January 29 – Feb 4, 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?
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
The rally that started last Friday continued all week until a sharp pullback ahead of this Friday’s close. A rational sign given the data, banker and earnings deluge next week. We have the FOMC, ECB and BoE decisions, earnings reports from Alphabet (GOOG), Meta Platforms (META), Apple (AAPL), and Amazon.com (AMZN), followed by the January Employment Report.
Only two S&P 500 sectors registered losses this week, utilities (-0.5%) and health care (-0.9%). Consumer discretionary (+6.4%), information technology (+4.1%), and communication services (+3.3%) sectors led the outperformers.
Short Squeeze Feeding Momentum.
The Goldman Sachs Most Short Index rose another 5.8% this week, increasing January gains to 20.6%. Short positions of note year-to-date gainers include Tesla (44.4%, 75% off low), Lucid (88.4%), Warner Brothers Discovery (57.3%), Carvana (63.9%), Wayfair (93.8%), Beyond Meat (50.4%), Lending Tree (79.7%), World Acceptance (56.4%), Carnival (36.7%), Expedia (32.6%), United Airlines (29.3%) and American Airlines (29.2%). In the Dow, Disney has jumped 26.1%, and Salesforce has gained 24%.
VIX continued to crater and tech stocks in particular such as Tesla were on a tear. Tesla is up over 75% from its recent lows. Reflective of over bearishness, vol crush and then delta chasing.
What’s significant on this rally is its selective, look at this week’s earnings with big upside and downside moves. Moves are sharp, take MSFT up 7% on earnings 30 mins later in the red on a conference call. Following Wednesday’s strong reversal, Tesla (TSLA) reported strong quarterly results and outlook, which drove the mega cap space, and Chevron (CVX), who reported Friday, announced a massive $75 billion stock repurchase program announcement.
Keeping some balance is the misses were not pretty, Intel (INTC 28.16, -1.93, -6.4%), disappointing guidance from KLA Corp. (KLAC 399.37, -29.39, -6.9%), earnings miss by Chevron (CVX 179.45, -8.34, -4.4%), and a Q4 profit warning from Hasbro (HAS 58.61, -5.17, -8.1%). The market responded to financial earnings with relief; American Express (AXP 172.31, +16.43, +10.5%) and Visa (V 231.44, +6.73, +3.0%).
The FOMC meeting is particularly relevant this week, this rally got a kick a long on Monday after a Wall Street Journal article by Nick Timiraos highlighted the possibility of the Fed pausing its rate hikes this spring, along with a recent survey of businesses by the NABE that conveyed a lower possibility (56% vs nearly two-thirds before) of the U.S. being in a recession or entering one.
Data this week was in that slot of solid, but not too solid.
- US Economy a Long Way from Recession in Q4, GDP Grew 2.9%
- Fed Impact Felt as Personal Spending and Inflation Soften in December
- Consumer Sentiment Improves with Inflation Expectations Lowest Since April 2021
The Advance Q4 GDP Report, weekly initial jobless claims, and December durable goods orders all came in better than expected. The PCE Price Index was up 0.1% month-over-month (consensus 0.0%) while the core-PCE Price Index, which excludes food and energy, was up 0.3%, as expected. That left the year-over-year changes at 5.0% and 4.4%, respectively, versus 5.5% and 4.7% in November.
January Univ. of Michigan Consumer Sentiment – Final 64.9 (consensus 64.6); Prior 64.6 picked up on improved sentiment for personal finances with higher incomes and easing inflation. Still two-thirds of consumers expect an economic downturn during the next year.
Housing Showing Some Life:
- U.S. Pending Home Sales Rise 2.5% in December as Real Estate Market Stabilizes
- Mortgage Refinance Rates Jump 15% with Mortgage Interest Rates at Four Month Low
- US New Home Sales Rose 2.5% in December as Lower Mortgage Rates Spur Some Buying
Treasury yields settled off their highs. The 10-yr note yield settled Friday at 3.52%, up four basis points this week. The 2-yr note yield, which is most sensitive to changes in the Fed funds rate, went out at 4.21% up one basis point this week.
