect over the past few weeks.

“We have a market trying to interpret the Fed who is trying to find out how they can interpret their long-only portfolio at a risk parity where rates cannot rise.”

– MoneyNeverSleeps

Cboe Daily Market Statistics

Our weekly reminder for risk. The downside is clear with the absence of moral hazard from repeated Federal Reserve market bailouts in an environment of some would say obscene liquidity pumps. Pure greed is the other part, not wanting to miss out on fees. The obvious question is, how deeply ingrained is this attitude through the markets? How do we ween the markets off this continuous dip feed? At this point the Central Banks have kicked that answer down the road.

Part A – Stock Markets

Weekly Highlights – USA

Indices

• S&P500 declined 0.7% (up 3.5% y-t-d),
• Dow dropped 2.7% (up 0.7%).
• S&P 400 Midcaps lost 0.9% (up 5.3%)
• Small cap Russell 2000 fell 1.0% (up 6.0%).
• Nasdaq100 added 0.7% (up 6.2%).

Sectors

• Utilities fell 3.0% (down 2.0% YTD).
• Banks slipped 0.5% (up 6.2%),
• Broker/Dealers declined 0.9% (up 6.2%).
• Transports were little changed (up 7.2%).
• Semiconductors dipped 0.2% (up 10.4%).
• Biotechs were about unchanged (up 4.7%).
• While bullion gained $6, the HUI gold equities index declined 0.5% (up 12.7%).

Biggest SPX Stock Winners and Losers Last Week

Global Stock Market Highlights

Highlights – Europe Stocks

• U.K.’s FTSE equities index declined 0.9% (up 4.3% y-t-d).
• France’s CAC40 slipped 0.4% (up 8.1%).
• German DAX equities index declined 0.4% (up 8.0%).
• Spain’s IBEX 35 equities index added 0.4% (up 8.4%).
• Italy’s FTSE MIB index was little changed (up 8.7%). 

Germany’s benchmark Blue Chip DAX 30 index (Deutscher Aktienindex) expanded to 40 companies on 20 September adding 10 new members to the German stock index from the MDAX which will be reduced from 60 to 50 members.

 Highlights – Asia Stocks

• Japan’s Nikkei: +0.6% Friday (+1.7% for the week),
• Hong Kong’s Hang Seng: +1.8% (+1.4% for the week),
• China’s Shanghai Composite: +0.8% (+2.2% for the week),
• India’s Sensex: -0.4% (+0.6% for the week),
• South Korea’s Kospi: +0.6% (+0.4% for the week),

 Highlights – Australian Stocks

• Australia’s S&P/ASX 200: +0.2% (+1.7% for the week).
• Friday tested nine months high.
• Another strong week for coal stocks. Last week Goldman Sachs updated its view on the sector. Coal miner Whitehaven soared 6.2% Friday ahead of earnings.
• Iron ore miner Fortescue Metals 52-week high of $23.12.

Highlights – Emerging Markets Stocks 

EM equities mixed

• Brazil’s Bovespa index gained 1.0% (up 2.1% YTD)
• Mexico’s Bolsa index added 0.7% (up 11.3%).
• Turkey’s Borsa Istanbul National 100 index surged 10.1% (down 0.3%).
• Russia’s MICEX equities index fell 1.5% (up 0.6%).

Technical Analysis

S&P 500

Daily: The daily SPX on Friday closed out the year right in the sphere of interest at the cloud twist. The market after spitting the 4100 and 38.2% retracement broke through all near support., though managing to capture the Tenkan on the last day of the year. This underscores the power from the SPX spat of June & October lows with impulse through the tenkan and Kijun energized by the daily cloud twist that fueled this rally. The completive wave came off extreme fear and bear that ended with relief. Now we have sated much of the greed phase and short fear phase. We have completed that cycle and from here we measure the alternatives.

Tracing back from highs the fuel from the top of the channel after completing 3 waves off ATH, accelerated after broke the Tenkan through to the 4600 OI where it reversed with impulse back to Tenkan. Bulls, this is likely a (ii) of a 5. Bears this is 1-2 of (i) completive V of degree. We watch if this low was a (iii), (a) or C. We have to respect the number of alternatives of degree of 5. With such trends keep it simple resistance is Tenkan and Kijun and watch for ABC. From no fear to panic is the driving element.

