NASDAQ 100 Maintains Upward Momentum, Eyes Further Gains

Traders' Opinions

Stocks

Summary:

In the NASDAQ 100, it's a one-way street for buyers. Consider initiating a position and incrementally add when it dips by 50 points. Caution is key; start small, gradually building your position. The goal is a strategic buildup, not a hasty plunge.

The Nasdaq 100 embarked on a modest rally during Monday's trading session, maintaining its upward trajectory. The prevailing sentiment suggests an inevitability of short-term pullbacks being absorbed by the market. Notably, the 17,000 level looms as substantial support, having previously served as resistance. Coupled with the proximity of the 20-day EMA, it forms a robust support zone. Viewing this through the lens of buying on the dip and riding the momentum seems a prudent approach.

The Nasdaq 100, home to some of the world's hottest stocks, thrives on momentum trading. A handful of key stocks wield significant influence, and as long as they remain in favor, upward momentum persists. The recent trading day showcased an impressive candlestick, hinting at potential follow-through in the days ahead.

In this landscape, being a seller in the Nasdaq 100 seems unfathomable, barring a substantial breakdown below 16,000. Such a scenario would signal a significant shift. For now, the market's appetite for upward movement is evident. Every 100-point drop becomes an opportunity for long positions, a trend likely to endure. The Nasdaq 100, driven by its momentum, operates with a mind of its own, creating an environment where strategic long positions thrive.

This market narrative unfolds in the dynamic world of the Nasdaq 100, where each dip becomes a chance to ride the wave of momentum. The confluence of technical levels and the dominance of key stocks underscores the resilience of this index. As we navigate these market currents, the mantra remains: embrace the dips, ride the momentum, and, above all, respect the unique character of the Nasdaq 100.

In today's early trading session, Tesla takes the lead as the Nasdaq 100's top performer, surging by 2.8%. However, the bigger picture reveals a year-to-date loss of approximately 13.6% for Tesla, showcasing the stock's recent challenges.

On the flip side, DexCom emerges as the day's underperformer within the Nasdaq 100, with a 1.5% decline. Yet, considering the broader perspective, DexCom has managed a 2.6% gain in year-to-date performance, illustrating a mixed picture of short-term setbacks and long-term resilience.

Two other noteworthy movers in today's market are Datadog, experiencing a 1.5% dip, and Fortinet, enjoying a 2.5% uptick. Each of these stocks adds its unique flavor to the Nasdaq 100 dynamics for the day.

As Tesla accelerates, DexCom faces a temporary stumble, while Datadog and Fortinet dance to their own tunes. This snapshot of the Nasdaq 100's components highlights the intricacies of daily market fluctuations. Investors navigate these movements, balancing short-term shifts with a broader perspective on the year's performance.

In the fast-paced world of the Nasdaq 100, where Tesla can surge and DexCom can dip, every trading day unfolds as a unique chapter in the evolving narrative of these market giants. Understanding the ebb and flow of individual components adds depth to the investor's playbook, where each move is a piece of the larger puzzle in the ever-changing landscape of the Nasdaq 100. NASDAQ 100 Maintains Upward Momentum, Eyes Further Gains_1

NASDAQ 100 Maintains Upward Momentum, Eyes Further Gains_1

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Chandan Gupta

Traders' Opinions

Economic

Commodity

WTI

In the tumultuous terrain of crude oil markets, Monday's trading session witnessed a slight dip followed by a resilient rebound. The market, in my analysis, has been engaged in a prolonged phase of base-building, signaling potential opportunities for investors. While I maintain a cautious bullish stance, I advocate prudence to avoid overexposure to the sector at this juncture. I foresee this cautious optimism defining the crude oil narrative for a significant part of the year.

The West Texas Intermediate crude oil market experienced an initial stumble on Monday but quickly pivoted, displaying signs of resilience. My belief is that the upward trajectory of oil prices will persist until a concerted effort is made to breach the resistance level at $75 per barrel. A successful breach above this level could set the stage for an ascent toward the 200-day EMA. The region below this level finds substantial support at the $71 mark, bolstered by numerous supports, and I anticipate a reluctance to dip below this threshold in the immediate future. If the market retraces to $68, it might establish itself as a sturdy floor. Any breakdown below this level would signal a bearish turn. However, my overarching perspective is that we are gradually establishing a foundation, paving the way for an eventual oil rebound. Nevertheless, a cautious approach is paramount in navigating these dynamic market waters. Persistent Buying Drives Momentum in Crude Oil Markets_1

Persistent Buying Drives Momentum in Crude Oil Markets_1

Brent

In the intricate dance of Brent crude, our journey begins with a brief retreat, a momentary step back, before rallying with signs of life—a potential prelude to testing the overhead resistance at the 50-day EMA. The question lingers: will the market venture beyond this line? Should it do so, the $80.50 mark emerges as the next near-term resistance, a formidable hurdle awaiting a challenger. Breaking through could unveil an enticing path toward the 200-day EMA. An intriguing signal, wouldn't you agree?

