US30 Is Ready To Retrace after Yesterday Midas SignalEntered Shorts at 385XX Levels Yesterday.
Aim TP1 at the middle moving average line.
Us500
$4,900 a historic momentYesterday, the SPX closed above $4,900 for the first time in history. Now, the question is, can it close above this level for multiple consecutive days? If yes, it will be positive for the index. However, a breakdown below $4,900 will be slightly concerning. Similarly concerning will be if RSI, MACD, and Stochastic start reversing to the downside on the daily graph. As a result, we will keep monitoring the situation and update our thoughts on the asset with the emergence of new developments.
Illustration 1.01
Illustration 1.01 shows the daily chart of the SPX and simple support/resistance levels.
Illustration 1.02
While waiting to see what path the SPX will take, we want to note that investors’ confidence seems to be eroding in the Chinese markets despite the announcement of new stimulus measures in the last two weeks.
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. Its purpose is purely educational.
SPX500 - BULLISH OR BULLISH? (TARGET 4910 AND BEYOND)A bit of a late post as the market is moving faster than my fingers can type but let's see how relevant this is regardless. Here is what I see:
What is on the chart? (follow the steps)
1) A strong price accumulation that gives us a potential liquidity target for later on! For now bullish until said otherwise.
2) The BOS level that serves as support.
3) The formation of a trendline which is bullish.
4) Our 1 Hour bearish FVG that may stunt price temporarily. Hence my trajectory leading downwards first!
5) ( NOW ) An accumulation structure that may propel price or lead it lower to our GOLDEN LEVEL!
6) The entry of the Gods. Yes, I am very enthusiastic but if I were to enter, it is here. We have an FVG + fib reload zone + trendline + hourly Kumo. I mean what else does a trader need? A crystal ball? No.
7) The final target. If we're bullish, what better than an ATH as a target?
As always, stay cold headed (unlike myself because when I see such a beautiful confluence of entry conditions, I just get excited) and happy trading! ;)
A Traders’ Playbook – the week that has everythingWe move past a busy week in markets and onto an even busier one, littered with potential landmines for traders to navigate.
One key theme which has legs this week are moves in Chinese markets – notably, China went after short sellers with several targeted measures. We also saw a 50bp cut to banks RRR amid reports of an RMB2t package for offshore SOE to buy Chinese equities – that said, with big inflows into mainland funds, the HK50 and CSI 300 managed an unimpressive 4.2% and 2% weekly gain respectively.
Judging by price action in the HK50 market players seem unsure about building on the move from 15k, and Fridays inside bar needs to be rectified – I would look to trade a break of 16300 (longs) and 15809 (shorts)
While hindsight is a wonderful thing, the equity index to be long on the week was the EU Stoxx 50, which is in beast mode (even when priced in USD). The ECB refraining from pushing back on market pricing has certainly helped, while EU earnings also ramp up. Looking ahead, Thursdays EU CPI could be very important for both the EUR and EU equity, where a weak core CPI print – below 3% - could open the door for the ECB to signal a big change from the collective at the 7 March ECB meeting, although we can gauge an immediate response to the CPI data from ECB members Lane and Centeno, who both speak after the CPI data.
US data last week, for the most part, impressed and should result in the FOMC statement being little changed this week. Nuance and positioning will play a key role in the moves in rates, the USD, gold, and equity. FOMC aside, it’s a big week ahead State Side, with a raft of key labour market reads, growth data points, the US Treasury Quarterly Refunding Announcement (QRA) as well as it being the marquee week of US earnings with Microsoft, Apple, Alphabet and Amazon reporting.
It’s not a shock that longs in NAS100 and US500 have had a collective rethink and thought twice about building on the move into 4900. That said, if we look at the volatility markets there has been no pickup in hedging activity with limited propensity to buy downside puts. In fact, all the talk has been that funds are selling index calls to collect premiums and enhance returns on their underlying equity positions. This is subsequently having a big effect in dampening volatility.
Crude and Nat Gas are where the moves are taking place, and certainly, SpotCrude had a flyer gaining over 6% on the week, trading into the Nov range highs and taking out the 200-day MA. US data has been a factor, but geopolitics is also a growing issue, and we watch headlines roll in. The bulls seem to have control for now, so upside risks remain – a break higher could also become problematic for future headline inflation, although we’re not at levels too concerning yet.
All in, we see a new week littered with key event risks – economic data flow, central bank meetings and corporate earnings. It pays to be aware of the calendar, whether one is day trading and navigating these potential vol events through the day. Or holding positions but not in front of the screens. Consider if the event holds the potential for outsized moves, where the skew of risk resides, and what the means for the stop placement and position sizing.
It’s the week that has it all – good luck.
The marquee event risks for traders to navigate this week:
• End-of-month portfolio flows – Investment bank flow models suggest USD selling to play out to rebalance portfolios, with some sizeable selling in Japanese equities to reweight.
• Aus Q4 CPI (31 Jan – 11:30 AEDT) – Q4 CPI poses an obvious risk to AUD and AUS200 exposures. The market looks for headline Q4 CPI to print 0.8% QoQ / 4.3% YoY (from 5.4%), with the trimmed mean measure also expected to fall to 4.3% YoY. Importantly, the RBA had forecast 4.5% for Dec CPI (on both metrics), so the further below that the more dovish the reaction in the AUD. As it stands, Aussie interest rate futures see no chance at the Feb RBA meeting, with a 1-in-4 chance of a 25bp cut in the May meeting. Given such sanguine pricing, we’d need to see a 3-handle on CPI YoY to bring a cut onto the table near-term and promote a big move in the AUD.
• China Manufacturing and Services PMI (31 Jan – 12:30 AEDT) – the market eyes the manufacturing index at 49.2 (from 49.0) and the services index at 50.6 (50.4) – after some big stimulus last week CN/HK equity index longs will be keenly hoping for the data flow to show signs of improvement, although it’s the property space that is of most interest.