On the downside the Kijun and those June lows now critical and is our trading Bear/Bull pivot in a high vol scenario. Watch each measured 3 wave move on the 240 & Murrey Math highlighted in the podcast. The prices pulled through the downward cloud pulled by the twist ‘helium contusion’ on the completive.

For fractal purposes, SPX completed 5 waves up where it reversed with impulse. Energy fueled from the power impulse down from +1/8 ATH spit of a spit fail. On the way down (just like up) it accelerated after it broke the Tenkan through the rejected Kijun and then through the median after tapping 8/8.

Weekly: In the last week of 2022 we again closed under the Tenkan and 8/8 after the failed rally was rejected at the 50wma and +1/8. Key support is the 38% correction and the previous low. Power came from rejecting the cloud as one would expect in a 3 or C. We have Kijun. the Tenkan and 50wma all above i.e impulse right to the weekly cloud is needed for cycle switching. For that you would have to break the Kijun and 50wma.

We are playing out S&P 500 energy after it held the sphere of influence from Nov 2020 reversed higher after spitting the 38% and key lows. At the time we opined “We do have a weekly cloud twist; however, the energy is waning without sharp impulse.” We got the sharp impulse right to weekly Kijun. For major cycles we watch the S&P 500 over 4,231, the 50% retracement of losses from the Jan. 3 & June 16 close. Since 1950 there has never been a bear market rally that exceeded the 50% retracement then gone on to make new cycle lows. Is this time different, as we tested and spat those June lows?

On the way up each new high evolved after testing Tenkan key support on the way and we are now getting a retest as resistance. We reiterate this needs to be recovered for a resumption of the uptrend meanwhile the bear market plays out. Watch Tenkan this week and watch for Kijun reaction. Extensions are difficult to time, keep it simple.

THE KEY: Key for the impulse higher was the spit or retest of MM 8/8 and Tenkan San, which held with the previous highs and Tenkan.  To repeat “We look for 3 waves down and reactions to keep it simple with the alternatives in the daily.”  Keep an eye on the put/call ratio with recognition to the sheer size of contracts AND keep in mind the stimulus distortion. The spit per channel fractal and Adams rule launched back over the cloud where we were encased AND we are back testing it. Watch if a spit or clear break support as Chikou rebalances

A reminder that Apple Inc $AAPL, Microsoft Corp $MSFT, Amazon.com Inc $AMZN, Facebook Inc $FB, and Google-parent Alphabet Inc $GOOGL make up approximately 23% of the total weight of the S&P 500. With that comes gyrations that are an outsized impact on broader markets

NASDAQ 100

The down move saw Nasdaq spit the weekly Kijun and a 1-2 off tenkan we spat MM 5/8 after holding the key 61.8% Fib. We watch the Tenkan & Kijun confluence above, the breakup level and between the 38/50 Fibs. The Nasdaq is well behind the S&P pace with the weekly cloud and 50wma well above. Support the 61.8% retest.

Recall ATH was after it broke and held the weekly Tenkan to see a spit of a spit fail which is completive of 5 of some degree with Chikou rebalancing. Watch Chikou for divergence for continuation or failure. Divergence with Russell also a clue.

Dow Jones

The Dow led the indices and closed above the weekly Tenkan after closing and testing last week. Prior test after the reaction off the June lows and sphere of influence. Support is the channel and Fibs. Tenkan and Kijun after the reaction empowered. Support is the channel and Fibs.

Russell 2000

The small cap Russell RUT bounced in double bottom off 1600 5/8 confluence which was the Nov 2020 breakup. Russell 2000 Resistance Tenkan and Kijun, note previous rejections. This is the index showing more of the fast money crowd and is trading like it. Needs to get traction in here for bulls. 7/8 & 8/8 support collapsed on the way down and is now major resistance.

