Blog: Market Analysis

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For subscribers of our “Daily Trading Signals”, we now also include a “Weekly Market Report”, where we provide a weekly deep-dive on the market, including fundamentals, technical, economics, and portfolio management:

Market Recap & Upcoming Week

Last week marked a period of gratitude and reflection, coinciding with Thanksgiving 2022. Despite the stock market being down 16% for the year, 2023 has witnessed a more robust market, stirring investor optimism.

Historically, the stock market has performed well post-Thanksgiving, with an average December return of around 1% over the last 30 years. This trend, coupled with the market’s recent upswing, suggests a possible continuation of gains. Since 1950, the market has often seen significant gains in years following a strong performance leading into Thanksgiving.

The stock market’s recent rally can be attributed to several factors. Key among them is the ongoing moderation in inflation, with the October Consumer Price Index (CPI) decreasing to 3.2% year-over-year. This trend of lower inflation has played a significant role in driving Treasury bond yields down, thus fueling the market’s upward momentum.

Additionally, the Federal Reserve’s more moderate stance on interest rates, as evidenced in the November FOMC meeting, has boosted market confidence. Furthermore, a gradual cooling in the economy, marked by slightly higher jobless claims and lower retail sales, seems to be aiding the rally without triggering recessionary fears.

The small-cap stocks, particularly the Russell 2000, have underperformed compared to the S&P 500 but might offer investment opportunities as the economy shows resilience amidst slowing growth and declining inflation.

This week in the financial markets, attention will be focused on a range of key economic data releases, with the spotlight on the latest inflation figures.

The Personal Consumption Expenditures (PCE) index is particularly significant as it provides insights into the effectiveness of the Federal Reserve’s inflation-fighting measures through interest rate hikes. This data is crucial for the upcoming Federal Open Market Committee (FOMC) meeting on December 12-13, which will be pivotal in determining future interest rate decisions.

Alongside inflation data, other important economic indicators due for release include new home sales, the September home-price index, October’s new and pending home sales, and the consumer confidence index for November. Additionally, the markets are anticipating the first revision of the U.S. Gross Domestic Product for the third quarter.

In the earnings arena, a series of reports from major companies across tech, finance, and retail sectors are expected. Notable among these are Salesforce, Intuit, Workday, Crowdstrike, Dollar Tree, and Five Below, each poised to provide further insights into the health and direction of their respective industries.

Daily Trading Signals (Highlights)

Palantir Technologies (PLTR) – Prices have hit our TP a few days ago, congrats to those who took this trade! 💰🔥💪🏻

If prices hold above the breakout, we could see a consolidation and then a resumption of the uptrend.

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Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media.

Weekly Market Wrap: Will We See New All-Time Highs in the Stock Market this Year?

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Market Recap & Upcoming Week

Last week in the markets was marked by a “just right” economic scenario, mirroring the tale of Goldilocks, with stocks reaching a two-month high and easing recession fears. Inflation showed signs of moderation, with the October Consumer Price Index (CPI) remaining unchanged and the annual rate dropping from 3.7% to 3.2%.

This decrease was aided by lower gas prices and a 20% reduction in oil prices since September. Core CPI also saw a slight decrease, indicating an overall slowing of inflation, which might lead the Federal Reserve to revise its projections downwards in their upcoming meeting.

Economic growth is gently decelerating but still expanding at a solid pace, indicating a gradual shift in the economy. Retail sales in October dipped slightly but less than expected, suggesting a slowing yet continuous consumer activity.

The job market is cooling, with jobless claims rising but still below historical averages, hinting at a strong economic foundation. Additionally, falling yields in Treasury bonds suggest a change in the Fed’s policy, possibly marking the peak of the rate hike cycle. This shift has led to a rally in both equity and bond markets, with the possibility of rate cuts in the second half of 2024.

The equity market’s broadening leadership and potential for laggards to catch up as yield pressures ease point towards an optimistic outlook for 2024.

This week, the trading landscape in the U.S. is shaped by the Thanksgiving holiday, with markets closing on Thursday and concluding early on Black Friday.

This period marks a significant retail event, with major retailers like Amazon, Target, Walmart, Best Buy, Home Depot, and Costco launching Black Friday sales, offering a variety of deals and promotions. The focus is not just on consumer behavior during this key shopping period but also on how these retail giants perform amid the festive buzz.

In addition to the retail frenzy, the week also brings attention to a few remaining earnings reports, notably from Lowe’s, Best Buy, Dick’s Sporting Goods, Abercrombie & Fitch, Kohl’s, and Nordstrom.

All eyes might be on Nvidia, the tech giant known for its strides in artificial intelligence, as it announces its earnings on Tuesday.