• FOMC meeting (1 Feb 06:00 AEDT) & Chair Powell presser (06:30 AEDT) – it will certainly be hard to match the strong dovish reaction in the Dec FOMC meeting and after the strong Q4 GDP print, and consumption the Fed will be in no mood to declare victory. With the Fed expected to lose its tightening bias, the FOMC statement should read neutral. There will also be a large focus on the timeline for tapering the pace of QT (or balance sheet reduction), notably with Jay Powell’s likely to be heavily probed on this in his press conference – all up, while positioning is always a factor, I see two-way risks for the USD and equity. See our preview here - pepperstone.com
• Sweden’s Riksbank meeting – the Riksbank will leave rates at 4% but should open the door to cuts, with the swaps market pricing the first cut in May. Preference for USDSEK upside, adding on a closing break of 10.5000.
• BoE meeting (1 Feb – 23:00 AEDT) – the GBP has found support from resilient UK data flow, with GBPUSD tracking a clean 1.2800 – 1.2600 range. The market will be expecting the bank to retain a hawkish lean and will be looking for changes in the vote split to a 8-1 or even 9-0 vote to hold rates. With the market pricing the first 25bp cut at the May BoE meeting at 50%, and the first cut fully priced in June, I see a two-way risk to the GBP at this meeting. See our preview here - pepperstone.com
• US nonfarm payrolls (3 Feb – 00:30 AEDT) – the median estimate is that we see 180k jobs created (the economist range of estimates is set between 285k to 120k), with the unemployment rate expected to tick higher to 3.8%. I think the USD reaction will be more closely linked to the outcome of the U/E rate than net job creation.
• EU CPI (1 Feb) – The CPI print could be pivotal to the ECB and could set the stage for a more dovish narrative from the bank. The market sees headline CPI falling to 2.7% (from 2.9%) and core CPI to 3.2% (3.4%). Chief economist Lane speaks 90 minutes after, so we could get an immediate reaction to the data from one of the ECB’s most influential members. The EU CPI print poses big EUR risk given the implication for ECB rate expectations, so consider EUR exposures over the news.
• US Treasury financing estimate (29 Jan) and Treasury Quarterly Refunding Announcement (QRA - 31 Jan) – the QRA was the trigger for lasting trending conditions in price in both August and November and the implications this time around could be significant. That said, I am leaning towards the idea that the market will not get a surprise this time around, but with T-bills still expected to play a big role in govt funding in the weeks ahead there will be further increased scrutiny on the level of RRP balances and ultimately the funding markets (SOFR-Fed funds). See our preview here - pepperstone.com
US earnings in the week ahead – As it stands, we’ve seen 25% of S&P500 companies report, 78% have beaten expectations on EPS (by an average of 6%) and 53% have beaten on sales. Companies have reported 1.6% aggregate EPS decline, and 3.7% sales growth.
In the week ahead we get earnings from just over 40% of the S&P500 market cap, including 4 of the illustrious MAG7 names – as a highlight I expect good interest in:
Tuesday - UPS, Microsoft (implied move -/+ on the day of reporting 4.3%), Alphabet (-/+ 5%)
Wednesday - Boeing (-/+ 3.8%), Mastercard (-/+ 2.9%), QUALCOMM (-/+ 5.6%)
Thursday - Apple (-/+ 3.2%), Meta (-/+ 6.5%), Amazon (-/+ 6.2%)
Friday - Chevron (-/+ 2.3%), and Exxon (-/+ 2.2%).
Other US data points worth considering:
US – Consumer confidence (31 Jan 02:00 AEDT), JOLTS jobs openings (31 Jan 02:00 AEDT), Employment Cost Index (1 Feb 01:00 AEDT), ISM manufacturing (2 Feb 02:00 AEDT).
In LATAM FX:
The BCCh (Chile) meet on Wednesday and are expected to ease by 100bp to 7.25%, although there is a chance they go 75bp - USDCLP is seeing positive momentum and I favour it higher near-term but have limited conviction.
The Brazilian CB go on the same day and should cut the selic rate by 50bp to 11.25%
Columbia also meet on Wednesday, and we see a 50bp cut to 12.50%.
S&P500 Potential UpsidesHey Traders, in the coming week we are monitoring US500 for a buying opportunity around 4880 zone, US500 is trading in an uptrend and currently is in a correction phase in which it is approaching the trend at 4880 support and resistance area.
Trade safe, Joe.
While China eases, it's still too early for the U.S. After testing $4,900 yesterday, the SPX retreated slightly lower. Currently, it trades near $4,870, and we keep monitoring the resistance at $4,900 and support at $4,800. We are also paying close attention to the RSI, which broke above 70 points on the daily graph; the invalidation of the breakout will raise a slight concern, and the same will apply to the spike in the VIX. Besides all these things, we will keep an eye on the Chinese markets, which saw a ban on short-selling being imposed last week and which failed to halt the crashing market. That prompted regulators to announce new stimulus measures and cut the reserve requirement ratio by 50 basis points (effective from 5th February 2024). Due to these major changes, we have changed our stance on the Chinese equity markets and are no longer bearish. However, it is still yet to see whether these measures will have a lasting effect (remember, plenty of other measures were implemented in the past few years, failing to halt the multi-year decline). Despite all this optimism and similar expectations among investors for the easing in the U.S., we remain highly cautious (and skeptical that the FED will cut rates in the next two meetings).
Illustration 1.01
Illustration 1.01 shows the daily chart of the SPX’s RSI. The yellow arrow indicates a bullish breakout above 70 points.
Illustration 1.02
The image above displays three major Chinese indices on the daily time frame. It can be observed that volume began to quickly increase alongside equities following the announcement of the boost to the economy.
Technical analysis gauge
Daily time frame = Slightly bullish
Weekly time frame = Neutral
*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. Therefore, your own due diligence is highly advised before entering a trade.
