S&P 500 Seasonality Breakout, US Tech V China Tech, Nat Gas Prices Are… Falling?
Hey it’s Kieran! Another week in the markets is upon us, so here are the key events to be aware of, and the most interesting Macro research coming out of the investment banks. I’ll hopefully speak to you this week in the Traderseed Trading Challenges and as ever, if you have any questions, just leave me a comment below.
Weekly Watchlist
Earning season continues this week, with the four largest US companies by market cap, Microsoft, Alphabet, Amazon & Apple, all set to report. These 4 companies make up a huge portion of the US equity indices, chiefly the S&P500 & Nasdaq 100, so if we see any unexpected earnings misses, expect the indices to come under pressure.
Also, this week the US will release 3rd Quarter GDP figures on Thursday. These are expected to show that the US has returned to growth after 2 consecutive quarters of contraction. Any surprises here will likely lead to rapid repricing of the USD & Interest rates, which will lead to more market chaos and highly volatile moves. We wouldn’t want it any other way :)
The Macro View
Seasonality breakout. We ended last week with a huge Friday rally in the S&P 500. Could this be the start of the end of year rally? The seasonality chart (last 20 years) shows us that usually at this point of the year, the bottom is in, and it’s all up from here.
Sentiment Awful. BofA Bull & Bear sentiment remains rooted to zero. No-one wants to buy stocks here. However, this usually acts as a contrarian indicator, which can lead to violent short squeeze rallies like we have seen this year. That said, in 2008/09 we were rooted to zero for a year, so nothing is a given.
Stronger up days. Bloomberg shows that S&P500 up sessions are getting more powerful than down-days. Is this the first sign of the beginning of a new bull market? or are traders just FOMO-ing into any up-trend that they see?
Big 4 Tech Concentration. As mentioned earlier, this week sees the four biggest companies, AAPL, MSFT, GOOGL & AMZN all report earnings. Together they make up about 21% of the S&P 500. Despite the huge sell-off in tech this year, this percentage remains very high and as such, the index remains highly concentrated in the fate of these four names. Should one of more of these tech giants miss earnings, hold onto your hats.
China Crashing. China has just “reported” GDP growth of 3.9%, so it appears that the economy has rebounded after the challenging lockdowns in the spring. However, on the ground it continues to suffer from the tight Covid policy and major challenges in the real estate sector. Today the CSI 300 broke below big supports, and is now trading at the lowest levels since March 2020.
Chinese Tech Giants. Whilst we await the fate of the US tech giants this week, lets check-in on the Chinese Tech giants. 1 year chart of BABA, JD, Tencent and Meituan. Yikes…
Armageddon postponed? Chart shows EU Natural Gas prices. Winter is almost here and EU gas prices are crashing?? Just shows, don’t trade the media reports, the only thing that matters is the price action. Buckle up for another crazy week!
I hope you found this interesting and useful. I write this newsletter every Monday so make sure to follow me! As ever, keep your risk management top of mind, trade safe, and stay nimble out there.
Have a good week!
Kieran
www.traderseed.io
Want to trade the markets this week? 100k Programs starting from $75!! Check out the new programs here!
New to trading? Try crypto trading bots or copy trading