Furthermore, market participants will be keenly observing updates on existing home sales and consumer sentiment, along with eagerly awaiting the insights from the Federal Open Market Committee’s (FOMC) latest meeting minutes, also scheduled for release on Tuesday.

Daily Trading Signals (Highlights)

CADCHF – Prices just broke new lows, one step closer to our TP! 💪🏻

EURJPY – Following up on this trade, it has hit our TP for +580 pips profit! Congrats to those who took this trade! 💰🔥💪🏻

20-year Treasury Bonds ETF (TLT) – Prices rebounded almost 10% off the lows! 💰🔥💪🏻

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Weekly Market Wrap: Stock Market Resumes Uptrend; CPI Data Due this Week

Click here for last week’s market report (6 November 2023)
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Market Recap & Upcoming Week

Last week’s economic discussions centered around the resilience of the U.S. economy, which displayed a robust growth trajectory through the third quarter of 2023. The annualized GDP growth rate of 4.9% for the quarter marked the highest since 2021, significantly outpacing the typical trend growth.

This expansion was largely fueled by personal consumption, a critical driver of the U.S. economy, accounting for about 70% of the GDP.

Despite this, concerns were raised about the sustainability of such consumer spending levels, especially as we approach the critical holiday shopping season. Analysts are pondering whether the American consumer can maintain this momentum given certain emerging constraints.

Several indicators suggest potential headwinds for continued consumption at current rates. Notably, household savings rates have dwindled to post-pandemic lows, with the stimulus-induced financial cushion seemingly depleted. Concurrently, credit card debt in the U.S. has surged to over $1 trillion, with delinquencies on the rise—a trend that could necessitate a pullback in consumer spending.

Additionally, the Federal Reserve’s Senior Loan Officer’s Survey indicated that banks are maintaining stringent lending standards, which could further suppress consumption by limiting access to credit for consumers and businesses alike.

These factors, combined with geopolitical uncertainties and the looming threat of a U.S. government shutdown, could dampen consumer sentiment and spending. However, a silver lining exists: a potential slowdown in consumption might ease inflationary pressures and forestall further Federal Reserve rate hikes, ultimately benefiting the financial markets and investors.

Investors will have their hands full in the coming week with a suite of critical financial disclosures. Retail giants Walmart, Target, Home Depot, and Macy’s are all queued up to report earnings, which will offer a peek into consumer spending habits as the Census Bureau also releases October’s national retail sales data.

These reports could be pivotal in shaping market sentiment, especially as the holiday shopping season looms on the horizon, a period crucial for retail profitability.

In addition to the retail sector’s performance, the week will also cast light on broader economic indicators.

The October Consumer Price Index (CPI) will provide fresh insights into inflation trends, while housing market health checks will come from reports on last month’s housing starts and the National Association of Home Builders’ Housing Market Index for November.

Meanwhile, a significant macroeconomic risk hangs over the market as the deadline for the national budget decision approaches on Nov. 17. Without Congressional action to pass spending bills or another stopgap measure by Friday, the government could face a shutdown, with potentially wide-reaching consequences for the economy and markets.

Daily Trading Signals (Highlights)

AUDUSD – The recent pullback in prices offer a low-risk shorting opportunity.

EURJPY – After breaking out from an “ascending triangle”, prices are heading up to test the next major resistance level.

AUDCHF – After hitting our TP, prices have gone back to test the top of the trend channel, giving us another shorting opportunity.

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Weekly Market Wrap: Strong Rally in the Stock & Bond Market!

Click here for last week’s market report (30 October 2023)
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Market Recap & Upcoming Week

Stocks saw a significant uptick last week, driven by encouraging economic indicators and a change in the Federal Reserve’s tone, which led to a dip in interest rates. The Federal Reserve, as anticipated, did not alter interest rates at its recent meeting, but communicated a more measured approach to future rate changes. This stance aligns with our belief that the Fed may conclude its cycle of rate hikes.

The most recent jobs data also gave investors reason to be optimistic, suggesting that the labor market is cooling just enough to further reduce inflation while remaining strong enough to sustain consumer spending and stave off a deep recession.

Although the path ahead may not be entirely without obstacles, the combination of recent market adjustments, positive economic signs, a potentially steady Federal Reserve, and traditionally strong seasons for stocks lead us to believe that there is a strong argument for the markets to gain traction as we approach the end of 2023 and look ahead to 2024.

Goldman Sachs’ revised inflation predictions hint at a silver lining with lower expected core CPI and PCE inflation rates by December 2024. These forecasts, converging with the Federal Open Market Committee’s estimates, suggest that inflationary pressures might ease, with slowing wage growth and a significant projected decrease in shelter inflation. As a result, the Fed seems poised to maintain its fed funds rate until late 2024.