Semiconductors SMH

Semiconductors SMH clean with reaction from above reverted with retest & break of the triple top patterning in a pennant. From there been a fractal on each exhaustion. Pull from Chip players $ON $TSM $NVDA $ASML $AMD $QCOM $AVGO $TXN $INTC $AMAT $LRCX $XLNX

NVidia $NVDA

NVidia’s latest slide was off earnings, back to lows at 4/8 after a failed breakup retest from May 2021. NVidia is a clear leader of #SOX #SMH look for cues there and ABC failures for changes. Above is the Key Break (mauve) and Tenkan to a flat cloud. Support the recent low at the 61.8% extension.

Apple $AAPL

Heading into another Earnings Apple held the sphere of influence after retesting 7/8 & break up. Kijun and Tenkan are about to touch, with earnings we watch for a kiss of death at the cloud as the story. Apple & other mega-cap names dominant the major indices, and a plethora of funds that hold it as a core position. The Vanguard Mega-Cap Growth ETF (MGK) delta is important to watch.

A firm rejection at $175 at +2/8 triggered a waterfall down for Apple. On the way up Apple gently motored up to new ATH over the massive $160 then $170 thru to $180 gamma level on the way down these levels became key energy levels all the way to $132. Support held at the May break (just like NVDA) where from there it spat the cloud pulled by a flat Tenkan and Kijun as it rebalanced Chikou. The old channel break and MM 8/8 is now key. Remember the impact $AAPL has, at least short term on all the major indices.

ARKK ETF

The ARK Innovation ETF (ARKK) finally found some support at -1/8, 78% off highs and the 423.6% extension! The fund is filled with growth stocks and was the top-performing U.S. equity fund tracked by Morningstar in 2020, it has not been a pretty slide.

The ARKK ETF trading clinically, tested triangle breakdown and failed off 50 WMA. Some work at support at 61.8% of whole move and then wrecked again. Clear crowd behavior, we saw ATH in NASDAQ & SPX, yet this couldn’t raise a bid – very telling negative divergence. $ARKK rebalanced Chikou at week’s end

ExxonMobil XOM

Part B: Bond Markets

Bond Watch

Treasuries

U.S. Treasuries continued the move from last week through Wednesday giving back most of those gains Friday resulting in a slightly higher finish for the week in most tenors. The long bond ended negative territory for the week while the 10-yr note and shorter tenors gave back most of their gains from Wednesday’s surge that sent yields on these tenors to levels not seen since September. Together with hopeful rhetoric Treasuries and European debt faced pressure at the end of the week. This week’s action tightened the 2s10s spread by another basis point to -72 bps. The U.S. Dollar Index slipped 0.2% for the week to 102.00.

Treasury Yield Watch

• 2-yr: +8 bps to 4.20% (-2 bps for the week)
• 3-yr: +8 bps to 3.84% (-5 bps for the week)
• 5-yr: +8 bps to 3.57% (-4 bps for the week)
• 10-yr: +9 bps to 3.48% (-3 bps for the week)
• 30-yr: +9 bps to 3.66% (+4 bps for the week)

For our complete Weekly Fixed Interest Analysis and Outlook visit our Bond Traders Weekly Outlook:

Mortgage Market

• Freddie Mac 30-year fixed mortgage rates dropped 23 bps to a four-month low 5.95% (up 239bps y-o-y).
• Fifteen-year rates sank 36 bps to 5.18% (up 239bps).
• Five-year hybrid ARM rates declined eight bps to 5.41% (up 281bps).
• Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up nine bps to 6.37% (up 278bps).

Part C: Commodities

Highlights

• Bloomberg Commodities Index increased 0.5% (down 0.6% y-t-d).
• Spot Gold added 0.3% to $1,926 (up 5.6%). Silver fell 1.4% to $23.93 (unchanged).
• WTI crude rose $1.78 to $81.64 (up 1.7%).
• Gasoline jumped 4.4% (up 8%),
• Natural Gas dropped another 7.2% to $3.17 (down 29%).
• Copper gained 0.8% (up 12%).
• Wheat slipped 0.3% (down 6%),
• Corn increased 0.2% (unchanged).
• Bitcoin rallied $2,800, or 14.2%, this week to $22,630 (up 36.6%).