Some things never change, when you think Greed is Good
Globally we saw the wipeout of over $50 billion from Indian billionaire Adani’s companies market caps after a report alleging fraud, Ponzi’s and a shell game. We keep an eye on follow on from this story and its global knock-on affect.
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?
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.
- “President Xi Jinping’s decision to dismantle Covid travel restrictions is accelerating an exodus by wealthy Chinese, who could fuel billions in capital outflows as they plow cash into property and assets abroad. Since the end of Covid Zero in December, many rich Chinese have begun traveling overseas to check out real estate or firm up plans to emigrate, immigration consultants said… That’s threatening a brain drain in the world’s second-largest economy as well as outflows that could pressure its financial markets.” January 25 – Bloomberg
- “Loans committed by China’s two main trade policy banks fell to a 13-year low of $3.7 billion in 2021 due to Beijing curtailing funding for large-scale oil projects, a study from Boston University Global Development Policy Center showed. Commitments made to 100 developing nations by the Export-Import Bank of China (China EximBank) and the China Development Bank (CDB) have fallen every year since hitting a record in 2016… ‘We expect an overall shift toward lower volume, higher quality investment from China,’ Kevin Gallagher, director of the university’s Global Development Policy Center, told Reuters.” January 24 – Reuters (Jorgelina Do Rosario and Rachel Savage):
The Market 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 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 FOMC, BOE, ECB and Jobs
Eyes will be on top macroeconomic reports such as nonfarm payrolls, Eurozone inflation, GDP growth in the Eurozone, Canada, Mexico and others, Chinese PMIs and US employment costs to name a few. Over 100 S&P earnings reports including big tech names AMZN, AAPl, META & GOOG.
Multiple central Bankers are out to test their resolve, and the markets resolve. Another FOMC meeting with the statement at 2pmET Wednesday followed by Chair Powell’s press conference starting at 2:30pmET. There will be no updated Summary of Economic Projections, or its dot plot offered at this meeting with the next chance at updating all of that arriving on March 22nd.
Three other central banks will weigh in with policy decisions this coming week. Banco Central do Brasil (Wednesday), Bank of England and ECB (Thursday).
Earnings include Apple, Amazon.com, Alphabet, Meta Platforms, Pfizer, McDonald’s, UPS, GM, Caterpillar, Ford, Starbucks and Merck.
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.
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
- S&P500 rose 2.5% (up 6.0% y-t-d)
- Dow gained 1.8% (up 2.5%).
- S&P 400 Midcaps gained 2.4% (up 7.8%),
- Small cap Russell 2000 rose 2.4% (up 8.5%).
- Nasdaq100 advanced 4.7% (up 11.2%).
- Utilities fell 1.0% (down 3.1%).
- Banks surged 4.7% (up 11.1%),
- Broker/Dealers rose 2.2% (up 8.5%).
- Transports added 0.9% (up 8.1%).
- Semiconductors surged 5.4% (up 16.3%).
- Biotechs gained 1.1% (up 5.9%).
- While bullion up $2, the HUI gold equities index was little changed (up 12.6%).
Biggest SPX Stock Winners and Losers Last Week
Global Stock Market Highlights
Highlights – Europe Stocks
- U.K.’s FTSE equities index was little changed (up 4.2% y-t-d).
- France’s CAC40 gained 1.4% (up 9.6%).
- German DAX equities index increased 0.8% (up 8.8%).
- Spain’s IBEX 35 equities index rose 1.6% (up 10.1%).
- Italy’s FTSE MIB index jumped 2.6% (up 11.5%).
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 Equities Index jumped 3.1% (up 4.9% y-t-d)
- South Korea’s Kospi index surged 3.7% (up 11.1%).
- India’s Sensex equities index dropped 2.1% (down 2.5%).
- China’s Shanghai Exchange Index was closed for holiday (up 5.7%).
Highlights – Australian Stocks
- Australia’s S&P/ASX 200: +0.3% Friday to 7493.8, up 0.2% in the fourth consecutive weekly gain. The index climbed as far as 7508.5, the highest since April, but was unable to sustain gains.