The risk manager – putting the US Treasury’s QRA on the radar While the US500 and NAS100 juggernaut rolls on and the VIX index remains under 13%, we ask what could derail this risk rally.
One event which has shown form through 2023 as a market mover is the US Treasury’s QRA (Quarterly Refunding Announcement).
For background the ‘QRA’ – or Quarterly Refinancing Announcement – is where the US Treasury Department announce and quantify its financing needs for the quarter ahead, as well as the composition and breakdown of T-bill and bond issuance.
In effect, the QRA could be a complete non-event for markets, or conversely result in a repeat of the powerful moves that we saw in both episodes in August and November - where the US Treasury’s (UST) QRA marked major turning points and trending conditions across bond, equity, and FX markets.
In the art of risk management, the QRA is an event worth monitoring.
Dates for the risk diary
On 29 January the UST announce its financing estimates for the period ahead. 2 days later (31 Jan) we get the breakdown of issuance and USD amount per maturity that they plan to target – this is key.
Coincidentally, just to spice things up, the breakdown of the USTs bond issuance falls on the same day as the FOMC meeting.
The August 2023 QRA case study
In August 2023 the US Treasury detailed they would finance its ballooning fiscal deficit by issuing a greater amount of longer-term US Treasuries than what was expected. With the Fed no longer a buyer of US Treasuries and Japan and China reducing its UST holdings, the highly price-sensitive private sector was asked to take down the increased bond supply.
The result was a sharp sell-off in the US 10yr Treasury, with yields rising from 4% to 5%. As US bond yields soared the S&P500 fell from 4600 to 4100, while the USD index (DXY) rallied by over 5%.
The November 2023 QRA case study
Turn to the following QRA in November 2023 and the US Treasury was keen to curb the sell-off in Treasuries, and a rising interest expense bill - subsequently announcing they would finance its fiscal shortfall away from longer-term bonds and towards US T-bills (debt instruments with maturities of less than 12 months).
While we can also attribute some of the move in markets to the Fed ‘pivot’ and rising expectations of a rate-cutting cycle, amid a soft landing – the move towards ultra short-term T-bill issuance saw the US 10yr yield trend to 3.78%, largely driven by term premium falling from +40bp to -45bp. Subsequently, the DXY fell 6% and the S&P500 rallied 16%.
Watch RRP balances
The RRP facility is an important monetary policy tool for the Fed, as it sets a floor on short-term interest rates (repo, money markets). With money market funds holding a preference to buy US T-bills at govt auctions, over investing in the RRP facility, we’ve seen a consistent drawdown in the level of the RRP facility to $639.56b (search this on TradingView under code – RRPONTSYD).
There are growing concerns that should RRP balances fall below $200b it may start to cause real stress in market funding rates, which as we saw in 2019 would have significantly negative implications for broad market sentiment.
Many consider SOFR (Secured Overnight Finance rate) to be the most important market rate of all, as it represents the cost of short-term financing. If SOFR rates move higher than the level the Fed pays banks to park their excess reserves on their balance sheet (currently 5.4%) – a tool used to put a ceiling on short-term rates - it would show the Fed’s monetary policy levers are no longer functioning efficiently, and that the funding channels are broken.
Traders can monitor this on TradingView by using the code FRED:SOFR-FRED:IORB – should this push above 0bp and certainly above 10bp it will get great attention.
Break it down
So, the concern is if the UST keep its current funding needs to be skewed towards T-bills, then RRP balances will likely fall to worrying levels, funding costs could blow out and equities will take a bath with the USD rallying on safe-haven flows.
Conversely, if the US Treasury move to skew its borrowing needs towards long-term Treasury issuance, then term premium would rise and US 10yr Treasury yields would move higher, again taking the USD higher and equity lower – a re-run of the bearish moves we saw between August and October.
This is a very simplistic breakdown of what is a highly technical concept, but the mix of debt funding could cause some short-term gyrations and it potential result in an earlier end to QT.
Given the US deficit is a growing market and political issue, how it’s funded matters for markets - One for the radar.
S&P500 Buy and Sell trading plan.The S&P500 (SPX) index has been trading within a Channel Up pattern since the December 07 low and is currently on the 3rd Bullish Leg towards the top (Higher Highs trend-line). The basic Support is the 4H MA200 (orange trend-line) which has (nearly) held twice this month, with the 1D MA50 (red trend-line) right below being the separator between a medium-term bullish and bearish trend.
We expect a maximum Leg growth of 5.56% like the one that topped on December 27, so we are buying towards 4900 or until the 4H MACD makes a Bearish Cross (standard peak/ sell signal within the Channel Up), in which case we will sell and target the Channel's bottom (Higher Lows trend-line) at 4800 (-2.80% decline like January 05), or close earlier if the 4H MA200 gets hit.
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A Traders’ Week Ahead Playbook: living in interesting times We reflect on the week that was and where the US equity markets stole the show, with new highs in the S&P500, and the NAS100 outperforming all major equity markets. A.I names went on a tear on Friday, where notably Nvidia, Broadcom and AMD felt the love. With 16% of the S&P500 market cap reporting this week, earnings and corporate outlooks will play a greater role in the price action – it is hard to be short these markets given the upbeat flow but it’s hard to chase as well.
Tesla and Netflix will be the trader favourites this week, with the options markets implying moves (on the day of reporting) of -/+ 5.4% and 7.5% respectively. Tesla needs to pull something out of the bag to turn sentiment around and we see price having lost 20% in the past 14 days. Netflix comes off the back of a 16.1% rally on the day of reporting Q323 numbers, so longs will be hoping for something similar, to take price above $500. A daily close below the 50-day MA and I’d be exiting longs.
Conversely, the HK50 and CHINAH were savaged by over 5% and shorts continue to be the play, although a surprise cut to the 1 & 5-year Prime Rate would cause a decent reversal higher.
