Market Overview: 7th MarchHello Birdies,
Here is the market overview for today what we are seeing on BTC, DXY and SPX.
Trade well and stay safe.
Us500
S&P500: Sell opportunity for at least 1 month.S&P500 is bullish on the 1D timeframe (RSI = 61.459, MACD = 50.390, ADX = 31.702) but the RSI has turned sideways for a long time which is the same pattern that led to the July 27th 2023 High. The index has had three major corrections inside the long term Channel Up, ranging from -8.16% to -10.64%. We expect the index to decline by at least -8.00% in the next 1 month and approach the 1D MA200 (TP = 4,750), which is intact since November 2nd 2023.
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VIX is making higher highs and higher lowsWhile the market continues to rise and investors grow confident the rally won't stop, the VIX keeps subtly making higher highs and higher lows.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Therefore, your own due diligence is highly advised before entering a trade.
SPX FORECASTMARKET PHASE
BLACKBULL:SPX500 is in a weekly uptrend, fueled by a daily timeframe expansion taking place.
AREA OF VALUE
We can expect a volatility contraction where lows will form, and therefore allow sell side liquidity to be created (sell stops, shorts, stop losses) below this corrective structure.
TRADE
No trade. Waiting for a corrective structure and creation of an area of value.
A Traders’ Weekly Playbook: Records are there for breaking After a quiet start to the week in markets, Friday’s US session saw risk come alive. A poor US ISM manufacturing at 47.8 – notable in the new orders and employment sub-components – was married with comments from Fed members Lorie Logan and Chris Waller, in turn promoting a strong rally in US Treasuries, with additional rate cuts being priced through 2024.
The result was new all-time highs in the US500, US30 and NAS100, with the US2000 eyeing a key breakout of its longer-term range high. New US equity highs backed new highs seen in the AUS200, JPN225 and EU Stoxx and GER40. Gold also got huge attention from clients, rallying 1.9% to set at a new closing high, and we’ve seen many in our alt-crypto offering (notably Bitcoin cash) ripping.
We’ll see if the feel-good factor lasts, but I find it interesting that equity and risky assets rallied despite seeing poor US data – where it’s easy to argue that poor data that increases economic slowdown risk, could have prompted risk aversion. So, while we can also point to Fed chatter, it seems in this case bad economic data was good for risk, with the overriding factor being increased rate cut expectations.
We’ll see if that same reaction is seen in the outcome of the US ISM services print and the various labour market readings, as these will be the key cross-asset drivers this week. Powell’s testimony to Congress will also get a look-in from traders and we know if he wants to move market pricing he can.
The ECB and BoC meeting and the China NPC meeting will get good attention but will play second fiddle to the US data.
The poor market internals in equity may be an amber warning sign to some, but market internals and breadth have offered no profitable signal for a while - pullbacks remain shallow and there is a hunt to go hard on risk. There is plenty to navigate this week but for now, the price action shows that the bulls are very much in control. Long equity hedged with gold exposures seems the play, and looking at the charts on the higher timeframes it feels like the path of least resistance being onwards and upwards.
Good luck to all.
The marquee event risks for the week ahead:
The key risk events for markets this week – China NPC meeting, ECB meeting, Jay Powell’s testimony to Congress & US nonfarm payrolls.
Monday
Switzerland CPI (18:30 AEDT) – the market looks for CHF headline CPI to print 1.1% yoy (from 1.3%) and core CPI at 1% (from 1.2%). The CHF swaps market prices a 25bp cut at the Swiss National Bank (SNB) meeting on 21 March at 70%, so a weaker than expected CPI print should see the market push that implied to c.90%, suggesting the SNB could lead G10 central banks in the sequencing of policy easing. As a result the CHF could become a consensus short from hedge funds. Look for XAUCHF to rally hard on a weak CPI number.
Tuesday
US ISM Services Index (Wednesday 02:00 AEDT) – the market looks for the services index to print 53.0 (from 53.4). Given the moves in risky assets (equity, credit) and gold post last week’s ISM manufacturing this data point could drive market volatility. A print below 51.0 would be a surprise and promote further upside in XAUUSD, with the market putting notable attention on the new orders and unemployment components of the survey.
Japan (Feb) Tokyo CPI (10:30 AEDT) – the market looks for JP headline CPI to print 2.5% (from 1.6%) and CPI ex-food and energy unchanged at 3.1%. After last week’s upside surprise in the JP national CPI print, and the upside move in 2-year JGB yields to 0.19% (the highest level since May 2011), the market will watch this one closely and an upside surprise could see JPY shorts cover.
BoJ Gov Ueda speaks at a fintech summit (15:00 AEDT) – after speaking last week at the G20 meeting and his comments considered dovish, we’ll see if this is the forum for a change in Ueda’s stance.