Yet, in the grand tapestry of opinions, I assert that oil remains an asset where buying every dip might be a prudent strategy. A belief persists that prices, like a dormant volcano, have the potential to erupt upwardly from seemingly nowhere in the future. Presently, however, we find ourselves in a state of sluggishness. Therefore, view each dip as a fleeting buying opportunity. The catch? Swift selling is imperative, as the goal is to capitalize on profits. Rinse and repeat this cycle diligently during each occurrence. This mantra holds true most of the time; a guiding principle as you navigate the unpredictable currents of crude oil markets.

So, the next time you cast your gaze upon the ever-shifting landscape of crude oil markets, remember this cardinal rule: seize the short-term buying chances, but be swift in your selling endeavors, adhering to the cyclical rhythm of the market. It's a subtle dance where timing is key, and in the realm of oil, this delicate choreography could be the key to unlocking profitable opportunities in the face of market fluctuations. Persistent Buying Drives Momentum in Crude Oil Markets_2

Persistent Buying Drives Momentum in Crude Oil Markets_2

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Ukadike Micheal

Economic

Stocks

In a speculative frenzy reminiscent of the meme-stock mania during the pandemic, the US equity market is witnessing a surge in the stocks of companies perceived to be tied to a potential Trump presidency. Obscure stocks, such as PSQ Holdings Inc., Fannie Mae, Freddie Mac, Phunware Inc., and Digital World Acquisition Corp., have experienced significant rallies, drawing parallels to the speculative trading behavior seen in meme stocks. The surge in these stocks is indicative of the market's reaction to the potential impact of Trump's candidacy on various sectors.

PSQ Holdings Inc., an online marketplace catering to "freedom-loving Americans," saw a 25% jump in its stock price, despite reporting modest revenue of $3 million over the first nine months of the previous year. Similarly, Fannie Mae and Freddie Mac, under federal government control since the Great Financial Crisis, reached two-and-a-half year highs. Phunware Inc., a software company associated with Trump's 2020 campaign, has seen its stock price soar by over 400% this year. Additionally, Digital World Acquisition Corp., which has been entangled in regulatory issues regarding its planned merger with Trump Media & Technology Group, surged by 88% in a single day.

The speculative fervor surrounding these stocks contrasts with the broader stock market's relatively subdued response to the upcoming election. While the market remains focused on economic trajectory and potential Federal Reserve actions, the recent gains in these Trump-linked stocks have garnered attention due to the perceived frontrunner status of Trump in the Republican party. The surge has also extended to companies like Fannie Mae and Freddie Mac, with speculation surrounding a potential privatization under a second Trump administration.

Despite the speculative nature of these rallies, the broader stock market has largely refrained from making significant moves based on the election's outcome, given the substantial uncertainty surrounding it. While previous rallies linked to Trump's potential return to the White House have occurred, the recent gains stand out due to the heightened perception of Trump's candidacy. The surge has also encompassed companies like Fannie Mae and Freddie Mac, whose over-the-counter stocks have seen increased speculation regarding potential privatization under a second Trump administration.

The recent surge in Digital World's stock price, despite no apparent change in the likelihood of the merger closing, has raised eyebrows. University of Florida finance professor Jay Ritter noted that the company's trading price suggests a valuation of over $8 billion, a figure he deems excessively high given its revenue and profitability figures. Similarly, Rumble Inc., which has a partnership with Trump Media, experienced a substantial increase in valuation following a deal with controversial media firm Barstool Sports. The surge in these stocks gained momentum after Trump's resounding victory in the Iowa caucuses, with returns over the past six sessions exceeding 80%.

West Palm Beach-based PSQ Holdings, known for its politically-themed merchandise targeting Trump's base, joined the Trump rally later than others. Despite struggling to gain traction since going public via a blank-check merger, the company saw a 25% rally on Monday, followed by an 8% decline as Trump faced off against Nikki Haley in the New Hampshire primary.