Pushback from several central bankers on the start point and extent of rate cuts (priced into swaps markets) caused front-end bond yields to move higher last week, with the market reevaluating whether March is indeed the start date for many central banks to start a cutting cycle. In the case of the Fed, the implied probability has fallen to 50%, and this pricing should hold firm until we see core PCE print later in the week – The USD holds a fair relationship with the evolving implied pricing for a March Fed cut, where rate cut probability falls the USD rallies (and vice versa).
The USD was the best performing G10 currency last week but with the ECB meeting in play this week, there are reasons to think EURUSD could push back into the 1.0950/70 area. The NZD gets close attention given the Q4 CPI print due and we’re seeing signs of diverging paths between the RBA and RBNZ in market pricing – looking for NZDUSD shorts on a momentum move through 0.6100 and AUDNZD longs at current spot levels, adding on a close through the 200-day MA.
The flow and set-up in gold is a little messy and the price is chopping about – no real directional bias in the near term and would look at selling rallies on the week into $2055 and buying dips into $2000.
While Nat Gas is getting good attention given price is in freefall, Crude is also on the radar with rallies recently sold into $75.20 and dips bought at $70 – A break on either side of that range could be meaningful.
Politics also comes into focus with the New Hampshire REP primary held on Tuesday – it won’t be a market event but could pull Trump one step closer to becoming the REP nominee, a fate most fully expect.
Good luck to all.
Marquee economic data for traders to navigate:
• China 1 & 5-year Loan Prime Rate – After the PBoC surprised and left the Medium-Lending Facility (MLF) rate unchanged last week the market now assumes the PBoC will also leave the 1 & 5-year prime rate unchanged at 4.2% & 3.45% respectively. The CHINAH was the weakest major equity market last week (-6.5% wow) and could revisit the October 2023 lows unless we see something far more definitive from the Chinese authorities.
• BoJ meeting (23 Jan no set time) – this should be a low vol affair, where expectations for policy change at this meeting are incredibly low, and one would be highly surprised if the BoJ lift rates out of negative territory. Consider the BoJ will provide new CPI and GDP forecasts at this meeting, and they could be very telling of the future need to move away from a negative rate setting.
• NZ Q4 CPI (24 Jan 08:45 AEDT) – the market sees Q4 CPI running at 0.5% QoQ / 4.7% YoY (from 5.6%. This is a clear risk for NZD exposures, where the outcome could see the market questioning if the RBNZ cut before/later than current pricing (in swaps) to start easing in May with 91bp of cuts priced by year-end. I like AUDNZD upside on growing central bank policy divergence.
• EU HCOB manufacturing and services PMI (24 Jan 20:00 AEDT) – the market sees both surveys modestly improving at 44.8 (from 44.4) and 49.0 (48.8) respectively. A services PMI read above 50 would likely promote EUR buying.
• UK S&P manufacturing and services PMI (24 Jan 20:30 AEDT) – The consensus is that we see the manufacturing diffusion index improving a touch to 46.7 (from 46.2), while services should grow at a slower pace at 53.0 (53.4). GBPUSD is carving out a range of 1.2800 to 1.2600 and I’m happy to lean into these levels for now.
• US S&P global manufacturing and services PMI (25 Jan 01:45 AEDT) – the market looks for the manufacturing index to come in at 47.5 (from 47.9) and services at 51.0 (51.4). A services PMI print below 50 could cause some gyrations in the USD and equity.
• Norges Bank meeting (25 Jan 20:00 AEDT) – The Norwegian central bank will almost certainly leave interest rates will stay unchanged at 4.5%. The market prices the first cut from the Norges Bank in June, with 107bp of cuts priced this year.
• Bank of Canada meeting (25 Jan 01:45 AEDT) – the market prices no chance of action at this meeting. The first cut from the BoC is priced in April with 101bp of cuts priced this year, so USDCAD (and the CAD crosses) tone of the statement.
• Japan Tokyo CPI (26 Jan 10:30 AEDT) – the market looks for headlines CPI to come in at 2% (from 2.4%), and super core at 3.4% (3.5%). The JP CPI print would need to miss/beat by some margin to cause a move in the JPY given the print is seen so soon after the BoJ meeting.
• ECB meeting (26 Jan 00:15 AEDT) – the market ascribes no chance of a cut at this meeting, but the ECB will provide new growth and inflation forecasts. Recent communication from multiple ECB members suggests a growing consensus for a cut in June, although EU swaps pencil in the first cut in April (priced at 82%), with 136bp of cuts priced by December.
• US core PCE inflation (27 Jan 00:30 AEDT) – the median estimate is for headline PCE to come in at 0.2% QoQ / 2.6% (unchanged) and core at 0.2% QoQ / 3% YoY (from 3.2%). US swaps put the probability of a cut in the March FOMC at 50%, so the PCE inflation data could influence that pricing and by extension the USD.
New Hampshire (NH) REP Primary (23 Jan) – Donald Trump is leading Nikki Haley in the polls by 15ppt in NH, with Trump picking up votes with Vivek Ramaswamy recently exiting the race, while Nikki Haley is benefiting from Chris Christie’s recent departure. Haley must win here or come very close, or her chances of becoming the REP nominee drop sharply. There is talk that Haley may drop out after NH if she doesn’t come close to gaining the most votes in NH, although she may still run in the South Carolina Primary (24 Feb) given it’s her home state – either way, the race for the REP nominee could essentially be over depending on the outcome of the NH primary. Polls close at 8pm EST, so we should know the outcome shortly after that.
US earnings – GE, Procter & Gamble, IBM (24 Jan after-market), Netflix (24 Jan 08:00 AEDT), Tesla (24 Jan after-market), Visa, Amex, Intel
S&P 500 At the All time High. What is next?In March 2023, I predicted that the US500 would experience an uptrend after breaking the bearish trendline that had constrained the price since 2021. The price successfully breached the trendline and underwent a retest.
