Wall Street’s major indexes rose to fresh record highs, boosted by soft-landing optimism and encouraging earnings from chipmakers and tech companies.
This week we will have crucial macroeconomic data along with important events.
The GDP for Germany and the European Union will be published on Tuesday 30 January. In the US we will assess the HPI index, the consumer confidence report, and the JOLTS figures.
On Wednesday 31 January, we will evaluate inflation data in Australia and the manufacturing sector for China. For the European session, we will have retail sales, unemployment rates, and inflation in Germany. In the United States, the ADP data is the most important event of the week, along with the FED meeting.
The US central bank is expected to leave rates on hold at the 22-year high of 5.25- 5.5%. Instead, the focus will be on Jerome Powell’s press conference for further clues over when the Fed may start to cut rates as inflation ticked higher to 3.8% YoY in December and as data points to a soft landing for the US economy. The market has dialed back Fed rate cut bets and no longer sees a rate cut in March but is pricing in an 85% probability that rates will be 25 basis points lower in May.
On Thursday 1 February, we will assess the German manufacturing index and the European inflation data.
In December, the European CPI ticked higher to 2.9% YoY, up from 2.4%, as the “base effect” dropped out. The market will be watching closely to see whether it resumes its trajectory towards the ECB’s 2% target, which could fuel dovish central bank expectations. However, with supply chain concerns rising and ships re-routing, there is a potential for inflation to remain sticky.
The Bank of England will announce its rate decision on Thursday, February 1st, and is expected to leave interest rates unchanged at 5.25%, a 15-year high. Bank of England governor Andrew Bailey has pushed back on expectations of an early rate cut. However, some economists believe it’s time for the BoE to relax its tough line after recent data shows that wages and economic growth came in below forecasts. The market is pricing in a Bank of England rate cut as early as May, with three more rate cuts expected over 2024.
In the United States, we will have the ISM and the manufacturing index.
On Friday, February 2nd, the US non-farm payroll will be released. The figures most probably will be a little less crucial than usual, given the Fed interest rate decision earlier the same week. December’s non-farm payroll was stronger than expected after 216K jobs were added in December and unemployment held steady at 3.7%. Investors will be watching for further signs of resilience in the jobs market. Any signs of weakness seeping into the jobs market could raise expectations of an earlier rate cut by the Fed.
In the meantime, earnings season continues. Tesla and Netflix have already reported earnings with very mixed outcomes. This week, other big names will revive the market. Microsoft and Alphabet are due to report earnings on January 30. Amazon, Meta, and Apple are set to report on February 1. With the NASDAQ100 at a record high, expectations are running high. The market will want to see the fundamentals to support the lofty valuations.
2024 will be very important for the markets. There are several political elections in different regions of the world, starting from the United States of America to Iran, Mexico, Portugal, the United Kingdom, and about 50 other countries. Furthermore, attention will be focused on the war in Ukraine and Israel as well as the various issues in the Middle Eastern region. The year is expected to be positive for the stock markets with 4-5 months of sideways and bearish movement. Most likely the lows for the year will be posted at the end of the first semester. After that, markets should rise until the end of the year, reaching annual highs in December.
What will happen from now on? We are approaching a crucial period of the year for the stock market. Furthermore, since reaching the lows on 30 October, prices have not yet experienced a retracement of more than 3%. The US indices are surging, aiming to close the month at new historic highs. However, statistically, a correction is anticipated between mid-February and mid-March.
From the lows of the week of 13 March 2023, the rise of the international stock exchanges has been incredible. The thesis that supported a lead to a very strong climb until August 4th, the annual setup, was confirmed with almost millimeter precision. Everything occurred as we predicted, and between September 2022 and March 2023, all international markets posted their temporary lows (which could also be the ten-year lows).
Beyond the rhetoric of the debt ceiling, the recession, and the banking crisis, only a decisive flip in sentiment could lead to a trend reversal. Earnings of US mega caps have shown off and many other companies are also ramping up the increase in revenue.
The average annual returns on international equities (World Stock Exchanges based on GDP) are around 11%. Current rates in America are more than 5%. With a projection for 10, 15, and 20 years, equity markets always beat bond markets. Therefore, we should be at the starting point of a 10-year bull market.
Rising interest rates won’t directly and inevitably lead to a recession. As long as these hikes are balanced with economic growth, there should be no danger. On the other hand, an exaggerated rate cut could drag down the markets for a long time.
The likely lows that were supposed to be posted in October 2022 will have a high probability of remaining so for many years. They could represent the lows of the entire decade. Despite a certain short-term overbought situation, the markets are unstoppable and will be like this for a long time. Here is why.
We have highlighted several times that stock prices tend to move at least 6/9 months before the economic cycle. For this reason, during the final part of 2022, the markets would have posted a significant bottom between June and October and then taken off again for the long term. The prices marked during the year had discounted the most unfavourable, geopolitical and geo-economic conditions.