- Coal stocks sold off after strong gains and were the biggest laggards. New Hope tumbled 9% to $5.84, and Whitehaven plunged 6.6% to $8.44. Woodside Energy shed 2.4% to $36.42, and Santos unchanged at $7.24.
Highlights – Emerging Markets Stocks
EM equities mixed
- Brazil’s Bovespa index increased 0.2% (up 2.4%),
- Mexico’s Bolsa index rose 1.5% (up 13.0%).
- Turkey’s Borsa Istanbul National 100 index sank 5.4% (down 5.8%).
- Russia’s MICEX equities index rallied 1.0% (up 1.6%).
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
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.
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.
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 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’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.
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.
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
Part B: Bond Markets
U.S. Treasuries pulled back for the second consecutive day on Friday, resulting in a mixed finish for the week. Inflation was on the backburner after a milder PCE as expected but after Japan’s Tokyo Core CPI rose 4.4% yr/yr in January it was back on topic. It was the sharpest rate of increase since 1981. On that, Japan’s prime minister said that domestic drivers of inflation are “feeble” and that a return to deflation should not be ruled out.
The 10-yr note yield hit 3.55% shortly after the PCE release, but settled the session at 3.52%. The 2-yr note yield, which is most sensitive to changes in the Fed funds rate, hit 4.24% after the release before pulling back to 4.21%.
Treasury Yield Watch
- 2-yr: +4 bps to 4.21% (+1 bp for the week)
- 3-yr: +4 bps to 3.92% (+8 bps for the week)
- 5-yr: +3 bps to 3.62% (+5 bps for the week)
- 10-yr: +3 bps to 3.52% (+4 bps for the week)
- 30-yr: +1 bp to 3.63% (-3 bps for the week)
For our complete Weekly Fixed Interest Analysis and Outlook visit our Bond Traders Weekly Outlook:
- Freddie Mac 30-year fixed mortgage rates rose seven bps to 6.02% (up 247bps y-o-y).
- Fifteen-year rates slipped three bps to 5.15% (up 235bps).
- Five-year hybrid ARM rates gained six bps to 5.47% (up 277bps).
- Bankrate’s survey of jumbo mortgage borrowing costs had 30-year fixed rates up 10 bps to 6.47% (up 269bps).
Part C: Commodities
- Bloomberg Commodities Index slipped 0.5% (down 1.1% y-t-d).
- Spot Gold was about unchanged at $1,928 (up 5.7%).
- Silver fell 1.4% to $23.60 (down 1.5%).
- WTI crude dropped $1.93, or 2.4%, to $79.68 (down 1%).
- Gasoline declined 2.1% (up 5%),
- Natural Gas fell 2.0% to $3.11 (down 31%).
- Copper slipped 0.7% (up 11%). Wheat rallied 1.0% (down 5%),
- Corn increased 1.0% (up 1%).
- Bitcoin gained $450, or 1.9%, this week to $23,090 (up 39%).
Key Long Term Commodity Charts
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
- 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.”
- For the week, the U.S. Dollar Index was little changed at 101.93 (down 1.5% y-t-d). 2022 gains were 8.2%
- For the week on the upside, the Australian dollar increased 2.0%, the Brazilian real 1.9%, the Mexican peso 0.6%, the Canadian dollar 0.5%, the Singapore dollar 0.4%, the South Korean won 0.4%, the New Zealand dollar 0.3%, and the euro 0.1%. The Chinese (offshore) renminbi gained 0.36% versus the dollar (up 2.44% y-t-d).
- On the downside, the South African rand declined 0.3%, the Japanese yen 0.2%, the Norwegian krone 0.1%, the Swedish krona 0.1%, and the British pound 0.1%.
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.
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!
On the Risk Radar
Fed Warnings on Possible Medium To Long Term Risks
Geopolitical Tinderbox Radar
Economic and Geopolitical Watch
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
Next Week’s Risk Dashboard via Scotiabank
- Key central bankers to confront skeptical markets
- FOMC: Will Powell convince markets he’s serious?