The following analysis resulted in an impressive gain of over 9000 pips. This development is particularly significant for long-term investors and position traders.
Currently, the price is above the 2021 all-time high. What lies ahead for the US500?
To anticipate the next move, we should monitor if the price closes above the current high. A period of consolidation or a retest, coupled with a bullish engulfing signal, would suggest the potential continuation of the uptrend. My target levels include psychological milestones such as 5000, 5100, and 5200. The extent of this trend remains uncertain, given the absence of resistance above. As the year progresses, price action will provide further insights.
However, a different scenario might unfold. If the price breaks and closes below the all-time high, accompanied by signs of a loss of momentum and a pattern indicating a trend reversal, I would consider shorting the US500.
What are your thoughts on this analysis? Please share your insights below.
S&P 500 Rally InboundOverall Order Flow is Bullish, And With this Market Maker Buy Model I see it rallying Today,
And with that Breaker in Mind I can see it Trading Down into that Creating a Judas Swing,
US500. high are placed? or not?#US500 (S & P)... market sustain from lat couple of 4 hours candle.
and as we discussed in our perveious us500 analysis that 4780 is market resistance area.. market break it but did not sustain above that area,
now again that is our resistance area if market hold it then now drop expected from here,
keep in mind guys that is market key level 4780.
manage accordingly.
trade wisely
good luck
Chinese equities falling, VIX skyrocketing, and rally stallingOvernight, multiple Chinese stock markets established new lows, setting the negative tone for the European trading session and futures markets in the United States, with all major U.S. indices diving into the negative territory ahead of the regular trading hours. So far, the SPX has failed to get through the psychological resistance of $4,800 and establish new highs. At the same time, other indices like the Nasdaq 100, the Dow Jones Industrial Average, and the Russell 2000 have been moving sideways since late December 2023. It is becoming increasingly apparent that the market’s bullish momentum continues to stall, which follows a period of extremely low VIX and cheap protection to the downside (two things that often precede a downturn in the market). As a result, we are closely monitoring an opening gap in the VIX; if the gap is not closed and the VIX continues to grow, it will strongly bolster the bearish case. The same applies to the decline in MACD, Stochastic, and RSI (plus its failure to break through 70 points) on the daily graph. In addition to that, there are signs of a double-top forming on the daily and weekly chart (not validated yet, though). Therefore, we continue to approach the market with heightened caution.
Illustration 1.01
The image shows three major Chinese stock market indices: the Hang Seng Index, the CSI 300 Index, and the Shanghai Composite Index. The Hang Seng Index has continuously declined since early 2018, while the Shanghai Composite Index and the CSI 300 have declined since early 2021; the performance is measured from the all-time highs until the latest market close.
Illustration 1.02
Illustration 1.02 portrays the daily chart of VIX. The yellow arrow indicates the opening gap in the VIX, a notable event, given its increase of more than 10% from the previous close.
Illustration 1.03
Illustration 1.03 shows the daily and weekly chart of the SPX. Yellow arrows indicate two peaks, which could potentially evolve into a double-top formation.
Technical analysis gauge
Daily time frame = Neutral (turning slightly bearish)
Weekly time frame = Neutral
*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. Therefore, your own due diligence is highly advised before entering a trade.
A Traders’ Weekly Playbook: Looking ahead to MarchWe move past the US CPI and PPI releases and the market has become even more convinced that the Fed’s easing cycle starts in March, with a 25bp cut priced for every meeting from this starting point. Yield curves are steepening (the US 2’s 30s curve is no longer inverted), driven by the short-end where US 2-year Treasury yields fell for six straight days, losing 23bp on the week.
US 5-year real rates (i.e. US 5-year Treasury adjusted for expected inflation over the coming 5 years) have printed new cycle lows and sit at the lowest yield since May ’23.
Some have stated the case that the US CPI print gives the Fed less scope to ease in March. Perhaps…but when we take the components from CPI and PPI that feed into the core PCE calculation (released 27 Jan), and we’re looking at an estimate of c. 0.2% mom, which sees the 6-month annualised rate of core PCE around 2% - and given core PCE is what the Fed set policy to – bingo, we have a clear justification as to why the bond and rates market feels March is the starting point.
Tuesday’s (Wed 03:00 AEDT) speech from Fed member Christopher Waller will be one of the key focal points this week, where recall he set off the rally in late November with definition on a timeline and a path to cut rates, which essentially started the Fed pivot and the year-end risk rally.
With talk of an earlier start to QT tapering and lower relative US bond yields, it’s a surprise that the USD is holding in so well with the DXY tracking a sideways range of 102.70 to 102.10. On the week the GBPUSD was the best performer in G10, with price pushing 1.2800, while the BRL got spoils in the EM FX space.
Gold has seen somewhat of a renaissance against this backdrop though, where on the 4-hr chart price closed above the recent downtrend, where on the daily price closed above the 5-day EMA. A weak US retail sales could offer renewed life for gold bulls and see price target 2075.
It's been a mixed picture in equity land, with much focus on the JPN225 gaining a massive 6.9% - although, the risk-to-reward trade-off suggests refraining from new longs and waiting for some of the heat to come out of the move. An RSI of 80 aside, 87% of stocks are above the 50-day MA, and 68% of stocks closed at a 4-week high. A sign of euphoria and a signal for contrarians or solid participation and therefore bullish? I favour the latter.
While US earnings continue to trickle in and the US election process officially kicks off in Iowa, China takes centre stage once again with retail sales, Q4 GDP, and property sales. China/HK equity remains challenged, but the tape is turning, and shorts are seeing signs that we may be turning from a trend position to one of trading a consolidation, where range trading in the CHINAH, HK50 and CN50 may be the strategy. We’ll see but if the data comes in softer, or we don’t see the level of monetary policy easing that’s priced, then frustration will likely see renewed selling flows.