‘Super Tuesday’ – the biggest day in the primaries calendar, with some 15 states voting to nominate their choice of Presidential nominee. Given Trump’s result in South Carolina, it seems a done deal that he will get the REP nomination, so it's hard to see Super Tuesday as a market event.
China 14th National People Conference – the market will learn of the government’s economic targets for 2024 and what they are aiming for GDP, inflation, unemployment, and the deficit. We should see officials target growth of “around 5%” but it is feasible they aim for more.
Wednesday
US JOLTS job openings (Thursday 02:00 AEDT) – the market looks for 8.89m job openings (from 9.026m) – Traders with long positions in equity and gold and USD shorts will want to see a weaker print vs consensus expectations.
Australia Q4 GDP (11:30 AEDT) – the market looks for Q4 GDP of 0.3% QoQ / 1.4% YoY (from 2.1%), but expectations will be massaged as we get the partials (inventory, company profits, net exports as a percentage of GDP). Can’t see this being a mover of the AUD to any great degree, so would have limited concerns about holding AUD positions over this data point.
UK Budget (23:30 AEDT / 12:30 local) – Rishi Sunak needs Jeremy Hunt to pull a rabbit out of a hat to get voter momentum into the UK election - but one questions if this budget moves the dial on voting intentions and impacts the UK bond market, and by extension the GBP? Recent media suggests the chance of a major fiscal boost from the budget has been reduced - see my colleague Michael Brown's preview here - pepperstone.com
Bank of Canada meeting (Thursday 01:45 AEDT) – the BoC won’t move on policy and will almost certainly keep rates at 5%. Given the recent downside surprise in December GDP (1.1% YoY) and January CPI print (of 2.9%) we could get stronger guidance on future easing. CAD swaps price 85bp of cuts (or just over three 25bp cuts) by December, so the move in the CAD will come as traders reconcile the tone of the statement with this pricing.
Thursday
Fed chair Jay Powell testifies to Congress (Friday 02:00 AEDT) – Jay Powell’s testimony will garner big attention from the market, where most see Powell offering a balanced/neutral view of economic risk and policy – this is his last formal forum to speak before the 20 March Fed meeting, in which some feel some risk of a risk of a hawkish pivot.
China trade data (no set time) – a hard one to react to given there is no set time for the release – the market looks for exports to increase by 3% and imports by 1.5%. A larger import number could boost currencies such as the AUD, NZD, and CLP.
Japan labour cash earnings (10:30 AEDT) – while we look ahead at Japan’s spring wage negotiations, the market looks for cash earnings of 1.3%, which suggests real wages of -1.4%
Mexico CPI (23:00 AEDT) – the market looks for headline CPI at 4.43% (from 4.88%) and core CPI at 4.62% (from 4.76%). Given recent economics, the prospect of a 25bp cut in the 21 March Banxico meeting looks likely, and the CPI print could reinforce that belief. Conversely, an upside surprise could see USDMXN break 16.9924 support and offer a larger downside move to 16.8000.
ECB meeting (Friday 00:15 AEDT) – the ECB are not expected to ease until June, so the statement and Christine Lagarde’s speech will most likely reflect the market’s central view. The bar seems high for the ECB to open the door to an April cut at this meeting, and Lagarde’s commentary may point to a “few month months” of data before they ease. The ECB’s updated economic projections, while likely to be downgraded, will still not be poor enough to suggest increased urgency to normalize. Unless we get a big surprise from the ECB, I’d be looking to fade moves in EURUSD into a 1.0920 to 1.0760 range this week.
Friday
US nonfarm payrolls (Sat 00:30 AEDT) – the market looks for moderation from the blowout January report, where the consensus sits at a healthy 200k jobs created in February. The unemployment rate is expected to remain at 3.7%, with average hourly earnings growing 4.3% yoy (from 4.5%). NFPs is the marquee event risk of the week, but forging a playbook is not clear cut – One questions if a rise in the U/E rate lifts risky assets as bond yields fall (rate cut expectations increase), or whether this outcome promotes risk aversion as traders consider the negative implications on economics. The USD will hold the cleanest read on the review of the data.
Canada employment report (Sat 00:30 AEDT) – the market looks for 20k jobs created and a tick up in the U/E rate to 5.8%.
International Women’s Day
Saturday
China CPI/PPI (12:30 AEDT) – the market sees CPI increasing by 0.2%, which would mark the first positive read after four months of falling consumer prices (month-on-month). PPI is eyed -2.6%. The trader’s concern here is around whether this offers any gapping risk for China assets, or its proxies (AUD, NZD, CLP etc) – I would argue it doesn’t.
US earnings – Target, Marvell Technology, Costco, Broadcom
Full Fed speaker line-up for the week
DOA trading Strategy - SPX, SPY, US500Sorry I haven't posted in awhile, here's a quick analysis on SPY.
