NASDAQ 100 Soars, Igniting New Highs

Traders' Opinions

Stocks

Summary:

Considering pullbacks now as potential value plays is wise. Selling this market may not be opportune as it's currently soaring upward without any sign of hesitation or slowdown.

In the current earnings season, Tesla reported less-than-stellar results, but intriguingly, market participants seem inclined to overlook these figures, opting instead to fuel the market's upward trajectory. The NASDAQ 100, in particular, has been enjoying a prolonged rally, prompting many to wonder what might halt its ascent. Notably, a support level around 16,950 has emerged, formerly a resistance zone that now acts as a short-term floor. Adding to this dynamic is the presence of the 20-day exponential moving average in the same vicinity.

Despite a degree of apprehension about the sustainability of this bullish trend, it seems that monetary policy is the primary driver influencing market sentiment. The prevailing sentiment suggests that any pullbacks should be perceived as potential value plays, rather than opportunities to sell, given the market's persistent upward trajectory. However, the concern lingers that this soaring trajectory will eventually meet an endpoint, and when it does, the descent might be less than graceful.

Currently, there's a prevailing sentiment that only monetary policy truly matters in steering the market. A cautious eye is kept on interest rates, which, if they resume their descent, could further stoke the market's upward momentum. It's worth noting that the NASDAQ 100's surge is not a broad-based phenomenon but rather propelled by a select few heavyweights like Tesla, Amazon, Microsoft, Nvidia, and a handful of others. It's a case where the success of just seven stocks can significantly impact the index.

Observing Thursday's trading session, the NASDAQ 100 once again displayed early strength, indicating a sustained upward push. The question on many minds is whether the market will gravitate towards the coveted 18,000 level. While this seems likely, there's a recognition that some groundwork may be necessary before achieving such a milestone.

In the current landscape, short-term pullbacks are perceived not as red flags but as buying opportunities, a sentiment reflected in the prevailing chart patterns. Investors appear to be adopting a perspective that views these fluctuations as chances to identify value rather than reasons to exit positions.

It's crucial to acknowledge the market's current reliance on a handful of dominant players. The likes of Tesla, Amazon, Microsoft, and Nvidia seem to be steering the ship, contributing significantly to the NASDAQ 100's upward trajectory. This concentration in a select group of stocks raises questions about the sustainability of the current market dynamics.

Looking ahead, the 18,000 level appears to be a psychological target that the market may strive for in the near term. However, a note of caution is warranted, acknowledging that reaching this milestone may necessitate navigating through potential challenges and uncertainties.

In conclusion, the current market exuberance, particularly in the NASDAQ 100, is a result of multiple factors, with monetary policy playing a pivotal role. While concerns about the sustainability of this bullish trend persist, the prevailing sentiment is to view pullbacks as opportunities rather than warnings. As the market continues its upward trajectory, keeping a watchful eye on the key players and potential shifts in monetary policy will be essential for investors navigating these dynamic times. NASDAQ 100 Soars, Igniting New Highs_1

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Chandan Gupta

Traders' Opinions

Economic

Forex

The US dollar found itself in a bit of a dance against the Canadian dollar in Thursday's trading session, lingering around the 1.35 level. This level, a significant psychological marker, naturally draws considerable attention. The market, however, appears caught in a back-and-forth scenario, characterized by choppy behavior.

It's crucial to recognize the close relationship between the Canadian dollar (CAD) and the crude oil market. The CAD is intricately tied to the fluctuations in crude oil prices, and currently, the oil market is displaying signs of a revival. This connection implies that if the oil market gains momentum, the Canadian dollar is likely to strengthen across the board, including against the US dollar (USD).

In essence, anyone venturing into trading this market should keep a watchful eye on the developments in the crude oil markets. The influence of oil prices on the Canadian dollar is a significant factor to consider when assessing potential movements in the USD/CAD pair.

Understanding this interplay provides traders with valuable insights, allowing them to navigate the dynamics of the Canadian dollar with a more informed approach. The correlation between the CAD and crude oil underscores the importance of staying attuned to shifts in the oil market, as these can significantly impact the strength or weakness of the Loonie against the US dollar.

For those engaging in USD/CAD trading, acknowledging the symbiotic relationship between the Canadian dollar and crude oil is a key aspect of making well-informed decisions. Keeping a close watch on the pulse of the oil market will provide traders with a more comprehensive understanding of potential movements in the CAD, contributing to a more strategic and nuanced approach to currency trading.

The influence of crude oil markets on the Canadian dollar is undeniable. As oil attempts to break out, it adds another layer of complexity to the USD/CAD pair. Despite a somewhat bullish outlook in the oil market, the US dollar is simultaneously gaining strength throughout the day, keeping us just below the critical 200-Day EMA—an indicator closely watched by many traders.

Expectations point toward continued noise in the USD/CAD pair. The current market volatility aligns with the global uncertainty where traders seem unsure about their next move. The Bank of Canada has hinted that rate hikes are not entirely off the table, while the Federal Reserve contemplates rate cuts in 2024. Such a divergence in monetary policy could signal challenges for the economy. It's worth noting that the Canadian economy is intricately tied to the US, with the latter being its largest customer for raw materials.