The set-up in US equity indices look balanced with 2-week risk – the risk bulls will naturally want the US500 to clear 4800 and the NAS100 through 17k, but with options expiry across the VIX, index and single stock plays this week (schedule below), one questions if we see a higher volatility post expiration. An obvious consideration for one’s risk management.
Good luck to all.
The marquee event risks for traders to navigate this week:
US markets closed for MLK Day (Monday) – partial trade in futures.
• China 1-year MLF rate (15 Jan 12:20 AEDT) – we should see the PBOC cut the Medium-Lending Facility by 10bp to 2.4% (from 2.5%), with a chance they cut by 15bp to 2.35%. Anything less than a 10bp cut could weigh on CHINAH, CN50 and HK50. We also remain on watch for a cut to China’s bank reserve ratio requirement (RRR) as well.
• UK employment and wages (16 Jan 18:00 AEDT) – on wages, the consensus is we see Average Weekly Earnings 3M/YoY moderate a touch to 6.8% (from 7.2%). The outcome will play into UK rates pricing, where the first 25bp cut is priced for May. GBPUSD seems to be finding good supply into 1.2800, so the GBP bulls will want to see a closing break here to add to longs. Favour EURGBP into 0.8560.
• China Q4 GDP (17 Jan 13:00) – the economist’s median estimate has Q4 GDP growing 1% QoQ and 5.2% YoY (from 4.9% in Q3) – GDP by its nature is a backwards-looking data point but given the lack of confidence international money managers have in investing in China, I think the outcome of the China GDP report could impact market volatility.
• China industrial production, fixed asset investment, retail sales, property sales (17 Jan 13:00) – the market looks for these data points to come in at 4.5%, 2.9%, 8% and -9.5% respectively. Certainly, the market will be closely watching the property sales data for further evidence that sales are troughing.
• UK CPI (17 Jan 18:00 AEDT) – a potential vol event for GBP traders, so monitor exposures over the data point - the market sees headline CPI coming in at 3.8% yoy (from 3.9%) and core CPI at 4.9% (5.1%). GBPUSD 1-week implied volatility sits at 6.67% (the 17th percentile of the 12-month range), and pricing a -/+ 105-pip move from Friday’s closing level.
• US retail sales (18 Jan 00:30 AEDT) – the median consensus is we see sales growing 0.4% mom, with the ‘control group’ element at 0.2%. The market picks and chooses to run with this data point, but I think a mom decline – should it come - could impact sentiment and promote good USD sellers.
• Aussie employment report (18 Jan 11:30 AEDT) – the median estimate is we see 15k jobs created, with the U/E rate unchanged at 3.9%. Aussie interest rate futures price the June RBA meeting as the probable first cut, so this pricing may come into question, but it would take a move in the unemployment rate to do so.
• Japan national CPI (19 Jan 10:30 AEDT) – the market looks for JP headline CPI to moderate to 2.6% (from 2.8%) and core CPI to print 3.7% (3.8%). After last week’s -3% decline in real wages, and falling inflation in Japan, coming at a time when other G10 central are expected to start a cutting cycle, it hardly incentivises the BoJ to lift rates.
Fed speakers – Christopher Waller (17/1 03:00 AEDT), Williams, Bostic, Daly
Other factors that could affect market sentiment:
• US Corp earnings – It’s a quiet week on the US earnings front with c3% of the US500 market cap report - Goldman Sachs and Morgan Stanley garner attention, while we see several regional banks out with numbers, so put the KRE ETF on the radar.
• US politics – On Monday we get the results from the Iowa Caucuses – Trump is almost certain to win the REP nomination, but could Nikki Haley gain some momentum to take into the New Hampshire Primary on 23 January?
• US options expiry – US equity index expiry (16 Jan), VIX options expiry (17 Jan), equity options expiry (19 Jan).
US30 H1 / TWO POINTS OF INTEREST / POSSIBLE SCENARIOS FOR LONG✅Hello Traders!
This is my idea related to US30 H1. I see two possible scenarios where I will look for a long entry in case of confirmation of retracement.
You can see two resistance zones from where I expect US30 will go bearish. In case of confirmation of retracement from the resistance zones, I will execute long trades until the price of 37760.
Traders, if you liked my idea or if you have a different vision related to this trade, write in the comments. I will be glad to see your perspective.
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Reacceleration of inflation presents a trouble for the FEDYesterday, the market became slightly spooked by the release of higher-than-expected inflation numbers in the United States. The immediate reaction of the SPX to the news was negative, with the index erasing its early gains; the same price action could be observed in the Nasdaq 100 and Dow Jones Industrial Average. Nevertheless, market indices recovered much of their losses by the close and have been trending sideways.
The reacceleration of inflation in the United States represents a hurdle for the FED in its quest to tame inflation (likely causing it not to cut interest rates at the next meeting at the end of January 2024 or in March 2024). In addition to that, it could shatter the investors’ expectations of premature rate cuts if no significant improvement is seen in the next print. In turn, that could negatively affect the stock market down the road.
In regard to technicals, the resistance at $4,800 continues to play a crucial role; if the price manages to break above it and close there (ideally for at least two consecutive days), it will be very positive. The resumption of growth in RSI, MACD, and Stochastic on the daily chart will also bolster a bullish case. However, the flattening of these indicators and a failure of the RSI to break above 70 points will be slightly concerning.
Illustration 1.01
Illustration 1.01 shows the 5-minute graph of the SPX. The yellow arrow indicates the moment when inflation numbers were released in the United States.
Technical analysis
Daily time frame = Neutral
Weekly time frame = Neutral
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 serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
US100 16868.6 +0.4% IDEA AHEAD OF THE CPIGOOD DAY TRADER
Hope everyone is great a look at the NASDAQ, S&P 500 & US30 ahead of HIGH IMPACT NEWS TODAY.
* Its been a bullish week for all the above mentioned indices alike as we see a rejection on the weekly time-frame.