These developments, paired with last week’s market rebound led by the tech sector and investors’ keen focus on Treasury yields and forthcoming policy announcements, paint a complex picture of the current economic landscape, where optimism in certain quarters is tempered by caution in others.

In the coming week, investors should brace for a flurry of earnings reports from major players across various industries. Notable companies such as Uber Technologies, UBS, and Occidental Petroleum are slated to release their financials, providing insight into sectors from tech to banking to energy.

Automotive enthusiasts will be watching Honda Motor Company and Rivian Automotive, while media and entertainment sectors will be eyeing the earnings from The Walt Disney Company and Warner Bros. Discovery. The performance of these companies could signal broader economic trends and potential shifts in market dynamics.

Economic indicators will also be in the spotlight, with the New York Fed’s quarterly report on household debt and credit shedding light on the financial health of American consumers. This report, due Tuesday, is particularly pertinent as it reflects the state of U.S. households in the face of current inflationary pressures.

At week’s end, the University of Michigan will offer a more immediate pulse on consumer mood with the release of its Consumer Sentiment Index for November. This data is crucial as consumer confidence levels have a direct impact on spending behavior and, consequently, the overall economic outlook.

Daily Trading Signals (Highlights)

USDJPY – Prices finally came close enough to our TP to close the position, congrats to all those who followed this trade! 💰🔥💪🏻

S&P 500 (US500) – Prices have rebounded from the bottom of the price channel, and is now at a crucial level of many confluences:

1. all 3 EMAs
2. down trendline
3. support-turned-resistance level

Will wait on the sidelines to see which way the breakout happens.

20-year Treasury Bonds ETF (TLT) – Could this finally be the turning point?

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Weekly Market Wrap: Mixed Earnings a Red Flag for Stocks?

Click here for last week’s market report (23 October 2023)
Click here to subscribe for the latest market report (30 October 2023)
Click here to see the archives of all our past market reports

Market Recap & Upcoming Week

Last week marked significant movements in the financial markets, with notable fluctuations in both stock and bond markets. One of the standout observations was the considerable shift in long-term interest rates over the past three months, indicating market expectations for persistently high rates, evident from the 20-year bonds carrying interest rates above 5%.

This sentiment was mirrored in the tech sector, where major companies like Alphabet and Amazon.com experienced substantial declines in stock prices. Alphabet’s underwhelming performance in its cloud business notably impacted its market capitalization, creating ripples across major indices like the Nasdaq and the S&P 500 due to the significant weight of these tech stocks.

The bond market too was not immune to turbulence, as exemplified by the 10-year Treasury note yields hitting a 16-year high, signaling potential headwinds for debt-reliant companies due to rising borrowing costs. The repercussions of these market movements were broad-based, affecting not just tech stocks but also sectors like healthcare, real estate, and small-cap stocks.

In contrast to this, Meta Platforms painted a more complex picture with its stock initially rising post better-than-expected earnings, only to retract due to cautionary statements from the company’s finance chief, showcasing the market’s volatility to earnings reports and forward-looking statements.

Amidst these market shifts, companies are recalibrating their operational structures through layoffs and cost-cutting, reflecting efforts to adapt to the changing economic landscape.

Despite the tumultuous week in traditional markets, alternative investments like Bitcoin seemed to retain investor interest, hinting at a complex risk appetite amidst macroeconomic concerns of slowing growth and rising borrowing costs.

This week, attention will be drawn towards a slew of earnings reports and central bank meetings, offering insights into both corporate performance and monetary policy directions. Companies like Apple, McDonald’s, Pfizer, AMD, Caterpillar, Stellantis, Qualcomm, PayPal, Airbnb, and Starbucks are all set to release their earnings, providing a comprehensive look at various sectors of the economy.

Simultaneously, key central bank meetings, including the U.S. Federal Reserve, Bank of England, and Bank of Japan, will be closely watched for any changes or indications in interest rates, which could have significant implications on global financial markets.

On the economic data front, the U.S. is set to release its nonfarm payrolls report for October and updates on home prices and PMI survey readings, shedding light on the labor market and broader economic conditions.

In the eurozone, preliminary GDP and inflation readings for the third quarter will be available on Tuesday, offering a snapshot of the region’s economic health. These data points, combined with the earnings reports and central bank decisions, will provide investors and policymakers with crucial information, making it a critical week to stay informed and make strategic decisions.

Daily Trading Signals (Highlights)

Bitcoin (BTCUSD) – Following up from last week, prices have surged up to $34,000, and are up 40% from the swing low! Congrats to those who had the patience to hold on! 💰🔥💪🏻

S&P 500 (US500) – Following up, prices are going down as predicted, and nearing our TP! Congrats to those who shorted! 💰🔥💪🏻

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