Key Long Term Commodity Charts

Copper

Gold

WTI Oil

Energy

Natural Gas

For complete Oil and Natural Gas Coverage please visit our dedicated publications ‘Around the Barrel’ and ‘Into the Vortex.’ – Weekly Analysis and Outlook for Energy Traders and Investors

BDI Freight Index

For our complete Weekly Commodity Analysis and Outlook visit our Commodity Traders Weekly Outlook:

Charts and commentary via KnovaWave on:

• Grains: Wheat, Corn, Soybeans
• Metals: Copper, Aluminum
• Precious Metals: Gold Silver
• Lumber
• Oil and Natural gas are covered separately (see below)

Part D: Forex Markets

John Maynard Keynes, 1920: “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction and does it in a manner which not one man in a million is able to diagnose.”

Highlights

• For the week, the U.S. Dollar Index declined 0.2% to 102.01 (down 1.4% y-t-d) 2022 gains were 8.2%
• For the week on the upside, the British pound increased 1.4%, the New Zealand dollar 1.2%, the Swedish krona 1.0%, the Swiss franc 0.7%, the South Korean won 0.5%, the Norwegian krone 0.3%, the euro 0.2%, and the Canadian dollar 0.1%.
• On the downside, the Brazilian real declined 2.0%, the South African rand 1.8%, the Japanese yen 1.3%, the Mexican peso 0.6% and the Australian dollar 0.1%. The Chinese (onshore) renminbi declined 1.23% versus the dollar (up 1.68% y-t-d).

For our complete Forex Weekly Analysis and Outlook visit our Forex Traders Weekly Outlook:

Charts and commentary via KnovaWave on the US Dollar, Euro, Japanese Yen, British Pound, Euro Pound, Swiss Franc, Canadian Dollar, Australian Dollar, New Zealand Dollar, Turkish Lira, Mexican Peso. Currency dynamics are complex. There are myriad facets to analyze and contemplate that influence all markets.

Cryptocurrencies

Bitcoin

Bitcoin continues to churn following the FTX collapse. BTC had been stuck in the sphere of influence in continuation awaiting a catalyst, and it came. Continues to perform technically to perfection. Impulse begets impulse. To understand panic, understand greed. $BTC tested the top of a rising channel after the preceding sharp downturn which was the downside breakout of an earlier bearish flag, after breaking downside a H&S top and then down it went….

Recall Bitcoin exploded higher following it’s correction impulsively upon completing 5 waves up at +2/8. Each Tenkan and Kijun tap saw an explosive kiss of death until we completed 3 waves to around 28,000. From there we have seen extreme volatility.

Looking back Bitcoin put in a high of $63,000 around Coinbase, the largest US crypto exchange successfully went public which signaled profit-taking. The high over $68,000 came after the launch over the Bitcoin ETF. From that high we have 2 main alternatives a V of a 1 of a V. For bears it a completive five with impulse right to the 50wma – an incredible 26% fall in a Friday night session. That’s impulse!

Ethereum

On the Risk Radar

Fed Warnings on Possible Medium To Long Term Risks

 Geopolitical Tinderbox Radar

Economic and Geopolitical Watch

Banks

Major banks kicking off earnings this quarter, including BlackRock (BLK), Citigroup (C), First Republic Bank (FRC), JPMorgan Chase (JPM) and Wells Fargo (WFC).

Major US Banks Deliver Mixed Results in Q4, 2022

The major money cents banks released earnings with many strong results for Q4. Mainly from the interest rate spreads on the positive side. We see a reversal of loss reserve releases from the pandemic kitty as the economy slides into recession.

• PNC Bank Earnings Hurt by Fall in Fee Income and Higher Credit Loss Provisions
• Citigroup Record Fixed Income Sales & Trading Revenue Cushion Earnings
• JPMorgan Earnings Boosted by Higher Interest Rates but Sets Aside $2.29 billion for Loan Losses
• Another Swing and a Miss from Wells Fargo Earnings
• Bank of America Earnings Beat, Benefiting Most from the Federal Reserve’s Interest Rate Hikes

The Week Ahead – Have a Trading Plan

What Macro and Micro Risks and Opportunities Lie Ahead this week

Global Watch

Next Week’s Risk Dashboard via Scotiabank ..

