The Santa Rally begins, Fear & Greed Index, Big Tech to Fall further
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.
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 programs. As ever, if you have any questions at all, just reply to this mail and i’ll be more than happy to answer anything.
Weekly Watchlist
This week, we’ll get all-important rate hike decsions from the Fed (Wednesday) and the BOE (Thursday). Both are expected to deliver large 75 basis point hikes to continue their fight against inflation. On Friday, we will also see October US non-farm payroll numbers, which will feed into expectations for the Fed’s December rate hike decsion.
Also this week, earnings season will continue to rumble on after big tech took a hammering last week. Despite the poor results of big tech, the equity markets took the news broadly in it’s stride and rallied significantly on Friday.
The Macro View
The Santa Rally has begun. The S&P 500 continues to track the last 20 year’s seasonality closely. We saw a short term bottom in October and an end-of-month breakout attempt. If this correlation is to continue this week, we should see a further push to the upside.
Fear and Greed Index. As ever, one should always look at market internals in a holistic way. The CNN Fear & Greed index has ticked up to Greed, signalling that FOMO might be starting, and this rally may be a bull trap. Plenty of room to run until we hit ‘Extreme Greed’ though, so we will see. .
Lots of traders playing this bounce. Goldman’s “sentiment & positioning” indicator makes a rare positive print. Positioning is no longer short, market internals are changing.
The 2008 v 2022 analogue..which we have been tracking all year is diverging slightly now. Is this a rejection of the analogue or are we just a few weeks ahead of schedule before the major end-of-year crash?
The S&P 500 Big 5. The five largest stocks in the S&P 500 have seen large scale multiple contraction. However, if history is a guide, we should see the big 5 earnings multiples fall in line with other index constituents before the bottom is in. The big 5 are currently sitting on 24x earnings, whereas the other 495 constituents are at 15x. Plenty more room to run to the downside.
Tech drawdowns from their high. Facebook, which has shed over $800 billion in market cap, is not the biggest loser, at least in dollar terms. Amazon and Microsoft have both seen more market cap evaporate from their recent highs.
US mid-terms are rapidly approaching… the outcome of which could see major changes in US Fiscal, Economic & Foreign policy. Republicans are heavily favoured in the prediction markets which puts major geopolitical shifts into play very soon. Stay nimble out there!
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
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