As mentioned from the last SPY analysis back in October 27, 2022 that we're still correcting in the market.
Now here's an update after finishing that correction in the market.
(#SPY) - Update, we're finally finishing this nice retest on SPY after breaking the downtrend.
We can drop more to $395 area but and if we hold there expect SPY to hit $427 next.
S&P500 Is it timed for a correction until the Fed Decision?The S&P500 index (SPX) has been trading within a long-term Channel Up since the October 13 2022 market bottom and since last Friday, the price has been griding on its top (Higher Highs trend-line). The longer it fails to convincingly break and close a full week above it, the more likely it is to deliver a technical pull-back.
On that technical setting, the 1D RSI has been on a lengthy Bearish Divergence (Lower Highs) since December 19 2023, which is similar to the one that led to the July 27 2023 Channel Up Higher High and the subsequent -10.96% correction. In fact the 1D RSI has printed a peak pattern (red circle) similar to all previous 3 Higher Highs that gave corrections ranging from -9.17% to -10.96%. July 27 2023 initially delivered a -5.84% pull-back before extending to -10.96%.
From a fundamental perspective though, if the market indeed gets rejected here and starts pulling back, it would seem ideally timed for a bottom near the next Fed Rate Decision meeting on March 20 2024, where the policymakers may give clearer hints for a June cut.
The correction's targets can only be determined technically though, so a potential -5.84% pull-back takes us marginally below Support 1 at 4845, right on the 0.382 Fibonacci Channel retracement level. If the market overreacts to the Fed, then a potential extension gives a rough 2nd Target at 4755, within Fib 0.5 and 0.618, which will approach the 1D MA200 (orange trend-line). On the current phase of the Bull Cycle we are at though, it is very doubtful to see in the near future stronger corrections.
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Crypto vs Stocks - Interesting Times🕝Over the past four days, Bitcoin has surged by 20%, while the US500 index experienced a modest decline of 0.35%.
This notable discrepancy in performance reflects significant market movements, influenced by recent events such as the approval of Bitcoin ETFs and the impending Halving.
Let's delve into these factors and their impact:
📈 Market Sentiment:
The recent approval of Bitcoin ETFs has infused the cryptocurrency market with renewed optimism. Institutional adoption, catalyzed by ETFs, signifies a broader acceptance of Bitcoin as a legitimate investment asset. This approval likely contributed to Bitcoin's surge, as investors seek exposure to the digital currency through regulated avenues.
💲 Halving Anticipation:
Anticipation surrounding the upcoming Bitcoin Halving event is driving market sentiment. Scheduled to occur in a couple of weeks, the Halving will reduce the block reward for miners, diminishing the rate at which new Bitcoins are created. Historically, Halving events have spurred significant price rallies, as reduced supply increases scarcity, potentially leading to upward price pressure. The looming Halving has likely fueled demand for Bitcoin, contributing to its recent surge.
📊 Risk Appetite and Diversification:
Bitcoin's outperformance against the US500 index also underscores varying risk appetites among investors. Cryptocurrencies like Bitcoin attract risk-tolerant investors seeking higher returns, particularly in anticipation of significant events such as the Halving.
🤖Technological Disruption:
Furthermore, Bitcoin's surge highlights the disruptive potential of blockchain technology and decentralized finance. Investors are increasingly recognizing the innovation behind cryptocurrencies, allocating capital towards transformative technologies.
As Bitcoin continues to assert its dominance in the financial landscape, one cannot help but wonder:
Are we witnessing the dawn of a new era in finance, where decentralized assets challenge traditional norms and reshape the way we perceive value?
📚 Always adhere to your trading plan, especially regarding entry points, risk management, and trade execution.
Wishing you all the best of luck!
All Strategies Are Good; If Managed Properly!
~Rich
Markets are reaching extreme greed territoryOptimism surrounding earnings last week helped to push the market higher. As a result, the SPX established a new all-time high above $5,100, and the VIX faltered below $14. Subsequently, it did not take long for Wallstreet analysts to upgrade their price targets for various companies, including the one with the most hype around it, NVIDIA. Some of these forecasts go as high as $1,400, which would value NVIDIA at nearly $4 trillion (more than Apple). However, as the Fear and Greed Index is reaching extreme greed territory and people are getting drunk from profits, it might be time for a reality check.
