Weeks Review| Prep W/C 6th  Feb 2023

Weeks Review| Prep W/C 6th Feb 2023

February 5, 2023 0 By The Balanced Trader

Last Weeks Summary

Weeks Summary

Rate hikes from the FOMC, Bank of England, and ECB have added to the developed world’s largest tightening of monetary policy in recent history. Despite signs of cooling headline inflation and persistent, albeit moderating, recession risks, the Fed raised rates by 25 basis points.

Suggestions from all but the ECB that we are nearing the end of the rate hike tightening path had sent equity markets globally soaring, with ES breaking above 4200, erasing half of its peak-to-trough losses from early 2022 when CB began their monetary policy tightening.

On the one hand, the relaxation of COVID-19 restrictions is likely to increase the global supply of many goods and inputs, thereby contributing to further cooling global inflationary pressures. Resurgent demand from a busier Chinese mainland economy, on the other hand, could fuel higher commodity price inflation. Copper, for example, is already rising on expectations of increased future demand. However, demand elsewhere in the world is showing signs of cooling as borrowing costs rise.

This week’s earnings from the top technology companies, notably Amazon, Google and Apple, all disappointed.

Nonfarm payrolls in the United States increased by 517,000, more than 2.5 times the 185,000 forecasts. The jobs data came in higher than expected, which bodes well for the US Dollar but may be a cause for caution given the FEDS data dependency and lofty gains so far this year.

Events Calendar:

KEY TAKEAWAYS

Earnings season continues with reports from The Walt Disney Company, PepsiCo, Activision Blizzard, PayPal, Uber Technologies, and automakers Toyota and Honda, among others.

The University of Michigan will release the preliminary February reading of its Consumer Sentiment Index (MCSI) on Friday, providing a timely update on consumer confidence.

U.K. will release fourth-quarter GDP figures on Friday.

Events Calendar: CET

Notable Tweets

Weekly Review

Review week’s RTH before I look at the profiles. Can you see where price action and reversals can you identify where the price becomes stuck–look at the overlapping profiles. Does this help? Look at last week’s references. Look at the shape of the daily profiles.

Weeks Price Action Review

Takeaways: Sunday reopens below FRI settle, retests, and liquidates.

Notice the FOMC LOW was Tuesday’s Globex HIGH and post open zipper low: 4048.5

I also liked the Friday late liquidation into the close after buyers failed to hold above Thursday’s POC and settle.

Why look at the Weekly and Monthly?

Current Daily charts see us return to test the high from Sep 13 2022, 50% retracement from Jan 2022 highs to the Oct lows. Quite amazing where that high got left. A drop below Friday’s low early week may see some backtesting lower before we make another attempt at higher prices. Notice Volume increasing (everyone loading up), which tends to mark highs/lows. Have we reached a crescendo yet? Looks close, I think.

Last week saw us break out of a multi-month balance following a dovish FOMC meeting and we are now OTFU. The auction catapulted above December CPI tail highs to find sellers lurking at the September 13th High of 4207. Following a stronger NFP we saw a pullback to close the week and month at the POC 4147.5. This week we will be looking to see if the double top at 4208-07 will be retested. With a large gap remaining unfilled from last August 18th -19th @ 4251-4271 area. Given that the auction has advanced so quickly I will be expecting an early week retest of the SB area 4117 – 4090. Signs that we have supply overhead at 4208 on Thursday and a more competitive offer on Friday at Thursday’s POC 4192 leading to a weak close on Friday.

4142 and 4109 are the Dec and Jan respective highs I will be monitoring for support from buyers where we last saw initiative PA away from the prior monthly balance highs.

Quite a clear buy imbalance on the weekly charts auction is continuing to OTFH on all but the daily. Buyers should be lurking at the Singles break between 4117 and 4091.5 where I will be looking for an early test in the week. A hold above this area would give further evidence higher prices are being accepted and a look above 4208 nonexcess high is highly likely. This would see buyers targeting the unfilled gaps from August 18th between 4271 and 4251. If buyers fail to hold the FOMC lows I would be looking for a test of the late Jan lows and to auction back the CHVN and 200DMA around 3982. Let us see.

All images can be found on my Twitter feed in high resolution. Please let me know if you have issues much appreciated.