Welcome 2023 – Market Outlook for January 2023

Wish you all a Happy New Year!!

The S&P 500 closed at 3839.5, down approximately 20% for the year, even with more than 7% gain in 4th quarter. The Nasdaq was far worse, with a 33% decline for the year. The last shortened week of the year felt the pain of tax loss harvesting at the start of the week and then tried to make a short squeeze attempt to push the market higher but failed. The market generally closed near the the prior Friday’s close. The rest of the market ETFs followed along with the SPY action. The semi sector felt some pain at the start of the week with the tax loss selling as NVDA continued to drop from the prior week. Crude made a recovery on Friday to close higher on the week. Gold closed on the higher end of the range and the highest close of the week. The VIX seemed to be pretty stubborn to hold the 21 level all week. This probably has something to do with the put/call skew(see below)! The Dollar index made a new low on Friday, which is the lowest low since June. The TNX closed on the upper end of the weekly range and at the highest of all December.

The first week of the new year will be busy one with December’s jobs report looming Friday, and many investors may be looking for ways to fix up their portfolio after 2022 turmoil. Friday’s jobs report is one of the two big events on the market calendar in the coming week. The Federal Reserve releases minutes from its December meeting on Wednesday at 2 PM, and investors will be hoping to get clean direction on size of the next rate hike move and Fed’s future intensions.

Some levels to watch out on upside or downside breakout.

1. $SPY – 375 to 387 .. whatever side it breaks.. chances to move in that direction.

2. /ES – Future .. 3820-3875 (range bound). If it breaks 3875 then it will move higher and vice versa if it breaks below 3820 then it can starts drifting lower.

Currently $SPY looks on upside breakout on 4 hr chart pattern and oversold on daily basis. This pattern is still emerging so early to say anything. If this gets more obvious then we can see some rally followed by short squeeze in SPY. (question is still if ?) 410-420 on cards if market makers and/or big fund managers think to move market upside. If market does not hold 375 level then we can easily see 360 quickly before or on FED announcement.

PUT/CALL
Interesting to see the put/call ratio average to see how high it has reached. According to some analysts, it has never been higher. Given this pessimistic view of option traders in this market there are a lot of people positioned for more downside movement. It will be critical to pay attention to recent swings lows as triggers or as signals of more weakness to come.

Currently, it is a guessing game until market breakout confirms in either direction. We should see the real tend in few days as earning season is also kicking off starting next week.

ECONOMIC: Source TradeTheNews.com

Tuesday:
08:55EST/13:55GMT US Redbook Retail Sales
09:30EST/14:30GMT Canada Dec S&P Global Manufacturing PMI
09:45EST/14:45GMT US Dec Final S&P Global Manufacturing PMI
10:00EST/15:00GMT US Nov Construction Spending

Wednesday:
07:00EST/12:00GMT US MBA Mortgage Applications (weeks ending 12/23 and 12/30)
10:00EST/15:00GMT US Dec ISM Employment; ISM Manufacturing; ISM New Orders; ISM Prices Paid
10:00EST/15:00GMT US Nov JOLTS Job Openings
14:00EST/19:00GMT US Dec FOMC Meeting Minutes

Thursday:
07:30EST/12:30GMT US Dec Challenger Job Cuts
08:15EST/13:15GMT US Dec ADP Non-Farm Employment Change
08:30EST/13:30GMT US Nov Trade Balance
08:30EST/13:30GMT US Continuing/Initial Jobless Claims
09:45EST/14:45GMT US Dec Final S&P Global Composite PMI; S&P Global Services PMI

Friday:
08:30EST/13:30GMT Canada Dec Unemployment Rate; Net Change in Employment; Full Time Employment Change; Part Time Employment Change
08:30EST/13:30GMT Canada Dec Participation Rate
08:30EST/13:30GMT Canada Dec Hourly Wage Rate Permanent Employees
08:30EST/13:30GMT US Dec Unemployment Rate
08:30EST/13:30GMT US Dec Change in Non-Farm Payrolls; Change in Private Payrolls; Change in Manufacturing Payrolls
08:30EST/13:30GMT US Two-Month Payroll Net Revision
08:30EST/13:30GMT US Dec Average Hourly Earnings; Average Weekly Hours All Employees
08:30EST/13:30GMT US Dec Labor Force Participation Rate
08:30EST/13:30GMT US Dec Underemployment Rate
10:00EST/15:00GMT US Dec ISM Services Index
10:00EST/15:00GMT US Nov Factory Orders; Factory Orders Ex-Transportation
10:00EST/15:00GMT US Nov Final Durable Goods Orders; Durables Ex-Transportation
10:00EST/15:00GMT US Nov Final Capital Goods Orders Nondef Ex-Air; Capital Goods Ship Nondef Ex-Air

If you want to learn more about how to play on volatility during this time of the market, please contact us on www.FinXdata.com.