Since the start of 2024, many large companies have begun another wave of layoffs. Here is the list of just some of them:
Amazon - laying off several hundred employees (the exact number is not known)
Cisco - laying off 5% of its workforce
Discord - laying off 10% of its staff
Duolingo - laying off 10% of its workforce
eBay - laying off 9% of its workforce
Microsoft - laying off some 1,900 people (about 8% of the workforce in gaming)
PayPal - laying off 9% of its workforce
Snap - laying off 10% of its workforce
Rivian - laying off 10% of its workforce
Unity - laying off 25% of its workforce
Twitch - laying off 35% of its staff
On top of these massive layoffs, there are also many corporate downgrades in forward guidance and an ongoing problem with sticky inflation, with the next print due on 8th March 2024. If new data confirms no improvement, it will likely cause fear to creep back into the market and weakness in stocks. With that said, we are proceeding very carefully in the current environment.
Illustration 1.01
The image above shows VIX's daily chart.
Illustration 1.02
Illustration 1.02 shows the parabolic chart of NVIDIA, which is reminiscent of many past charts that reached bubble territory and then popped.
Technical analysis gauge
Daily time frame = Bullish
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Therefore, your own due diligence is highly advised before entering a trade.
US500 Will Move Lower! Short!
Please, check our technical outlook for US500.
Time Frame: 8h
Current Trend: Bearish
Sentiment: Overbought (based on 7-period RSI)
Forecast: Bearish
The market is testing a major horizontal structure 5072.7.
The above observations make me that the market will inevitably achieve 5023.1 level.
P.S
We determine oversold/overbought condition with RSI indicator.
When it drops below 30 - the market is considered to be oversold.
When it bounces above 70 - the market is considered to be overbought.
Like and subscribe and comment my ideas if you enjoy them!
S&P500 This Bull Cycle is far from over.On this analysis we view the S&P500 (SPX) from the longer term perspective of the 1M time-frame in order to answer the question of why it hasn't pulled-back since the October 2023 Low. The answer can be given by observing the index from a cyclical point of view.
First, with the exception of the March 2020 COVID flash crash and more recently October 2022, the 1M MA50 (blue trend-line), was intact since October 2011. Even during those two tests, it never closed a monthly (1M) candle below it. This makes it the current long-term Support and every pull-back towards it is a buy opportunity on the lowest possible risk.
The catalyst on this long-term analysis is the Channel Down that started on the 1M RSI since the September 2015 Low. Every decline near its bottom (Lower Lows trend-line) is a buy opportunity, while near its top (Lower Highs trend-line) is a sell. Right now the Cycle (5th since the bottom of the 2008-2009 Housing Crisis) is at the point after its 1st mid-cycle correction (blue circle) where the 1M RSI typically bounces off its MA (yellow) trend-line.
This hasn't just happened within the RSI's Channel Down but is also a characteristic of all Cycles since the bottom of the 2008-2009 Housing Crisis. At the same time, the 1M MACD rises on a Bullish Cross.
As a result, even though a short-term pull-back can be technically justified, the current Bull Cycle is far from over as the 1M RSI hasn't approached the Channel's top. Technically that should be towards the fall of 2024 followed by a volatile 2025.
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S&P500 Is a -3% pull-back probable here?The S&P500 index (SPX) is having another bullish week with the current green 1W candle being the strongest since the first week of the year. Nonetheless with the 1W RSI overbought at 75.00 and the price very close to the Higher Highs trend-line that started on the late November 2022 High, a short-term pull-back seems probable at the moment.
The long-term price action since 2016 shows that every time this 1W RSI overbought pattern emerges, and the index is trading near (or at) the Higher Highs trend-line, it makes a correction between -3.10% and -4.50%. From the current levels, the minimum of -3.10% pull-back would deliver prices around 4950 while a -4.50% one, prices around 4865. Long-term traders can look to continue buying such dips as long as the 1W MA50 (blue trend-line) is supporting.
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The Nvidia effect; US equity indices break out to new highs The Nvidia effect has ripped through global equity markets and given fresh wind to markets that were looking ominously poised for a 3-5% drawdown. New highs have been seen in EU Stoxx, GER40, JPN225, and the US large-cap equity bourses; the US30, US500 and NAS100.
What levels do the bulls target now?
Well either, you’re looking at fibo extension/projections, psychologically important round numbers, or you hold until price action offers an exit signal, or your trailing stop is triggered.
Our client flow is progressively skewed short index positions at current levels (85% of open positions on US30 are held short, 74% short on the NAS100), with many countering for a reversion move, although this is an aggregation of different strategies and timeframes.
Nvidia hits the sweet spot
Nvidia has dominated the narrative and rightfully so – the flow-on effects into the AI/semi’s scene has been truly emphatic. I won’t go over Nvidia’s numbers at a granular level, but clearly, they hit the absolute sweet spot – beating on Q424 actuals by some margin across the board, but also on their guidance for Q125 numbers.
While not meeting some very lofty market expectations was a small risk, there was perhaps a greater fear that the guidance would be too hot, subsequently creating an incredibly high bar to beat in the future. That wasn’t the case, and one could say the outcome was a ‘goldilocks’ scenario.