- ECB: Moving toward restrictive
- BoE: Less convincing to do here
- US nonfarm payrolls: is consensus too negative again?
- Are US layoffs alarming or evidence of overdue churning?
- GDP: Eurozone, Canada, Mexico, HK, Sweden
- Soaring US employment costs
- Eurozone inflation to face renewed energy pressures
- China’s rebound to face an early test
- PMIs: US ISMs, China, India
- Brazil’s central bank to hold, weigh fiscal risks
- US auto sales to rebound
- CPI: Eurozone, Peru, SK, Indonesia
- NZ jobs and wages to inform RBNZ’s next move
- Heavy US earnings including big tech
Central bank Watch
We have the big central bank triple header, the Federal Reserve (Fed), Bank of England (BOE) and European Central Bank (ECB) all set to deliver more rate hikes. The Banco Central do Brasil on Wednesday is expected to keep the Selic rate at 13.75% which is where it has been since last August.
This Week’s Interest Rate Announcements (Time E.T.)
- Wednesday, February 1, 2023
- 14:00 Fed Interest Rate Decision
- 16:00 Banco Central do Brasil Interest Rate Decision
- Thursday, February 2, 2023
- 07:00 BoE Interest Rate Decision
- 08:15 ECB Interest Rate Decision
For our complete Central Bank Analysis and Outlook visit our Central bank Watch:
Economic Data Watch
US Data Focus
- Monday: Nothing of note
- Tuesday: Q4 Employment Cost Index (prior 1.2%) at 8:30 ET; November FHFA Housing Price Index (prior 0.0%) and November S&P Case-Shiller Home Price Index (prior 8.6%) at 9:00 ET; and January Chicago PMI (prior 44.9) at 9:45 ET
- Wednesday: Weekly MBA Mortgage Index (prior 7.0%) at 7:00 ET; January ADP Employment Change (prior 235,000) at 8:15 ET; final January IHS Markit Manufacturing PMI (prior 46.8) at 9:45 ET; December Construction Spending (prior 0.2%), January ISM Manufacturing Index (prior 48.4%), and December job openings (prior 10.485 mln) at 10:00 ET; weekly crude oil inventories (prior 0.533 mln) at 10:30 ET; and February FOMC Rate Decision (prior 4.25-4.50%) at 14:00 ET
- Thursday: Weekly Initial Claims (prior 186,000), Continuing Claims (prior 1.675 mln), preliminary Q4 Productivity (prior 0.8%), and preliminary Q4 Unit Labor Costs (prior 2.4%) at 8:30 ET; December Factory Orders (prior 1.0%) at 10:00 ET; and weekly natural gas inventories (prior -91 bcf) at 10:30 ET
- Friday: January Nonfarm Payrolls (prior 223,000), Nonfarm Private Payrolls (prior 220,000), Unemployment Rate (prior 3.5%), Average Hourly Earnings (prior 0.3%), and Average Workweek (prior 34.3) at 8:30 ET; final January IHS Markit Services PMI (prior 46.6) at 9:45 ET; and January ISM Non-Manufacturing Index (prior 49.6%) at 10:00 ET
Global Data Focus
- OPEC: OPEC oil ministers will meet online to review levels of output. The Joint Ministerial Monitoring Committee of OPEC+ is expected to endorse the current oil output policy of the group.
- Canada: Canada will publish the latest monthly GDP data.
- Europe: European Central Bank expected to move forward with their aggressive campaign on inflation and raise interest rates by 50 bps on Thursday. Key reports on growth, inflation, and unemployment will be released for the Euro Area, Germany, Italy, France, and Spain. Euro Area business survey and producer prices; Germany’s domestic and external trade; Switzerland’s KOF leading indicators, retail sales, and consumer confidence; and Turkey’s inflation rate. January’s manufacturing and services PMIs will also be updated.
- UK: Bank of England are expected to move forward with their aggressive campaign on inflation and raise interest rates. Bank of England’s monetary indicators and Nationwide Housing Prices; January’s manufacturing and services PMIs will also be updated.
- China: Chinese PMI data the first gauge since the government transitioned away from its zero-Covid policy at the start of the month.
