Back to Business, January Seasonality, Retail capitulation may be starting
HAPPY NEW YEAR! After a couple of weeks break, the newsletter is back, and I’m more excited than ever to jump into the markets. Last year, the markets provided some of the most unprecedent events and outsized moves in history. Now at the start of 2023, it feels like we are in the eye of the storm, where nothing is guaranteed and anything can happen. That likely means volatile markets, big opportunities, and another wild ride. So let’s get this year started!
Also, like I mentioned before year-end, if you are interested in Coaching/Mentoring ‘Private One to Ones’, click this link to add your name to the list, and I’ll let you know when I have further details. And of course, make sure to grab yourself a Traderseed Challenge and keep working on your prop trading skills.
Weekly Watchlist
The key event of the week is Thursday’s US Consumer Price Index (CPI) numbers for December. Markets are highly sensitive to inflation right now so any surprises will lead to outsized moves. Also this week, Q4 earning season gets underway. Consensus analyst estimates call for a 1.6% decline in S&P 500 Q4 earnings year over year. Given the current plethora of recession risks, this may (or may not) be optimistic.
New to trading? Try crypto trading bots or copy trading on best crypto exchanges
The Macro View
S&P 500 January Seasonality. The Santa rally is over, time for “chop season”. Chart shows average S&P performance, past 20 years.
January Seasonality in pre-election years. As ever, the devil is in the detail, it turns out that in pre-election years, January is the strongest month on average, up 4.1% on avg (since 1950).
Also, higher 89% of the time (up 16 of 18 times).
What are the chances of back to back down years in the S&P 500? Unusual (outside world wars), but not unheard of. Also a word of warning, previous multi-year bear markets (other than 1913–14) saw the second year deliver larger losses than the first.
US vs Rest of world stock markets. Anyone for some mean reversion?
Retail capitulation may be starting. We have been waiting for signs of the all important retail capitulation. It is highly unlikely that markets bottom without major capitulation from retail, as well as institutional participants. Goldman Sachs note that the last 2 weeks has seen some of the largest retail selling in their history.
US 10 year at huge levels. Interest rates are driving everything right now and the US 10 year rate is currently at a major level. With CPI on deck this week, this chart needs to be watched.
Brent Crude Oil 2020–2024 vs 2004–2008. Frequent readers will know that I love these historical analogues. This is a fun one with the current Brent Crude Oil price plotted on top of 2004–2008. Incidentally, this would get oil to about $250 before prices fell in 2024.
I hope you found this interesting and useful. As ever, I’m only an email away, so just reply to this mail if you have any feedback or questions.
Have a good week!
Kieran
www.traderseed.io
Want some help getting funded with a prop firm? One of my goals for 2023 is to help a small group of traders reach their trading goals. If this is something that you might be interested in, join the list and i’ll let you know when I have further details. Join the list here.
Traderseed has been designed to help traders develop the skills required to be successful trading with prop firms. Check out our programs here!