It’s hard to go past the commentary on their outlook and future operating environment, as this has not just lifted Nvidia but the whole scene. Saying that demand will continue to exceed supply all year was a massive bullish trigger. Detailing that supply constraints should improve over the year was also well received, with supply chains asked to increase capacity by 30% for CYQ1. Sales to China have also dropped to mid-single-digit percentages despite such explosive revenue growth, which was a factor and could be a big kicker further into the future.
Nvidia shares not only closed +16.5%, far higher than the -/+11% implied in options pricing but adding $276b in market cap was absolutely staggering. The fact price closed right on its session highs must enthuse the bulls and for tape readers, it tells a lot about the mindset of the collective – dips will likely be shallow, and traders will chase the upside.
87.75m shares traded hands – the most since November 2023 - and in the options market, we saw 1.51m calls bought vs the 20-day average of 913k. Valuations are obviously lofty, but they matter little for these high-growth plays, which are essentially out-and-out momentum vehicles.
Also, consider that Nvidia holds its highly anticipated GTC conference on 18 March – where they are likely to update the market on new products and innovations – so pullbacks in the stock should be shallow, and we could see buyers push price higher into that event.
The spill over into names like Super Micro Computers (+32.9%), AMD (+10.7%), Marvell (+6.6%) and Broadcom (+6.3%) is clear. The Philadelphia Semi ETF (SOX) also gets some focus as price breaks to new ATHs. Offshore we saw plays such as Infineon, ARM Holdings, Tokyo Election, Taiwan Semi and Korean Semi names all working well and finding a solid bid.
The biggest one-day move since early February
On a broad index basis, the NAS100 saw its biggest one-day move since Feb 2023 (a 3% move was a 3.3 Z-score move). That said, for such a big percentage change in the index volumes were only 7% above the 30-day average, although this was more than offset by good breadth with 82% of stocks higher (72% in the US500).
NAS100 implied volatility has fallen a touch with the NAS100 VIX index dropping 1.21 vols to 18.4% with the S&P500 VIX -0.80 vols to 14.5%, with traders rolling out of downside hedges. Hedges cost money when the market is ripping and subtract from performance.
So global high-quality growth equity has found its mojo courtesy of just one stock, and what they have said about the outlook, which of course means so much not just for the A.I adopters but the enablers.
We can once again talk about concentration risk in equity, but we can use the 2023 case study and see that reduced participation in the rally isn’t the red flag for contrarian positions it perhaps once was.
While CFD traders will take timeframes down and trade intraday flows – long and short – the primary big-picture trend remains higher, so for those who hold for longer than a day, we need to assess the big risk that can cause a 5%+ drawdown.
What can cause a reversal?
That risk is inflation, and a resurgence of concerns that we move into a far higher-for-longer regime, with rate cuts essentially priced out for 2024. It is my view that equity can hold in and even push higher if expected rate cuts are priced out for 2024, as long the cause is solid growth dynamics. But if the primary reasoning for reduced rate cut expectation is inflation, which causes long-end bond yields to rise (both nominal and real), and volatility in interest rates and US Treasury’s lifts then equity risk premium will rise, and the bears will likely get their 5-10% pullback.
For now, the Nvidia show is real, and a feel-good factor runs through the whole sector – The NAS100 breaks 18k, the US500 eyes 5100 and the US30 looks up at 40k.
S&P 500 INDEX $SPX - Nov. 17th, 2023BUY/LONG ZONE (GREEN): $4531.84 - $4726.36
DO NOT TRADE/DNT ZONE (WHITE): $4380.94 - $4531.84
SELL/SHORT ZONE (RED): $4117.36 - $4380.94
Currently there is bullish momentum, as seen coming off the gap up from Monday close-Tuesday open, however; after this momentum upwards we have only seen price go sideways up to today. Price is resting inside a zone towards the top side where bulls can look for a breakout to start entering in longs. For bearish entries there would need to be some structural breakdowns for the bears to enter as the price approaches the $4380.94 level. Both the bullish and bearish zones can be widened to include the entry levels of the respective zones for early entries.
This is what I would personally look at before entering trades, everything is subject to change on a daily basis and as I analyze different timeframes and ideas.
ENTERTAINMENT PURPOSES ONLY, NOT FINANCIAL ADVICE!
EURUSD - CRASH COMINGHello
Today I analyzed the EURUSD currency pair very carefully - in my opinion, we will see huge drop, this is not investment advice.
S&P500: 1W MACD about to make a Bearish Cross. Huge sell signal.The S&P500 is on the second straight bearish 1W candle and if the week closes this way, it will be the first series of red 1W candles since the October 23rd 2023 bottom. The 1D timeframe has already turned neutral (RSI = 51.449, MACD = 32.820, ADX = 32.340) after a prolonged period inside the overbought territory, so we can claim that a medium term correction has started. A 1W MACD Bearish Cross will confirm it, as it has been the single most major long term sell signal in the past 1.5 years.
