Jump to content

Wall Street Wobbles: Navigating uncharted volatility


Recommended Posts

US markets end the week on shaky ground amidst bond market volatility and central bank liquidity concerns. Despite a dip in employment rates, inflation fears persist as the focus shifts to the start of the Q2 earnings season.

 

original-size.webpSource: Bloomberg

 
 Tony Sycamore | Market Analyst, Australia | Publication date: Monday 10 July 2023 

US equity markets concluded the week on a shaky note, troubled by escalating volatility in the bond market and a liquidity drain of an aggregate -$687.2bn last week from central banks.

Market volatility amid central bank concerns

The declines occurred despite a softer-than-expected non-farm payroll figure as the US economy added 209k jobs last month, missing forecasts of 225k.

Although the economy added the fewest jobs since December 2020, the cooling wasn't sufficient to halt the unemployment rate falling back to 3.6% from 3.7% in May. It also failed to prevent average hourly earnings from rising by 0.4% in June, leading the annual rate to increase to 4.4% versus 4.2% expected.

Payroll and unemployment figures: An overview

The pivotal events for this week will be US inflation data on Wednesday night, previewed below. Keep an eye out for Federal Reserve speakers, including Daly, Mester, Bostic, and Kashkari, who will be active before the Fed's blackout period begins the following week.

Q2 earnings season commences on Friday with reports from JPMorgan, Citigroup, and Wells Fargo.

A peek into the week: Inflation data and Fed talks

CPI

Last month, headline CPI eased to 4% from 4.9% in April, driven by a decline in energy prices. Core CPI, which excludes volatile items such as food and energy, eased to a one and a half year low of 5.3% from 5.5% in April.

This month US headline and core CPI are both forecast to rise by 0.3%. This would see the headline rate fall to 3.1% YoY from 4% in May, with base effects and declines in energy and food prices playing leading roles in the deceleration.

Inflation

Core inflation is expected to fall to 5.0% YoY from 5.3% in May. Shelter inflation is expected to continue its downward trajectory, as are airfares and medical inflation, following a reset in health insurance inflation in October last year.

While inflation has likely peaked, core inflation remains sticky, and the Fed will want to see more confirmation that a downside progression is continuing to be made on core inflation to ease market fears of further tightening.

S&P 500 technical analysis

At the start of last week, our view was that seasonal strength in July would see the S&P 500 and other US indices extend their gains. However, by Friday morning, as noted on Twitter, we had changed our tune based on "the rally in yields and the possibility of a double top at 4500ish in the S&P 500."

While below 4500, we expect last week's pullback to extend towards 4368. Should the S&P 500 see a sustained break below 4368, the next layer of support is not until 4300.

Be aware that a sustained break above 4500 indicates the uptrend has resumed towards 4600/4630.

S&P 500 daily chart

 

original-size.webpSource: TradingView

Nasdaq technical analysis

The sharp rally in bond yields last week undercut support for the Nasdaq, leaving a potential double top in place at 15,475ish.

While the Nasdaq remains below 15,475, we expect last week's pullback to extend towards 14,853. Should the Nasdaq see a sustained break below 14,850, the next layer of support is not until 14,500.

Be aware that a sustained break above 15,475 indicates the uptrend has resumed towards 16,000.

Nasdaq daily chart

 

original-size.webpSource: TradingView

Dow Jones technical analysis

The Dow Jones chart is strewn with several highs this year between 34,250 and 34,600, each a failed attempt to break above the December 34,712 high.

After its latest failure last week at the 34,465 high, risks to the downside are mounting. Should the Dow Jones break below support at 33,600/50, it will likely see the decline extend towards the 200-day moving average, currently at 32,976. This level needs to hold to avoid a deeper pullback towards the May 32,586 low with the possibility to the banking crisis March 31,429 low.

Dow Jones daily chart

 

original-size.webpSource: TradingView

 

  • TradingView: the figures stated are as of July 10, 2023. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • It would be difficult and the next line of action would be withdrawal of assets to a good alternative exchange or wallet and observe how the whole drama will end 
    • The recent turbulence in the market has resulted in significant losses and liquidations for many traders. While futures trading offers the potential for rapid portfolio growth, it also carries considerable risks, demanding both bravery and a strong belief in technical analysis (TA). However, despite my attempts, futures trading hasn't been my strong suit. Creating a resilient crypto portfolio doesn't necessarily mean diving into high-risk ventures like futures trading. It took me some time to realize that there are alternative, nearly risk-free methods to build a solid portfolio. Yet, the allure of quick profits in crypto often overshadows the patience required for these strategies. Whether you're involved in futures or spot trading, the market's unpredictability can lead to significant losses, as demonstrated by the recent downturn affecting BTC and most altcoins. Many traders found themselves unprepared, lacking sufficient USDT reserves for dollar-cost averaging (DCA) during market recoveries. Nevertheless, there is hope. For those looking to maximize profits while minimizing risks, products such as launchpools, launchpads, or PoolX offer promising opportunities. Available on various top centralized exchanges (CEX), these platforms involve staking assets like USDT, BGB, BNB, or OKB, depending on the exchange. One observation I've noted is that whenever an exchange announces a launchpool or launchpad event, the value of the exchange token tends to soar. This surge is fueled by users eager to participate and earn complimentary tokens. Following the event, participants can benefit from both the acquired tokens and the increased value of the exchange token. This approach has proven successful for me, as evidenced by the recent ENA launchpool event on Bitget. Have you explored similar opportunities in the past? Please feel free to share your experiences.
×
×
  • Create New...
us