A holiday-shortened week got off to a weaker start, with China posting some pessimistic growth figures and some unfortunate news ahead of bank reports. This comes after two positive weeks to start 2023 for the S&P 500.
But there’s more than a whiff of optimism in the air, according to our call of the dayfrom the founder and chief investment officer of investment research platform Macro Ops Alexander Barrow.
“The weight of evidence leaned heavily in favor of the bulls last week after a series of high signal amplitude impulses triggered,” the Macro Ops team writes in a blog post on Monday. They see this could lead to some decent gains for the S&P 500 before it “rebounds again”.
Market breadth refers to how many stocks are participating in an up or down move. Range momentum indicators can determine where markets are heading and according to some are often found at the start of new bull markets.
“In our view, we are in the broader process of overcoming at best, as we expect a recession towards the end of the year. But, after last week, we have to be open to the possibility of a run on previous January highs, which would be 20% above current levels,” says the macro operations team.
To read: US stocks could drop 10% as ‘pain trading’ consolidates before rebounding later in the year
They pointed to others who have also noticed some indicators of width momentum in the past week, including evidence of an “unprecedented width trifecta quantifiable edges. The first part of this is longtime investor Walter Deemer’s Breakaway Momentum signal, which indicates “really powerful bullish momentum,” which he recently tweeted about:
@WalterDeemer
The rest of that triple signal came from Wayne Whaley’s Advance Decline Thrust and then Quantifiable Edges’ own Triple 70 boost signal.
As Quantifable Edges pointed out, Thursday was the first time the three landed on the same day. Two of the three signals triggered on the same day happened only seven times, as shown in the graph below:
quantifiable edges
As well as flagging a range of bullish indicators, the Macro Ops team also offer some investment advice – they suggest exposure to homebuilders now (a sector they flagged in November).
“The market is overestimating a recession in the first half of this year, when economic and monetary data lag behind, suggesting it won’t happen until the end of the year. This means Q1/Q2 earnings won’t be as bad as many expect, meaning people are below risk. A reversal of the risk cycle + a reopening of China should help narrow mortgage spreads, increasing demand in a tight supply market, which is good for builders,” says the team, who like BlueLinx Holdings BXC
and FirstSource BLDR Builders.
To read: Fund managers are ‘much less pessimistic’ than Q4, says Bank of America
the markets
market watch
DJIA Shares
SPX
COMP
are lower while bond yields are BX:TMUBMUSD10Y
BX:TMUBMUSD02Y
are going the other way, along with the DXY dollar.
US CL crude oil prices
are higher – OPEC left its forecast for oil demand in 2023 unchanged but said there are too many uncertainties for the market – and gold GC00
is falling. Bitcoin BTCUSD
it rose above $21,000 over the weekend and continues to trade above that level.
the buzz
On the heels of a big batch of Wall Street bank profits last week, Goldman Sachs’ GS
reported disappointing results, along with provisions for credit losses, and stocks fell. Morgan Stanley MS
stocks are slightly lower as earnings beat estimates by one cent per share and credit loss provisions increased. SBNY Bank Subscription
also reported and stocks are slightly higher despite a loss of earnings.
TRV travelers
the stock is falling after the insurer’s guidance fell short of market hopes.
Netflix NFLX
will report later this week.
NATI National Instruments Stocks
are higher after Emerson Electric EMR
raised its bid for the measurement systems maker to $7.6 billion.
Stocks in Chinese electric vehicle maker Xpeng XPEV
fell after the Chinese electric vehicle maker slashed prices on most of its cars by around 10%, following similar moves by Tesla earlier this month.
China has announced its first overall population decline in decades as society ages and birth rates plummet. And it reported data showing its economy grew by 3% in 2022, less than half the rate of 8.1% the previous year, the second lowest annual rate since at least the 1970s.
Meme stock investor Ryan Cohen allegedly took a stake in China’s Alibaba BABA
and launched an activist campaign to get the e-commerce giant to buy back more shares. Equities are a little lower.
A New York regional industrial index – Empire State – showed a sharp drop in activity in the new year. The rest of the week will bring updates on retail sales and the housing market, along with other data and some Fed speeches.
The founders of defunct crypto hedge fund Three Arrows Capital and crypto exchange CoinFlex are launching a new crypto exchange that will focus on claims trading.
best of the web
Deaths from despair may be caused by loss of religion, new research paper argues
Return of El Niño will bring unprecedented heat waves this year, climate experts warn
Nest wants you to pay $33 a month for greener trash
A famous genetics professor fined $29 million after convincing a friend to invest $20 million in his “miracle” to cure Huntington’s disease.
the chart
@bondvigilantes
The biggest macro decision of the week could come from the Bank of Japan on Wednesday, as speculation mounts that the central bank may end its ultra-easy monetary policy and rein in the yield curve.
“The Bank has had to buy a record amount of Japanese government bonds to defend policy since it was adjusted in December, with recent purchases topping previous peaks,” points out Gurpreet Gill, global fixed income macrostrategist at Goldman Sachs Asset Management.
For now, watch the USDJPY yen
and JGBs, strategists say.
the tickers
These were the most searched tickers on MarketWatch as of 6 am ET:
|
ticker |
security name |
|
BBBY |
bed bath and beyond |
|
TSLA |
tesla |
|
GME |
GameStop |
|
AMC |
AMC Entertainment holdings |
|
MULN |
Mullen Automotive |
|
NO |
NO |
|
BABYSITTER |
alibaba |
|
MONKEY |
AMC Entertainment Holdings Preferred Stock |
|
AAPL |
Litter |
|
DWAC |
Acquisition of the Digital World |
random readings
Scientists direct beams with laser beams for the first time.
Wyoming lawmakers want to ban electric car sales to protect the oil and gas industry.
Need to Know starts early and updates until the opening bell, but sign up here to have it delivered to your inbox once. The emailed version will be sent around 7:30 am Eastern.
Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.
.