The speculative fervor surrounding these stocks reflects the market's anticipation of the potential impact of a Trump presidency on various sectors. However, the valuation discrepancies and the speculative nature of these rallies raise concerns about the sustainability of the current market sentiment. As the market continues to react to political developments, investors and analysts alike remain cautious about making significant investment decisions based on the outcome of the upcoming election.

The recent surge in stocks linked to a potential Trump presidency reflects a speculative frenzy reminiscent of the meme-stock mania seen during the pandemic. While the broader stock market remains focused on economic indicators and Federal Reserve actions, the speculative nature of these rallies underscores the market's anticipation of the potential impact of a Trump presidency on various sectors. However, the valuation discrepancies and the speculative nature of these rallies raise concerns about the sustainability of the current market sentiment. As the market continues to react to political developments, investors and analysts alike remain cautious about making significant investment decisions based on the outcome of the upcoming election.

Source: Bloomberg

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Ukadike Micheal

Forex

Economic

In 2023, U.S. employers experienced a significant surge in planned job cuts, with a 98% increase compared to the previous year. The report by Challenger, Gray & Christmas revealed that companies announced 721,677 planned job cuts, marking a substantial rise from the 363,832 layoffs reported in 2022. The technology sector bore a significant portion of the losses, with a 73% increase resulting in 168,032 job cuts. Additionally, retail companies accounted for a large share of the job cuts, slashing 78,840 positions, which represented a staggering 274% increase from the previous year.

As the labor market softened amid high interest rates and persistent inflation, concerns arose about the potential worsening of the situation in 2024. Labor costs remained high, prompting employers to exercise caution and implement cost-cutting measures. This trend could potentially slow the hiring process and lead to continued layoffs in the first quarter of 2024. The technology sector, impacted by factors such as AI, mergers, and acquisitions, was expected to face ongoing challenges.

In 2023, health care and product manufacturers, including hospitals, also cut a significant number of jobs, eliminating 58,560 positions, marking a 91% increase from the layoffs announced in 2022. Deteriorating market and economic conditions were cited as the top reason for job cuts, with factors such as high inflation, rising interest rates, and ongoing geopolitical tensions contributing to the challenging environment. Despite exercising caution and flexibility in hiring, retailers faced a substantial increase in layoffs.

While the labor market defied expectations for a slowdown and remained historically tight, economists suggested that it was gradually normalizing after the rapid pace of the previous year. The report followed the Labor Department's announcement that the economy added 216,000 jobs in December, indicating a gradually slowing labor market.

As job cuts continued to rise and economic conditions evolved, the coming year posed uncertainties for job seekers, with the potential for continued caution and challenges in various sectors. The data underscored the dynamic nature of the labor market, shaped by economic factors, technological advancements, and industry-specific challenges.

As the labor market experienced a significant acceleration in job cuts in 2023, concerns arose about the potential worsening of the situation in 2024. The report by Challenger, Gray & Christmas revealed a 98% surge in planned job cuts compared to the previous year, with companies announcing 721,677 planned job cuts, marking a substantial increase from the layoffs reported in 2022. The technology sector and retail companies were particularly impacted, with significant increases in job cuts.

Amid high interest rates and persistent inflation, labor costs remained high, prompting employers to exercise caution and implement cost-cutting measures. This trend could potentially slow the hiring process and lead to continued layoffs in the first quarter of 2024. The technology sector, impacted by factors such as AI, mergers, and acquisitions, was expected to face ongoing challenges. Additionally, health care and product manufacturers, including hospitals, also cut a significant number of jobs, citing deteriorating market and economic conditions as the top reasons for the layoffs.

Despite the historically tight labor market, economists suggested that it was gradually normalizing after the rapid pace of the previous year. The report followed the Labor Department's announcement that the economy added 216,000 jobs in December, indicating a gradually slowing labor market. As job cuts continued to rise and economic conditions evolved, uncertainties for job seekers emerged, with the potential for continued caution and challenges in various sectors. The data underscored the dynamic nature of the labor market, shaped by economic factors, technological advancements, and industry-specific challenges.

The labor market in 2023 experienced a significant surge in planned job cuts, raising concerns about the potential impact on the economy and job seekers. The data revealed substantial increases in job cuts across various sectors, with factors such as high interest rates, persistent inflation, and technological advancements contributing to the challenging environment. As the labor market continued to evolve, it posed uncertainties for both employers and job seekers, highlighting the dynamic nature of the workforce and the need for adaptability in the face of economic and industry-specific challenges.