AS WE SCALE LOWER TO THE DAILY TIME-FRAME
* We swept those historic highs and rejected back into the range.
NASDAQ DAILY
* The NASDAQ tested the 50% FIB as we see a rally up
* Continuation is possible just as a possibility of sweeping the high.
S&P 500 DAILY
Same as NASDAQ we see the same setup on the US500
DOW JONES DAILY
* THE DOW is highly bullish this bring some interest Ahead of CPI.
* Traded Above the hostoric highs and kept there range bound for a some weeks.
* It will be interesting to see a push higher here but anticipating some reversals.
* With some projections there is still room above we see -2 projection and -4 projection yet to be tested.
A JUMP TO THE HOURLY TIME FRAMES
NASDAQ 1H T/F
* Beautiful bullish trend
* On high alert for signs of momentum shift but we remain strongly Bullish.
* We do see a cisd but this alone is not enough. awaiting more confirmations.
* THE SAME WITH THE S&P 500
US 30 1H
* Some bearish momentum coming into play.
* premature to decide ahead of high impact news but it would be great to see some reversal before continuation with the trend.
* LIKE I MENTIONED AWAITING TO SEE SOME SORT OF REVERSALS ON THE INDICES BUT IF CONTINUE BULLISH WE RIDE THE TREND
*** TRADING HIGH IMPACT NEWS IS HIGHLY RISK AS THE VOLITILITY IS CRAZY THIS IS NOT ADVISE TO EXCECUTE DURING THIS HIGH IMPACT NEWS***
HOPE YOU ENJOYED THIS OUT LOOK, SHARE YOURS BELOW🛑
lets see how it goes.
IF THIS IDEA ASSISTS IN ANY OR IF YOU LIKE THIS ONE
SMASH THAT LIKE BUTTON & LEAVE A COMMENT.
ALWAYS APPRECIATED
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* Kindly follow your entry rules on entries & stops. |* Some of The idea's may be predictive yet are not financial advice or signals. | *Trading plans can change at anytime reactive to the market. | * Many stars must align with the plan before executing the trade, kindly follow your rules & RISK MANAGEMENT.
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| * ENTRY & SL -KINDLY FOLLOW YOUR RULES | * RISK-MANAGEMENT | *PERIOD - I TAKE MY TRADES ON A INTRA DAY SESSIONS BASIS THIS IS NOT FINACIAL ADVICE TO EXCECUTE ❤
LOVELY TRADING WEEK TO YOU!
All eyes on inflationThe SPX regained ground above $4,700 in the past two trading sessions and is now testing resistance at $4,800. If the index breaks above the resistance and closes above it for at least two consecutive days, it will bolster a bullish case; a growth in RSI and Stochastic on the daily graph will also strengthen this case. However, a failure of the SPX to take a foothold above $4,800 combined with a spike in the VIX will raise our suspicion about the prospects of the SPX continuing higher. With that said, there is a release of inflation numbers in the U.S. today, which might cause markets to turn volatile, especially if the print will come in higher than expected. As a result, we are approaching the market very carefully.
Technical analysis
Daily time frame = Neutral
Weekly time frame = Neutral
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 serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
S&P500 Dead cat bounce?The S&P500 index (SPX) is unfolding today the 3rd green 1D candle in a row, having gained back the vast majority of losses sustained last week. The December 28 rejection took place just below the 4820 All Time High (ATH) and as the 1D MACD is printing a sequence similar to the July 27 2023 peak, we expect the price to make a bearish reversal before the week is over.
The minimum target on this correction for us is the 1D MA50 (blue trend-line), which currently is at 4580. Throughout this 14-month Channel Up though, the minimum decline % has been -8.06%. So if selling gets accelerated we don't rule out seeing a 1D MA200 (orange trend-line) test at 4450. In order to re-sell though this low, we need to get a candle closing below the 1D MA50 and then sell upon a bounce above the 1D MA50, similar to September 01 2023 and March 06 2023.
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A Traders’ Playbook – Let the good times roll Just when you start to sense that risky assets (such as equity) may head into a more prolonged drawdown, with various Fed members talking about easier financial conditions subtracting the need to lower rates, we see a solid rally in the NAS100, US500 and US2000.
The NAS100 had its best day since 14 Nov, as tech led the way courtesy of Nvidia’s new product launch, with new graphic cards that can lead the way in AI PCs. Tech aside, the rally was broad-based, with 84% of stocks closing higher and energy the only sector closing lower.
Long NAS100 / short US30 is a trade that I see as having further juice, with Boeing subtracting 132p from the US30 alone. Either way, new equity highs seem to be the more likely risk here.
Further tailwinds for risk appreciation have come from a NY Fed 1- and 3-year inflation survey which showed further moderation, while Fed member Bostic detailed he thought inflation had come down more than expected. Crude prices falling 3.8% and an 8.6% fall in EU Nat Gas prices seem to be giving risk a kick, as are the modest falls in US nominal and real yields too.
As always, we try and justify a move in markets after the fact, but it’s the flows that count and that we trade, and price action suggests weak shorts have covered, with the bull’s regaining composure.
Can it last? Well, one suspects that comes down to the outcome of this week's US CPI data and while much of the macro discussion has swung on the future of balance sheet runoff (‘QT’), those long equity/short USDs will need to see further downside momentum in core CPI and going someway to justifying the 25bp cut priced for March and 142bp of cuts priced for the year.
As we see below the event risk heats up this week, with CPI prints all over the shop and China’s data flow and credit stats also a factor. US earnings kick into gear with the banks giving us insights into their asset quality and credit trends. Bitcoin is already flying high as the market is firmly of the view the SEC give its blessing for the cash ETF, and there is no signs that the market is ready to sell the fact just yet.
We also start to focus on political issues although whether the market trades these themes is another factor. Next week we get the Taiwan elections and that could have implications for USDTWD. We also start the proceedings in the US election with the Iowa caucus, although most are looking more at the Primary in New Hampshire (23 Jan) with Nicki Haley polling quite well in that state. And so it starts….