- Japan: January consumer confidence figures and December housing starts, industrial production, retail sales, and unemployment rate.
- India: Union Budget for the 2023 financial year, as previous pledges of conservative spending clash with recent concerns of slower growth in the government’s final year in office. January PMIs
- South Korea: South Korea January PMIs, inflation and trade data.
- Australia: Ai Group Manufacturing Index for January and retail sales, housing credit, and building permits for December.
- New Zealand: December trade balance and fourth-quarter labor market figures.
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.
- Monday. First trading date following the FDA action date for Pfizer (PFE) and Myovant Sciences’ (MYOV) drug treatment myfembree for pain associated with endometriosis.
- Tuesday Deadlines for the acquisition of F-star Therapeutics (FSTX) by invoX Pharma (OTCPK:SBHMY) and for the proposed merger between Rogers Communications (RCI) and Shaw Communications (SJR). Sports betting will officially be legal in Massachusetts. Wynn Resorts’ (WYNN) Encore Boston Harbor, MGM Resorts’ (MGM) MGM Springfield, and Penn Entertainment’s (PENN) Plainridge Park all landed the Category 1 sportsbook licenses that will allow legal in-person sports betting. Shareholders with Lionheart III Corp (LION) will vote on taking sustainable supply chain player Security Matters public in a SPAC deal.
- Wednesday – Chinese electric vehicle makers Nio (NIO), Li Auto (LI), and XPeng (XPEV) monthly deliveries reports. Macau gross gaming revenue report for January will be closely watched with a few days of the Chinese New Year included and the first full month of relaxed COVID restrictions. Samsung (OTCPK:SSNLF) will hold its Unpacked product event. The company is expected to announce the S23 series of phones at its first in-person event in three years. OPEC oil ministers will meet online to review levels of output. The Joint Ministerial Monitoring Committee of OPEC+ is expected to endorse the current oil output policy of the group. Shareholders with AMCI Acquisition Corp. II (AMCI) will vote on the SPAC deal to take carbon capture and transformation company LanzaTech public. The FDA action date arrives for GlaxoSmithKline (GSK) on daprodustat for the treatment of chronic kidney disease.
- Thursday – GamesBeat Summit: Into the Metaverse 3 two-day virtual conference will begin. The event will include a focus on the findings and emerging trends within the metaverse. The tone could be of interest to investors holding the Roundhill Ball Metaverse ETF (METV). Texas Instruments (TXN) will webcast the company’s capital management review. Bionano Genomics (BNGO) will hold a strategy day event.
- Friday – Shareholders with Aesther Healthcare Acquisition (AEHA) will vote on the SPAC deal to take Ocean Biomedical public.
Earnings Highlights This Week:
- Monday includes NXP Semiconductor (NXPI) Whirlpool (WHR), Koninklijke Philips (PHG) and Principal Financial (PFG)
- Tuesday includes Exxon Mobil (XOM) Advanced Micro Devices (AMD) General Motors (GM) Pfizer (PFE), United Parcel Service (UPS) McDonald’s (MCD), Mondelez (MDLZ), Sysco (SYY), Amgen (AMGN), Electronic Arts (EA), Snap Inc. (SNAP), Match Group (MTCH), Caterpillar (CAT), Spotify (SPOT) and Marathon Petroleum (MPC)
- Wednesday includes Altria (MO) T-Mobile US (TMUS), Meta (META), Brinker International (EAT), GlaxoSmithKline (GSK), Humana Inc. (HUM), Pinterest (PINS) and Peloton Interactive (PTON)
- Thursday includes Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Starbucks (SBUX), Ford (F),Eli Lilly (LLY), Merck (MRK), Shell (SHEL), Bristol-Myers Squibb (BMY), ConocoPhillips (COP), Qualcomm (QCOM), World Wrestling Entertainment (WWE), Harley-Davidson (HOG), Ferrari (RACE), Penn National Gaming (PENN), and Honeywell (HON)
- Friday includes Cigna (CI), Honda Motor (HMC), Regeneron Pharmaceuticals (REGN) and Sanofi (SNY)
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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