The last 1W MACD Bearish Cross was formed after the August 14th 2023 1W candle and the then declined by -8.58% initially to reach the 1W MA50 and then completed a -10.90% decline to form a HL at the bottom of the Channel Up. -8.00% and -9.00% corrections have been common on MACD Bearish Crosses. In any case, this indicates that the S&P500 can drop to 4,650 (-8.00%) in order for the market to see if the 1W MA50 can hold as a long term Support after an incredible 4 month rally.
See how our prior idea has worked out:
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MY SECREET WEAPON STATEGY FOR SHORT TERM!Daily Markets: Investors Watching Fed Speakers Closely After Inflation Data
Following the Consumer Price Index (CPI) report that showed little progress on core inflation, the market will be dissecting comments from a pair of Fed speakers now that market expectations for rate cuts softened considerably after yesterday’s inflation data.
WARNING!
I AM NOT FOLLOW THE TREND STYLE TRADER, IM WITH MY INDICATOR TO CATCHING THE SIGNAL AND DECIDE PRICE ACTION. SO BE THE FIRST AT THE TOP OR BOTTOM.
U.S. indices uneasy ahead of FOMC minutes and NVIDIA earningsToday is a big day, with the NVIDIA earnings being scheduled after the U.S. market close and FOMC minutes coming out about two hours before that. While waiting for these releases, we would like to discuss several developments in the market. First, the SPX’s price is flirting with the bullish trendline connecting important troughs on the 4-hour chart. Second, the RSI’s structure, resembling a triangle on the daily chart, became broken yesterday. Third, the MACD became inverted on the daily time frame and now points to the downside. Fourth, the Volatility S&P 500 Index is relentlessly trying to advance higher. All of these signs suggest a (some) loss of bullish momentum and are slightly concerning.
Illustration 1.01
Illustration 1.01 displays the 4-hour chart of SPX and a bullish trendline, which the price is flirting with; a breakout to the downside will be concerning (especially if accompanied by another spike in the VIX).
Illustration 1.02
The image above shows the daily chart of the SPX’s RSI. The yellow arrow highlights the bearish breakout.
Illustration 1.03
Illustration 1.03 portrays the daily chart of MACD. The yellow arrow indicates a bearish inversion.
Technical analysis gauge
Daily time frame = Neutral
Weekly time frame = Bullish
*The gauge does not necessarily indicate where the market will head. Instead, it reflects the constellation of RSI, MACD, Stochastic, DM+-, ADX, and moving averages.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Therefore, your own due diligence is highly advised before entering a trade.
Liquidity sources are drying upOn Friday, the S&P 500 in the last part of the session began to fall with some force. And today, we have seen that it has fallen and opened below the support zone at 4.998
The question we have to ask ourselves is: What does this mean? Does it mean it will continue to fall? Has a roof formed?
Last Friday, the options contracts expired. This meant the disappearance of the gamma, and meant the disappearance of a source of liquidity, that is, the money coming from the dealers to cover the positions they had open.
That money has disappeared, therefore, we must consider that a source of liquidity is missing.
Until we see how the gamma is situated, at what levels it stabilizes and what the behavior of investors is in the options market, it is reasonable to think that we will witness temporary fragility at least during the first days of this week.
And what does the chart tell us?
This morning it has pierced the support in the 4.998 zone. This is a symptom of weakness, of short-term fragility.
What 2 options are there?
If it now rebounds and is not able to exceed the 5.000 level, it will most likely deploy a new downward leg.
And if it rebounds, and moves sideways above 5.000, it is most likely that the price will try to return to the high zone.
Now, 5.050 is a wall. It was already before the expiration of the options contracts, and it is even more so now. Therefore, maximum rise is in the 5.050 zone.
If it fails to break above 5.000, we have support between 4.941 and 4.922
As long as the S&P 500 remains above that level, I will maintain a bullish bias.
S&P500 Short-term pull-back is very likely now.The S&P500 has hit (even surpassed on the liner scale) the top of the 16-month Channel Up pattern with the 1D RSI on a Bearish Divergence (price on Higher Highs while the RSI on Lower Highs). If the price closes a 1D candle below the 4H MA100 (red trend-line), which is dangerously close to, it will be the first such bearish signal since August 02 2023 and the previous Higher High of the Channel Up.
Of course the final confirmation comes if the 1D MA50 (blue trend-line) breaks but that is currently on Support 1 and our first Target at 4845. So if the 1D MA50 breaks, we will take a new short and extend selling with a 4755 Target, which represents a -5.84% decline from the current top, similar to the August 18 2023 pull-back.