• How markets and the economy behave around US debt disputes
• Consensus has been too bearish on US growth
• The US consumer is more resilient this time
• BoC: Risk versus reward around hike expectations
• BanRep expected to deliver another mega-hike
• BCCh like to extend policy hold
• BoT to hike as tourism recovers
• SARB to cool the pace of hikes?
• US PCE to follow CPI
• Aussie inflation expected to accelerate
• NZ picks a new leader while hoping inflation eases
• Global PMIs to inform Q1 GDP growth tracking
• earnings season intensifies
• Other global releases focused on the US 

Central bank Watch

The most notable event is FOMC minutes. St. Louis Federal Reserve Bank President James Bullard is scheduled to give a presentation on the U.S. Economy and Monetary Policy on Thursday. Richmond Federal Reserve Bank President Thomas Barkin and Atlanta Federal Reserve Bank President Raphael Bostic are scheduled to give speeches Friday.

This Week’s Interest Rate Announcements (Time E.T.)

• Tuesday January 24, 2023
• 02:00 Bank of Thailand Interest Rate Decision
• Wednesday January 25, 2023
• 10:00 BoC Interest Rate Decision
• Thursday January 26, 2023
• 08:00 SARB Interest Rate Decision
• 16:00 Chile’s BCCh Interest Rate Decision
• Friday January 27, 2023
• 15:00 Colombia’s BanRep Interest Rate Decision

For our complete Central Bank Analysis and Outlook visit our Central bank Watch:

Economic Data Watch

US Data Focus

• Monday: December Leading Indicators (consensus -0.7%; prior -1.0%) at 10:00 ET
• Tuesday: $42 bln 2-yr Treasury note auction results at 13:00 ET
• Wednesday: Weekly MBA Mortgage Index (prior 27.9%) at 7:00 ET; weekly crude oil inventories (prior 8.41 mln) at 10:30 ET; and $43 bln 5-yr Treasury note auction results at 13:00 ET
• Thursday: Advance Q4 GDP (consensus 2.6%; prior 3.2%), advance Q4 Chain Deflator (consensus 3.2%; prior 4.4%), December Durable Orders (consensus 2.9%; prior -2.1%), Durable Orders ex-transportation (consensus -0.2%; prior 0.2%), weekly Initial Claims (consensus 205,000; prior 190,000), Continuing Claims (prior 1.647 mln), December advance goods trade deficit (prior -$83.30 bln), December advance Retail Inventories (prior -0.3%), and December advance Wholesale Inventories (prior 1.0%) at 8:30 ET; December New Home Sales (consensus 614,000; prior 640,000) at 10:00 ET; weekly natural gas inventories (prior -82 bcf) at 10:30 ET; and $35 bln 7-yr Treasury note auction results at 13:00 ET
• Friday: December Personal Income (consensus 0.2%; prior 0.4%), Personal Spending (consensus -0.1%; prior 0.1%), PCE Prices (prior 0.1%), and Core PCE Prices (prior 0.3%) at 8:30 ET; December Pending Home Sales (consensus -1.0%; prior -4.0%) and final January University of Michigan Consumer Sentiment survey (consensus 64.6; prior 64.6) at 10:00 ET

Global Data Focus

• OPEC:
• Canada: BoC is likely to raise its overnight rate by 25bps to 4.50% in its first meeting of 2023, pushing borrowing costs to the highest since 2007. 
• Brazil:
• Mexico:
• Europe: Eurozone flash S&P Global PMI survey, consumer confidence in the Euro Area. German GFK consumer indicator. German Ifo business climate indicator. Spain preliminary Q4 GDP data and unemployment rate; France, Italy, and Turkey business and consumer survey; Sweden house price index; and Switzerland balance of trade.
• UK: Flash PMI survey, CBI gauges for factory orders, business optimism, and retail trade, as well as public sector net borrowing
• China: Chinese financial markets and statistical offices will be closed due to New Year’s celebrations. 
• Japan: Minutes from the Bank of Japan’s latest monetary policy meeting, the Summary of Opinions for insights. Flash PMI figures for January.
• India:
• South Korea: GDP data for the fourth quarter and consumer and business confidence for January.
• Australia: Inflation rate for the fourth quarter, NAB Business Confidence for December, and January’s flash PMI.
• New Zealand: Fourth-quarter inflation

