The Week in Review Sunday 9 January 2022
The Financial Markets – what’s occurring
The Employment Report showed a less than expected increase in new jobs created. 199k versus 400k
Stock market didn’t like it at first blush. The important number for me was the unemployment rate was 3.9% and the average hourly earnings were up .6% versus .4 expected. Ten-year bond yield 1.76% after figs which is continuing higher.
So, the report shows wage inflation and the FEDs unemployment target reached therefore no change in the plan to reduce QE in a hurry. Reasonable employment stats indicate the economy is going well and does not need the huge monetary stimulus; therefore, it will be removed for fear of inflation – STOCKS LIKE THE STIMULUS AND WILL FALL WHEN IT IS REMOVED.
Last week also saw FED minutes which were more Hawkish than expected. Stock indices which had been falling continued more rapidly to the downside. In last week’s review I called for a selloff mid-week and it duly occurred.
I also called for Bitcoin selloff which dropped to support around 40k by week’s end.
There is an atmosphere of risk off causing all the speculative “assets” to fall. See all the SPACs and new tech companies, IPOs, falling dramatically all so reminiscent of 2001 Dotcom Bust. It took some time after the spec stocks collapsed then for the indices to follow. So, if history repeats itself the FED rug pull will lead to “lower for longer” Stock indices IMHO
Covid – still a factor
It is all about lockdowns and their effect on the economy, also about overwhelming health services. The apparent mildness may keep people out of hospitals but the “worried well” will demand service…. staff will not be able to work across all levels of the economy, causing economic disruption.
Has been growing for years if you consider asset price inflation (property, commodities, and stocks) however the price of goods and services are now increasing every month. Oil up 55% yoy !!!! the final piece will be wage inflation. This week US CPI figs released on Wednesday will probably show no relief from increased prices.
With China de facto lockdown we will get more supply bottlenecks.
Will Kazakhstan spur more soviet satellites into revolt and cause Putin to do something permanent about it and what will the West do in reply.
Powell and Brainard attend confirmation hearings in Washington. What will they reveal to the politicos on Tuesday and Thursday? Its role is to create a good environment for employment and control Inflation. Traditional economic theory requires interest rates to rise to control inflation.
QE will finish in March, but rate increases will be dependent on inflation and economic growth. However, the Bond market is pricing in 3 rate rises in 2022.
FED’S DALY: INFLATION IS NOT AS TEMPORARY AS WE ONCE THOUGHT, BECAUSE COVID ISN’T EITHER
Shorter bond yields are rising. The ten-year hit 1.76% on Friday and will get to 2 % soon imo.
Economic news due CPI. Powell’s statement re the economy in his Congree testiment.
Earnings season begins again –starting with big US banks Friday morning.
Stock market Seasonality points to a bearish run in the next two weeks.
“Common misconception: Bubbles result in an immediate crash. Sometimes yes, other times it can take months of wide price range chop in different sectors to begin filtering through. 2000 is such an example, $DJIA $SPX just chopped in range for 6 months while tech fell apart.”
Bubbles deflating –
Spoos are resting on the 50 day moving average from which they bounced 8 times in 2021.
Nasdaq below 100dma!!!
The S&P500 is “just resting” at the 50dma after putting in a failed breakout…
False break outs tend to get the breakout buyers stopped out below their entry level and cause further selling.
$nvda isn’t finished falling just yet, that gap is waiting to get filled at $230. One of the Big 5
I am not so sure about these lines, I see support at 40k. In TA lines drawn from lows and highs can be quite subjective
I posted this chart last week and the resistance held!!!
My chart guy said
1st week of 2022 in the books and not the greatest start for #ES_F: A failed attempt at an All-Time High, loss of key supports, and now testing a 50dma that has already been tested 10x last year. Action early next week critical for bulls, defending this weeks low in particular
Otrher markets- last week’s view pertains.
Gold – no big action here imo. Upside curtailed by strong $ and rising rates. Downside curtailed by inflation
Euro/$ – trend is everything in FX, so slowly strenthening $ but no great opportunitiues.
Bitcoin – a risk asset about which I am jaundiced because of the crookery that surronds it. Also Govs have to control currencies.. it looks unhealthy chart wise ….
Leave oil bonds etc to the specialists.
Col’s trades – selling at the 50dma has not worked as we know for some time. But because of the matters discussed above, I will be looking to short the spooz at the open tonight. I feel the balance of risks point lower. I won’t be too brave so small size and tight stops, it will be a long week
Call or email for discussion.
Colin 01-6644034 0851722729