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S&P 500 Bull Market: Balancing Opportunity and UncertaintyThe S&P 500's remarkable surge to unprecedented heights, with a staggering 39% increase from its October 2022 low, signals a robust bull market that has captivated investors worldwide. Yet, amidst the euphoria, concerns linger about the optimal timing for investment, prompting a closer examination of the current market landscape.
Undoubtedly, the current bull market presents ample opportunities for investors to capitalize on potential earnings. Despite reaching record highs, there remains significant room for growth, making procrastination a potential pitfall. Delaying investment decisions risks missing out on the market's upward trajectory, potentially foregoing substantial returns.
However, prudence dictates a nuanced understanding of the market's dynamics, recognizing both its positive and negative aspects. Historical data provides invaluable insights into navigating similar market conditions, offering lessons from past experiences.
Consider the aftermath of the Great Recession, where the S&P 500's recovery was gradual, taking several years to reach new all-time highs. Investors who hesitated to enter the market during this period may have missed out on significant gains, underscoring the importance of a long-term perspective.
Conversely, attempting to time the market perfectly carries inherent risks. Waiting too long to invest may lead to missed opportunities, while overcaution could result in lost potential gains. The unpredictability of short-term market movements adds another layer of complexity, highlighting the challenges of making accurate forecasts.
In light of these factors, adopting a strategy of dollar-cost averaging can offer a prudent approach to investing. By making regular investments over time, regardless of market fluctuations, investors can mitigate the risks associated with trying to time the market. This method allows for the smoothing out of price volatility, providing a more stable path towards wealth accumulation.
Ultimately, the key to navigating the S&P 500 bull market lies in recognizing the inherent trade-offs between opportunity and uncertainty. While the allure of potential gains is enticing, prudent risk management and a long-term perspective are essential for sustainable investment success. By embracing a disciplined approach and leveraging time as their ally, investors can navigate the complexities of the market with confidence, maximizing their chances of long-term financial growth and prosperity.
A Traders’ Weekly Playbook: After record levels comes chopOn the week we learnt that the UK and Japan are in a technical recession, although this meant little to markets and perhaps the bigger issue in Japan was the steady stream of pushback from key Japanese officials on recent JPY strength.
US retail sales fell 0.80% in Jan, a sinister turn when both US CPI and PPI were far hotter than expected, putting us on notice that the US core PCE print (due on 29 Feb) could be above 0.4% MoM - which if seen a year ago would have been a trigger for the Fed to hike by 25bp. The Feb CPI print (due 12 March) will get huge attention, and while some way off is a key date for the diary.
Among a barrage of ASX200 companies reporting, we also saw a poor Aussie employment report, which put great emphasis on the February employment report (due on 21 March) given economists (and the ABS) expect a solid snapback in hiring in this data series. The ASX200 eyes new ATHs, and key earnings from the likes of BHP, RIO, QAN and WOW this week could take us there.
In markets, the USD gained for a sixth straight week, although a 0.2% week-on-week (Wow) gain was more of a stealth grind higher than an impulsive one-way tear. Assisting USD flows was a reduction in US swaps pricing, where we started the week with 113bp of cuts priced by December 2024, and finished with 91bp (or 3.6 cuts), which helped lift the US 2YR Treasury to 4.64% (+16bp on the week). If the market hadn’t already amassed a sizeable USD position, then one could argue the USD move would have been higher.
The EURUSD weekly shows indecision to push the pair lower and a move above 1.0805 (last week's high) and should take the pair through 1.0828 (200-day MA) and onto 1.0865, which would be a level I’d be looking to fade longs on the week.
While we saw the US500 0.4% lower on the week, we saw the prior week's low of 4918 (and the 5-week EMA) holding firm, with traders selling the VIX index above 15%. While US cash equity will be closed Monday for Presidents Day, I’m expecting choppy trade through to Thursday - so the intraday environment for day traders could get a little messy and it will pay to be nimble.
The NAS100 was the underperformer last week but should attract good attention from clients this week with Nvidia’s number due out on Wednesday (after the cash close), and where the market eyes some punchy in reaction to the headlines, which could spill out into AI names more broadly.
The Year of Dragon got off to a solid start for China equity outperformed, notably in the small-cap space (the CSI500 closed +10% WoW) and we see the CN50 index looking compelling for further upside, and I see 12,000 coming into play. While National Team flows and PBoC liquidity have supported China/HK equity, economics do matter, so put the China Prime rate decision and new home sales data on the radar to potentially influence this week.
On the China proxy theme, Copper etched out a solid move on the week although we have seen selling interest into $3.80. Crude is also getting attention from traders, with price gaining 3.4% WoW and testing the 29 Jan pivot high. Moving in a bullish channel we see upper trend resistance into $80.50 – a level to put on the radar.