Earnings and Event Watch

US Stocks Watch

Investors (and algos) will focus on the conference calls and outlooks. Last quarter everyone expected the worse, we saw critical updates on production in coronavirus impacted regions and if there is extended halting of operations weighing on multi-nationals. 

Events

• Monday. The Chinese New Year holiday will be celebrated all week. Decarbonization Plus Acquisition Corporation IV (DCRD) will vote on the deal to take energy firm Hammerhead Resources public in a SPAC deal.
• Tuesday Precigen (PGEN) is scheduled to present Phase 2 data on PRGN-2012. Shareholders with Jack Creek Investment Corp. (JCIC) are set to hold the rescheduled vote on the SPAC deal to take Bridger Aerospace public. Canadian Appeals Court will hold a hearing on the merger deal between Rogers Communications (RCI) and Shaw Communications (SJR).
• Wednesday Phase 3 top-line data on Aridis Pharmaceuticals’ (ARDS) AR-301 (tosatoxumab) is due to be released. Kinder Morgan (KMI) plans to post an investor presentation update to its investor relation website. Plug Power (PLUG) will hold a business update call. Nikola (NKLA) will hold a press conference to unveil what it says is an exciting hydrogen solution.
• Thursday – The FDA will hold a meeting on COVID-19 boosters that could be relevant for Johnson & Johnson (JNJ), Pfizer (PFE), Moderna (MRNA), and BioNTech SE (BNTX). Evercore ISI will hold an investor event focused on Airbnb (ABNB). BetMGM will release an update. The sports betting property is jointly owned by MGM Resorts (MGM) and Entain (OTCPK:GMVHF). Ventyx Biosciences (VTYX) will host a R&D event
• Friday – Charles Schwab (SCHW) will hold a winter business update call for institutional investors.

Earnings

Earnings Highlights This Week:

• Monday includes Baker Hughes (BKR) Synchrony Financial (SYF)
• Tuesday includes Microsoft (MSFT) Raytheon Technologies (RTX) Lockheed Martin (LMT) General Electric (GE), Danaher (DHR), Johnson & Johnson (JNJ), 3M (MMM), Halliburton (HAL), DR Horton (DHI), Texas Instruments (TXN), Union Pacific (UNP), and Canadian National Railway (CNI)
• Wednesday includes Tesla (TSLA) AT&T (T) ASML Holding (ASML), IBM (IBM), Abbott Labs (ABT), Group 1 Automotive (GPI), Kimberly Clark (KMB), Lam Research (LRCX), Wynn resorts (WYNN), Las Vegas Sands (LVS), Levi Strauss (LEVI), Hess Corporation (HES), Packaging Corporation of America (PKG), Wolfspeed (WOLF), Knight-Swift Transportation (KNX), Crown Castle (CCI), CSX Corporation (CSX), and Norfolk Southern (NSC)
• Thursday includes Intel (INTC) Southwest Airlines (LUV) Mastercard (MA) Visa (V) American Airlines (AAL) Alaska Airlines (ALK), American Airlines (AAL), Comcast Corporation (CMCSA), Nucor Corporation (NUE), Archer-Daniels Midland (ADM), Dow Chemical (DOW), Tractor Supply Company (TSCO), Rockwell Automation (ROK), Nokia (NOK), and STMicroelectronics (STM)
• Friday includes Chevron (CVX) Northrop Grumman (NOC) L3 Harris Technologies (LHX) American Express (AXP), Colgate Palmolive (CL), Church & Dwight (CHD), and Autoliv (ALV)

IPO Wrap

US IPO Week Ahead:

Focus on yourself and what YOU CAN INFLUENCE, set your trading plan and goals in be set for 2022.

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