Source: Fox News

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Economic

Central Bank

Forex

Dollar comes back to life

The US dollar started the new year on a strong note. A series of economic indicators have reaffirmed the resilience of the US economy lately, forcing traders to reconsider how quickly and how deep the Fed will cut interest rates this year.

Investors now see just a 45% probability that the Fed will cut rates in March, down from nearly 90% last month. This rethink follows the latest prints on inflation and retail sales, which came in stronger than anticipated, challenging the notion that the US economy is losing steam.

With the labor market also remaining in good shape, there doesn't seem to be any urgency to slash rates immediately. Several Fed officials have argued the same point lately, stressing that markets have gone overboard with pricing in such heavy rate cuts, and that the actual pace of rate reductions will likely be slower than what traders expect.

An upside GDP surprise?

With the prospect of a rate cut in March now priced almost like a coin toss, the upcoming GDP stats will be crucial in tipping the scales, driving the dollar accordingly. Economists expect the US economy to have grown at an annualized pace of 1.8% during the final quarter of 2023, driven by heavy government spending and solid consumption.

As for any surprises, a stronger-than-expected GDP print seems more likely than a disappointment. This is mostly because of the Atlanta Fed GDPNow model, which currently estimates growth at 2.4%, significantly higher than the official forecast.

This model has a solid track record in terms of predicting actual GDP numbers, and if it proves accurate this time as well, the dollar would likely benefit as investors continue to unwind bets of rapid Fed rate cuts. Will US GDP Surprise to The Upside?_2

Looking at the charts, euro/dollar has been in a steady decline so far this year. Another round of encouraging US data could add fuel to this selloff, pushing the pair down towards its recent low of 1.0840, a region that also encapsulates the 200-day simple moving average.

On the flipside, a disappointing GDP reading would likely propel euro/dollar higher, with the 1.1100 zone likely to act as the first major barrier to any advances.

Beyond the GDP data, another important release this week will be the latest core PCE price index on Friday.

Can the dollar keep rising?

All told, the outlook for the dollar still appears quite bright. The US economy is in much better shape than other major regions such as the Eurozone, which might already be in a minor technical recession.

With economic growth differentials favoring the United States, there's a clear risk that the Fed will cut interest rates at a slower pace than the ECB will during this cycle, keeping the dollar supported. Historically speaking, the dollar often thrives in late-cycle environments, especially if the US economy is healthier than the rest of the world.

Finally, it's worth noting that the powerful rally in stock markets has dampened demand for safe haven instruments like the dollar in recent months. If this rally loses some steam and valuations compress now that investors have started to scale back rate cut bets, it could be another element that helps the dollar advance.

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SAXO

Commodity

Silver prices hit a two-month low on Monday, with the trigger being a technical break below key support while the driver was an ongoing risk aversion towards metals depending on growth and demand, not least in China, the world's top consumer, where the economic outlook continues to darken with stock markets in Hong Kong and Shanghai hitting multi-year lows. With gold continuing to attract support above $2000 in anticipation of rate cuts, lower inflation and continued central bank demand, the XAUXAG ratio has risen to a 15-month high, reflecting silver's relative cheapness.

Since early December when silver, together with gold, saw a premature and unsustainable spike, the price has suffered a relatively steep fall, culminating in Monday's technical drop below support-turned-resistance at $22.50. With gold holding steady around $2025, the gold-silver ratio briefly spiked above 92 (ounces of silver to one ounce of gold) before bargain hunters appeared to provide support. For the market to recover its poise a break back above $22.50 is the minimum requirement, with the steep downtrend from December offering a later challenge just below $23. A sustained break lower could see short sellers target channel support in the $21.50 area. Silver and Copper in Focus After Recent Declines_1

Silver and Copper in Focus After Recent Declines_1

Just like gold, silver has seen net selling from ETF investors since 2022, when the Federal Reserve embarked on its aggressive rate hike cycle, with current total holdings at 694 million ounces being the weakest since May 2020. Meanwhile, in the futures market, speculators such as hedge funds and CTAs held a 6,000 contract, or 30 million ounce long in the week to January 19, not far below the one-year average around 11,000 contracts. Do note that this group tends to anticipate, accelerate, and amplify price changes that have been set in motion by fundamentals. Being followers of momentum, this strategy often sees this group of traders buy into strength and sell into weakness, meaning that they are often found holding the biggest long near the peak of a cycle or the biggest short position ahead of a through in the market.