Staying in the commodity theme, silver (XAGUSD) has found good buying interest off $22 and has closed above the double bottom neckline and the 200-day MA – upside into $24.00/50 looks possible. On the ag’s, cocoa and wheat come on the radar as short set-ups, while corn has seen a solid bear trend since October but indecision in Friday's price action, suggests traders are on notice for a small reversal this week.
The marquee event risks for traders to navigate:
Monday
US cash equity and bonds are offline for Presidents Day – futures will be open but will close early.
Tuesday
China 1 & 5-year Prime Rate (12:20 AEDT) – The market sees the 5-year Prime rate lowered by 10bp to 4.1%, while the 1-yr rate is expected to remain at 3.45%. The Prime rate is the benchmark rate by which households can borrow from Commercial banks. We may see some disappointment in China's equity markets if the PBoC refrain from easing, which has been the trend of late. This time may be different, so conversely, a deeper-than-expected cut across both tenors may see traders adding to an early long position in the CN50 index.
Wednesday
Canada Jan CPI (00:30 AEDT) – The consensus is we see Canadian headline CPI coming in at 3.2% (from 3.4%) and core CPI unchanged at 3.6%. The CAD swaps market sees the first cut from the BoC occurring at either the June or July meeting. A core print above 3.6% should see good CAD inflows, while below 3.4% should interest CAD sellers. The GBPCAD (daily) setup is on the radar, where a closing break of 1.6950 would inspire short positions for 1.6800/1.6750.
Australia Q4 Wage Price Index (11:30 AEDT) – the median estimate from economists is for Q4 wages to increase 0.9% QoQ & 4.1% YoY (from 4%). The AUD may see a small move on this data point, but it will naturally be dependent on the extent of the outcome vs expectations. A wage print above 4.3% would be a big surprise and get some attention from Aussie rates traders who see the first cut (from the RBA) at the August meeting.
Nvidia Q424 earnings (after-market) – as noted in the Nvidia preview the options market prices a substantial -/+11% move on earnings. Naturally this sort of reaction – if it plays out - has the potential to cause big volatility in the NAS100 and US500 after the cash market close, so it is a clear event risk.
Thursday
FOMC meeting minutes (06:00 AEDT) – the January FOMC minutes should be a non-event given it predates last week’s stronger US CPI and PPI print. Any colour on an early end to QT may get some focus though.
EU HCOB (flash) manufacturing & services PMI (20:00 AEDT) - the market looks for the EU manufacturing index to print at 47.0 (from 46.6) and services at 48.8 (from 48.4). If these median expectations prove to be correct, then we would see a slight improvement in the pace of decline, which is modestly EUR positive. Seems unlikely we see a sizeable reaction in the EUR unless we see services above 50.0.
UK S&P (flash) global manufacturing & services PMI (20:30 AEDT) - the market looks for the UK manufacturing index to print at 47.5 (47.0) and services at 54.5 (from 54.3). So, a slight improvement is expected in both metrics. A service PMI print above 55 could see increased movement in the GBP and cement expectations the BoE will look to cut rates from August. GBPUSD needs a catalyst as it tracks a tight sideways range, while I hold a preference for GBPNOK lower, with GBPCAD shorts a potential trade I’m looking at.
Friday
S&P Global US Manufacturing & Services PMI (01:45 AEDT) – the market looks for manufacturing index to print at 50.5 (from 50.7) and services at 52.1 (from 52.5). Any reading above 50 shows expansion from the prior month, so if the consensus proves to be correct then both metrics will show expansion but at a slower pace. Hard to see a pronounced move in the USD or US equity unless we see a sizeable beat/miss.
China New Home Prices (12:30 AEDT) – China’s new home prices have fallen every month since May 2023, so further falls seem likely in the January series. China equity may find sellers if we see the pace of decline increases from the December outcome of -0.45%. Any improvement in the pace of decline could be taken well by the CN50 and HK50 Index which are already seeing tailwinds courtesy of National Team buying.
ECB 1 & 3-year CPI expectations (20:00 AEDT) – there is no consensus by which to price risk for the EUR, but consider the last estimate was 3.2% and 2.5% respectively. Any impact on the EUR will come from the extent of the revisions. June remains the likely forum for the ECB to start a cutting cycle. Biased long of EURJPY given the bullish momentum for 163.
US Politics – The South Carolina REP Primary is held on Saturday – will this be the stage for Nikki Haley to formally exit the REP Nominee race?
Marquee corporate earnings reports
• US corporate earnings – Home Depot (Before-market 20 Feb), Walmart (Before-market 20 Feb), Nvidia (After-market 21 Feb)
• ASX200 Corp earnings – COH (19 Feb), BHP (20 Feb), WOW (21 Feb), RIO (21 Feb), QAN (22 Feb), FMG (22 Feb)
• HK Corp earnings – HSBC (21 Feb)