During 2024, we expect an annual return of around 10 percent. The lows are likely to be posted between May and June, while peaks should be reached in December. The maximum expected upward extension for the year is 15%, and the downward slip is expected to be identical.
As always, we will confirm the annual forecast from time to time. The forecast of Wall Street for 2024 is full of uncertainty and complexity, requiring investors to be constantly vigilant and flexible in their strategies. The ability to adapt to changing market dynamics and navigate through global challenges will be crucial to success in the financial environment in the coming months.
The S&P500 index posted new historical highs, reaching the 4934 area.
The new control zone is 4910-922; closing above or below this level could determine a new bullish lunge or a weekly corrective phase.
New supports in the 4886-877 area will be easily reachable if prices start to accelerate downwards below 4910.
Below 4867, prices could experience a substantial pullback and became the new weekly support; intermediate supports in areas 4854 and 4844-840.
New supports in area 4834-822-817 and 4807-4799.
Monthly support in the 4792-780 area. Additional support in area 4774-768 and 4759.
The movement occurred on Monday 8th created a new support area in 4743. Intermediate support in area 4725.
Support area 4707-4700 is again confirmed. Key supports in the 4680 and 4660 areas. The latter becomes the monthly area.
The 4595-4607 area became the monthly control area, closing below it could lead to a significant corrective movement.
The supports in the 4592-4582 area are confirmed, the loss of this latter zone could lead to swift corrections up to the 4562-4552 support, crucial for the ongoing upward movement.
Additional supports in area 4542-4538 and 4528-4523.
4517-4510 and 4503-4494 confirmed. The support in the 4491-4474 area is critical, and the loss of this latter area could bring steep corrections. The target is the support in the 4428 area, which is confirmed as a monthly level.
Confirmed 4411-4409, 4397, 4390-388 and 4371-4384.
The 4363 level is confirmed, the breaking of this important level could lead to swift corrections towards 4334-4327, 4320-4315, 4303-4292 up to 4256, which remains a key support for the ongoing rally. Additional supports in areas 4244-4223, an overbought area, 4190-4185, and 4164-4158.
Late November support at 4138-4124 became the new monthly support. 4117 and 4100 are confirmed. Losing the latter support could lead to heavy drawdowns in the medium term.
Confirmed the supports in 3930-3905-3899, 3945-3957-3961, 3979, 3993-4000, and 4032-4043 areas. The 4064-4075 areas remain a crucial support for this year too.
3890-3879 is still a critical area because, in this specific area, buyers managed to concentrate. Additional support in 3864-3857 areas. Another intermediate zone is located in the 3822-3814 area.
Support in the 3808-3798 zone was confirmed, below which prices could start a new downward spiral.
Confirmed supports in 3669, 3680-3689-3701, 3711-3726-3733 areas.
3762 and 3711 are the monthly levels that support the current uptrend, so beware of any breakout of these levels: We could witness a new trend reversal.
The psychological support of 3600 remains crucial. The support at 3644-3651 has halted the fall and is now the monthly support after this solid uptrend. It shouldn’t be reached again, to avoid new and heavy downward movements. Below is the 3607 level. Then again, the 3557-3547, 3538-3524, and 3514-3507 are support levels. The 3485 support is now the annual, critical, and historical level for the S&P500 index. We will monitor whether this last level could stop, at least in the medium term, the bearish direction of the markets. Should we go beyond it, 3200-3300 will be the target, sought after by funds, investors, and traders halfway around the world.
Protecting 4867 will push prices towards new historical highs, the first target is 5000-5100 and then 5300-5500. New resistances in the 4876 area.
How to move? In recent days, a bullish phase has emerged without significant corrections. As we already mentioned, there were no apparent dangers until 6 January, but from this date onwards, a decline of one or even two months could unfold. Despite the ongoing bullish strength, we will maintain a high level of attention until 31 January. A break below the weekly supports could lead to substantial drawdowns. The recent vertical movement in prices could be reversed at any time. The upcoming Fed meeting and the quarterly earnings reports will provide valuable insights to trigger new operational ideas.
DE40 – Last week, the German index attempted to break the weekly resistance at 16927-972, and on Friday, it came close to succeeding, poised to reach new historic highs.
New supports in the 16888-821 and 16786-735 areas. Additional supports in the 16681-619 area, support the ongoing price rally.
Supports 16573-533 and 16498-440 confirmed.
Support at 16416-306 confirmed which remains weekly. Only below this latter area, the Dax could begin a serious retracement.
Additional supports in the 16263-223, 16198-163, and 16132 areas. These levels are great areas to look for long entries. Below 16132 prices can accelerate strongly downwards, towards the new critical support at 16025-15958.