Silver and Copper in Focus After Recent Declines_2

Copper meanwhile remains rangebound with China growth concerns being offset by speculation the Chinese government will have to do more to support an ailing economy, and not least the prospect for a tightening market outlook as the green transformation continue to gather momentum and miners cutting their production forecasts as they being challenged with harder-to-mine deposits, rising costs, water restrictions and increased scrutiny of new permits.

Industrial metals have generally posted a weak start to the year as the outlook for global and not least Chinese manufacturing and construction activity still is under scrutiny, for now more than offsetting calls for stronger stimulus measures in China, and the potential positive impact of restocking once an expected series of rate cuts from major central banks begin later this year. The Bloomberg Industrial Metal index trades down around 4% on the month with losses being led by aluminum and zinc while copper, for the above-mentioned reasons has managed to limit the losses, despite some recent aggressive selling from speculators in the futures market.

According to the latest Commitment of Traders report from the CFTC, speculators had during a two-week period to January 16 shifted their net position in the HG futures contract from a 10k long to a 25k short, the biggest bet on lower prices since July 2022. Combining this observation with a volume weighted average price (VWAP) during this two-week selling period around $3.8050, and the risk of another short squeeze may attract fresh attention should the price manage to break higher from here. We maintain a positive outlook for copper given the prospect of an increasingly tight market towards the second half of the year, but given current China worries and ongoing speculation about the timing, pace and depth of incoming US rate cuts, the short-term direction will likely be decided by short-term trading strategies.

HG copper is currently trading near the center of a 40-cent wide range, and following early January weakness the market is now showing signs of consolidating with a band of key moving averages offering resistance between $3.79 and $3.825. Silver and Copper in Focus After Recent Declines_3

Silver and Copper in Focus After Recent Declines_3

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Ukadike Micheal

Economic

Brussels aims for an annual investment of approximately €1.5 trillion between 2031 and 2050 to achieve a 90% reduction in greenhouse gas emissions by 2040, as per a draft document from the European Commission. The plan is part of Brussels' strategy to achieve "economy-wide climate neutrality" by 2050. The ambitious target is viewed as a means to accelerate climate action amid growing economic damage from extreme weather events, although some sectors express concerns about the feasibility of the requirements.

The draft document suggests that the high level of investment required would significantly outweigh the costs of inaction, providing substantial economic benefits. Keeping temperature rises to 1.5C above pre-industrial levels could save the EU €2.4 trillion in economic losses between 2031 and 2050, with additional benefits of cutting net costs of fossil fuel imports by €2.8 trillion over the same period.

The proposed 90% emissions reduction target, seen as a way to address the escalating economic impact of extreme weather events, aligns with the EU's commitment under the climate law to reduce emissions by 55% by 2030 and achieve net-zero emissions by 2050. However, some industries, particularly in agriculture, express concerns about the stringent requirements amid inflation and the aftermath of the energy crisis caused by geopolitical events.

The draft document emphasizes the transformative opportunities presented by the ongoing transition, stressing the chance to pioneer clean technology sectors, create new jobs, stabilize energy costs, and enhance overall quality of life while safeguarding against climate-related hazards.

To attain the proposed goal, the document outlines the need for a nearly fully decarbonized electricity sector by around 2040, a substantial shift of the workforce into green industries, and an overall 85% reduction in fossil fuel consumption compared to 1990 levels. Remaining fossil fuel use, primarily in transportation, would consist mainly of oil for ships, aircraft, and other transport.

The investment required for this ambitious target, excluding transportation and vehicle-related costs, is estimated to be close to €660 billion annually between 2031 and 2050. A significant portion of this investment will be allocated to rapidly scale up carbon capture technology, with a separate draft emphasizing the need to capture 450 million tonnes of carbon dioxide annually by 2050 to achieve the net-zero goal.

The draft document also highlights agriculture, including livestock breeding and fertilizer use, as a major contributor to greenhouse gas emissions. It hints at incorporating the agricultural sector into the EU's emissions trading system by reflecting the price of agricultural emissions in the food value chain.

While the draft document is an early version subject to potential revisions, it is set to be published by the EU's executive arm on February 6. This publication will initiate a debate over the 2040 target, contributing to a formal legislative proposal after the new commission takes office post-EU elections in June. The document will also play a crucial role in establishing the EU's 2035 Nationally Determined Contribution, a key emissions reduction target for the UN's COP30 climate summit.

As the EU positions itself as a climate change policy leader, the draft document underscores the economic toll of climate-related events, with 220,000 deaths and a cost of €650 billion since 1980. The EU hopes that its commitment to renewable power, carbon pricing, and circular economies will provide a competitive advantage as more countries adopt sustainable practices.