Money Market Mentor — 17 Jan 2023

Welcome to our weekly market snapshot, where we lift the velvet rope to give you a sneak peek at the hot topics we’ve been discussing with our members at our regular Monday night webinars.

This week our crosshairs are trained on the Dow30 and EUR/USD, but let’s kick things off with the S&P 500.

Trade activity and a positive advance/decline ratio suggest the S&P 500 is starting to work through the gears, yet the price action still lacks momentum. The long side still appeals, with the potential to benefit from intra-day trades open to those buying in volume at the open.

The big divergence between value and growth, as seen in struggling tech stocks and the performance of the Dow30, reflects ongoing concerns in the market. Wagons are circling around strong names and dividends while traders are resisting riskier options for now.

This market has yet to show its hand, but this week should indicate the direction of travel for the next few months. Historically, stocks struggle in mid-January, but in pre-election years,
they typically cast weakness aside and drive higher.

On the currency front, price action remains restricted and with February looming — seasonally a weak month for many currencies — the next big move is likely to be to the

Charts such as EUR/USD seem clear and I will be focusing analysis there along with indices. Should they stay strong, USD shorts will continue to be the main choice.

Last week saw the EUR price push past 1.0800, but so far this move has all the hallmarks of a failed break. Signs of weakness in equities are likely to see this dip back down, but I’m keeping an open mind and am prepared for both scenarios.

AUD, NZD, CAD, CHF, and JPY are all a wait and see, with GBP a short below 1.2070.

On gold there is a strong correlation between its price and the JPY chart, with traders being forced to take positions they don’t really want because of recent Bank of Japan decisions. I’m happy to be long but realise the strength of the JPY and bonds, together with the weaker Dollar, are likely to be temporary.

Crypto is a much more interesting proposition. Typically a surge in tech stocks is a bellwether for a crypto run, yet last week’s rise has come while the Nasdaq remains close to recent lows.

Commercials have cut shorts and started to add some longs, but at the moment it looks like a short squeeze, forcing short sellers out rather than new buyers in. I have my first long in place at 18,500, but I will need more evidence before I commit more.

We go into a lot more detail about the emerging trends and levels to watch for in our weekly webinar and member newsletter, and cover many more markets.

Hope to see you on there soon. Click here if you’d like to join us.

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