15918-872 is confirmed, below this level, we could observe swift downward corrections with targets at the key volumetric supports of 15679-620 and 15589-533. Additional support in areas 15422-384 and 15315-252.
15130-097-070 and 15036-15000 confirmed. Monthly support in the 14935-895 area. Other supports in the 14874-801 and 14775-730 areas. 14662 and 14625-590 confirmed.
Confirmed intermediate supports 14138-184, 14342, 14414-545.
Critical area at 13814-781. The loss of the volumetric zone 14069-13974 opens the gateway to the monthly support in the 13621 area.
Solid supports in areas 13692-608, 13550-516, and 13457-410. Supports 13314-333, 13331-410, 13438-467 are confirmed.
Confirmed volumetric supports in areas 12865, 12833-12909, 12978-13038, 13113-178, 13222-280, 13307-357.
Confirmed the supports in area 12808-766. From 12628 to 12766, there are a series of intermediate supports, helpful for long entry from pullbacks. 12566 becomes monthly support.
Additional critical supports are 12407-517 for the concentration of volumes. 12353-275 is the first bullish turning zone. Confirmed support in areas 12223 and 12136.
It was also confirmed support in the 19920-15006 area. This is 11875-11950-12024, which halted the price fall after the US CPI data on 13 October 2022. Losing it would mean new bearish pressures and a touch of the weekly support in the 11766 area; with extensions to 11650 and 11542 below it. The 11095 mark could be a target in case of a massive sell-off. These levels can be considered annual reversal points.
The Dax has reached our annual target in the 16800-17000 area. If prices stabilize above 16927-972, we will aim for 17100 and then the final extension of 2023 in the 17500 area. Possible new annual targets in the 18000-18500 area.
If by the following Friday, prices remain above 16664 we could witness a chance for a continuation of a bullish movement on a monthly basis; below 16418, the trend could move firmly downwards again.
US30 – Last week, the American index broke the control area of 37914-861, reaching new historical highs, and the first target in the 38000 area. Furthermore, on Friday it managed to close in the 38122 area.
New supports in the 3816 and 37921-861-793 area which become weekly.
Confirmed 37715-452. This broad range will withstand any bearish attempt, and only a powerful break will trigger new and substantial drawdowns.
Additional supports in the 37404, 37338 and 37303-186 area, which become weekly.
The loss of 37303-186 could lead to heavy sell-offs. Intermediate areas: 37126-034, 36927-850, 36762-657, 36617-498, 36465-342. The latter becomes monthly. All of these areas are excellent buying opportunities. Only the loss of the monthly support could open up to corrections for the medium term.
Confirmed 36094-36300, 36013-35872, 35813, 35717-570, 35459-370 and 35337-237. These are optimal levels to take into consideration for possible long re-entries in the event of a price correction.
Supports in the 35206, 35140, and 35052-34946 areas are confirmed.
34880, 34833-796, and 34717-630 confirmed which is the critical volumetric support. The loss of these supports will be due to swift corrections at targets 34383-210 and 34082-33929, which become the new monthly support.
Confirmed 33868-811, 33767-598, 33557-457 and 33384-192. Monthly support in area 33133-057. Additional supports in area 32896-792.
New monthly support in the 32771-650 area. Critical supports were confirmed in areas 32600-524 and 32393-331.
Confirmed supports are located in two overbought areas: 31197-497 and 31536-764. Additional support areas are placed at 31753-920, 32111, and 32276. The 31861 level still remains a
key one.
31036-31125 is still to be considered critical support for the monthly level. It was confirmed 30953-815, 30715-614, 30559-381, 30253-136, and 29696-29906.
The 29485 mark remains a critical one. In addition to the 29619-529 and 29338-29264, the support zones 29159-28876 and 28800-28685 are again kept. These are all excellent supports to look for long entry opportunities from pullbacks. Should they all be pierced to the downside, prices could move toward 28319, 28051, 27765, and 27019 in extension.
At 35620, the gap of Tuesday 2 August 2022 will be filled. Final resistance in the 35673-715 area.
New resistances in the 38103-162 and 38189-231 areas. Above the latter areas, prices will seek intermediate targets in the 38500 zone. New annual targets 40000-42000.
IMPORTANT NOTE: The market witnessed new peaks in volatility, however, it failed to start the expected corrective phase which is now just postponed. Therefore, it will be crucial to monitor whether the weekly supports are maintained to determine the possibility of a bullish continuation or not during this month. Prices have not yet provided any clues in this regard, and the breaking of the local highs for the period could lead prices to new peaks before a more accurate reversal.
Also, this week, it is wise to note Monday’s openings and Friday’s closings for confirmation or denial of the current trend. Avoid overtrading and watch for volatility imparted by HFTs. Mark any gaps that may also appear during the week, with particular attention to those on Monday.
Enjoy your trading!