Good luck to all.
Key marquee event risks to navigate:
Tokyo CPI (9 Jan 10:030 AEDT) – the market eyes 2.5% yoy on headline CPI (from 2.6%) and 3.5% on core (3.6%). The Tokyo CPI print leads the national CPI numbers, so they could influence BoJ expectations and by extension the JPY.
Aus monthly CPI (10 Jan – 11:30 AEDT) – the market eyes the monthly CPI print at 4.5% (from 4.9%). The monthly print comes before the all-important Q4 CPI print on 31 Jan. Aussie interest rate futures price a cut in May at 25%, with 43bp of cuts priced by Dec 2024. AUDUSD looks supported by the rally in US equities, although to get the pair firing through 0.6750 we may need to see a reversal higher in Chinese/HK equity markets.
BoE gov Bailey testifies to parliament (11 Oct 01:15 AEDT)
ECB member Schnabel speaks (11 Jan 01:00 AEDT) – EU swaps price a 25bp cut in the March ECB meeting at 50% - EURGBP is on the radar with momentum skewing the cross to lower levels and potentially a re-test of 0.8540.
Fed speakers - NY Fed member John Williams offers his 2024 economic outlook (11 Jan 07:15 AEDT)
US CPI (12 Jan 00:30 AEDT) – this is the marquee event risk for the week so watch exposures over this key data point. The market looks for headline CPI at 0.2% mom / 3.2% yoy (from 3.1%) and core CPI at 0.3% mom / 3.8% yoy (from 4%). US swaps price a 25bp cut in the March FOMC at 69%, with 140bp of easing by Dec 2024 – this pricing will come into review on the CPI print, and by extension, the USD and equity markets will move in sympathy.
China's new yuan loans and aggregate financing (no set time or date this week) – the market looks for a small lift in new yuan loans to RMB1350b. There is a growing view that credit will soon increase as banks ease borrowing costs, but is there a demand for cheaper credit?
China CPI/PPI (12 Jan 12:30 AEDT) – the market looks for China’s CPI to come in at -0.4% yoy, and PPI -2.6% yoy. We see the Chinese bond rallying strongly with 10yr govt bond yields at multiyear lows, suggesting a market high on easing PBOC easing expectations – A weak CPI print should only increase expectations of a RRR cut.
China trade balance (12 Jan – no set time) – this can be a notoriously hard data point to price risk around given the outcome is typically someway off the median consensus estimates. As it stands the view is we see a 1.6% rebound in exports, and 0% growth in imports. The HK50, CHINAH and CN50 could be sensitive to the outcome of this print and traders will want to see a solid rebound to initiate longs.
Other CPI prints – Mexico (9 Jan 23:00 AEDT), Columbia (10 Jan 10:00 AEDT), Norway (10 Jan 18:00 AEDT)
Other key events to navigate:
• Crypto traders - The SEC deadline on Bitcoin cash ETF (10 Jan – no set time)
• US bond auctions - 3YR Treasury ($52B - 10 Jan 05:00 AEDT), US 10YR ( FWB:37B – 11 Jan 05:00 AEDT), 30YR ($21b – 05:00 AEDT)
• US banks earnings due out on Friday - Blackrock, JP Morgan, Bank of America, Wells Fargo, and Citi
US500 to turnaround?SPX500USD - 24h expiry
Although the bears are in control, the stalling negative momentum indicates a turnaround is possible.
A Doji style candle has been posted from the base.
The primary trend remains bullish.
This is positive for short term sentiment and we look to set longs at good risk/reward levels for a further correction higher.
We look to buy dips.
We look to Buy at 4682 (stop at 4660)
Our profit targets will be 4737 and 4757
Resistance: 4750 / 4820 / 4920
Support: 4610 / 4500 / 4415
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Global markets are turning lowerIn the first week of 2024, major U.S. indices turned to the downside. Year-to-date, the Nasdaq 100 declined by about 2.2%, the S&P 500 by 1%, the Dow Jones Industrial Average by 0.3%, and the Russell 2000 by 3%. The situation is no better overseas, where in the Chinese market, major indices also slipped lower. In particular, the Hang Seng Index lost about 5.3%, the CSI 300 lost 3.7%, and the Shanghai Composite Index lost 3%. The same story also played out in Europe, where the DAX declined by about 1.7%, the UK100 by 0.8%, and the French CAC40 by 2.3%. On top of that, Europe saw a reacceleration of inflation, putting much anticipation on these numbers in the U.S. that are scheduled for release on Thursday. If inflation is also reaccelerating in the U.S., it will likely put pressure on the FED to keep conditions tight for longer than expected. As a result, this can lead to repricing in the markets.
Now, on the subject of technicals, there is a divergence between the price and RSI on the weekly graph. Simultaneously, the RSI is peaking below 70 points, which is a bearish sign. As for the daily chart, all RSI, MACD, and Stochastic continue to develop bearish structures, tilting the odds toward more weakness. Consequently, we will monitor the resistance near $4,700; if the price fails to regain ground above it (with at least two consecutive closes above it), it will be concerning.
Illustration 1.01
The red and green arrows on the weekly chart of SPX show the divergence between the price and the RSI.
Illustration 1.02
Illustration 1.02 displays the daily chart of the Hang Seng Index, which has been declining since 27th January 2023, erasing about 28.3% of its value. For the first week of the current year, the index is down approximately 5.3%
Illustration 1.04
Illustration 1.03 shows the CSI 300 on the daily graph. The CSI 300 has been declining since 18th February 2021, losing about 44.6% of its value.
Technical analysis
Daily time frame = Bearish
Weekly time frame = Slightly bearish
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 serve as a basis for taking any trade action by an individual investor or any other entity. Your own due diligence is highly advised before entering a trade.