Looking ahead, a breach above the 1.3550 level opens the door to a move toward 1.36, a level marked by significant resistance in the past. Conversely, a drop below the 1.34 level could lead to a descent to 1.33. Anticipating a more substantial move, while likely, lacks the confidence needed in the current uncertain landscape. In the short term, adopting low timeframe trading with a range-bound indicator seems to be a prudent approach given the prevailing market dynamics. US Dollar Holds Steady in Ongoing Interaction with the Canadian Dollar_1

US Dollar Holds Steady in Ongoing Interaction with the Canadian Dollar_1

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Zi Cheng

Traders' Opinions

Forex

Fundamental Analysis

Following the January policy meeting, the European Central Bank left key rates unchanged and maintained the existing statement language, as expected. During the subsequent press conference, ECB President Christine Lagarde refrained from discussing the potential timing of a policy shift and reiterated that it was premature to consider rate cuts, highlighting a consensus among policymakers. Lagarde did acknowledge a decline in wage growth and anticipated a continued easing of inflation throughout 2024.

Despite the Euro initially showing resilience after the ECB event, it failed to attract buyers later in the day. Concurrently, a risk-averse market sentiment, exemplified by a notable drop in US stock index futures early Friday, bolstered the USD and exerted additional pressure on the EUR/USD pair.

Later in the day, the US Bureau of Economic Analysis is set to release the December data for the Personal Consumption Expenditures Price Index. The previous day, the BEA reported a 2% increase in the PCE Price Index for the fourth quarter, aligning with market expectations and mirroring the third quarter's growth. Consequently, the market response to December's PCE inflation figures is anticipated to be subdued.

Additional US data revealed that the Gross Domestic Product outpaced analysts' projections, expanding at an annual rate of 3.3%, significantly exceeding the expected 2% growth and further strengthening the USD.

Given a potential dominance of safe-haven flows in the latter part of the day's financial markets, EUR/USD may encounter challenges in staging a recovery leading into the weekend.

Technical Analysis

EUR/USD has been consolidating this whole week within this channel that I have drawn in the chart attached below. I will be monitoring for breakouts to determine if I want to place long positions or short positions. From the 200 Day Moving Average, we can tell that it is consolidating as well because price remains very close to the 200 SMA, when this happens, it means that buyers and sellers are not strong enough to push past support or resistance.

EUR/USD Continues To Consolidate Around 1.08000_2

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ING

Economic

Central Bank

Inflation on the cusp of hitting the 2% target

The December personal income and spending report contains a number of interesting stories, but the obvious headline is that the US economy has been able to return inflation towards target in an environment of vigorous consumer spending growth. Something that is even more remarkable after a significant supply shock and during a period of ultra-low unemployment.

There were no real surprises on the inflation front with the core personal consumer expenditure deflator (the Fed’s favoured measure of inflation) coming in at 0.2% month-on-month, but the year-on-year rate is 2.9% rather than 3% – yesterday's GDP report basically told us this. Importantly, the MoM change was 0.17% MoM, which is exactly what we need to consistently achieve to get inflation to 2% YoY over time. This is the sixth month in the last seven that we have been at or below this key threshold and this should give the Fed real confidence that the job is done on inflation and policy rates do not need to be so restrictive. In fact, the 3-month annualised rate is now just 1.5%, suggesting we run the risk of undershooting later this year!

Personal consumer expenditure deflator MoM, 3M annualised % YoY%

Weak Inflation and Strong Growth Underscore the Goldilocks US Economy_1

Strong spending still driven by legacy savings

For activity to be so strong in this benign inflation environment is astonishing. Consumer spending rose 0.7% MoM versus the 0.5% consensus with an upward revision to November from 0.2% to 0.4% growth. Unfortunately, it isn't being fuelled by incomes, which rose only 0.3% MoM nominally while the true measure of spending power – real household disposable income – which is income after tax and adjusted for inflation, rose just 0.1% MoM. For real (inflation adjusted spending) to be up 0.5% MoM, it highlights how important the run-down of savings and robust credit card spending continue to be in keeping overall consumption so strong.

Real household disposable incomes remain lacklustre

Weak Inflation and Strong Growth Underscore the Goldilocks US Economy_2

First-quarter GDP growth set to remain robust, leaving May the more likely start point for rate cuts

This is not sustainable over the long term, but the consumer refuses to lie down. Given this momentum, first-quarter GDP looks increasingly likely to be in the 1.5-2% range, meaning the consensus of 0.6% growth needs to be revised up – even if there is zero consumer spending growth in January, February and March, the QoQ annualised rate of consumer spending growth will be 2.1% in the first quarter! This must make a March rate cut look less likely and we continue to favour May being the timing for the first move.

Source: ING

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Ukadike Micheal

Economic

Political

Palestinian-Israeli conflict

In a politically charged case brought by South Africa, the International Court of Justice has issued a ruling ordering Israel to limit harm to Palestinians in Gaza. The court also directed Israel to take steps to prevent and punish incitement to genocide, as well as ensure basic services and humanitarian assistance to Palestinians in Gaza. The 17-judge panel did not grant South Africa’s request to immediately suspend Israel’s military operations in Gaza, but it declined to dismiss the case, signaling a significant development in the ongoing legal battle.

The court's decision, which pertains to South Africa’s request for emergency measures while the case is being heard, is likely to add to the mounting international pressure on Israel to restrain its operations in Gaza. While the final ruling on the allegation of genocide is expected to take years, the impact of the case has already reverberated globally, leaving a western-backed democracy facing serious allegations of committing the highest international crime.

Israeli Prime Minister Benjamin Netanyahu has vowed to continue the military campaign while striving to keep civilians out of harm’s way. He vehemently rejected the allegation of genocide as "false and outrageous" and portrayed the court's decision not to call for a ceasefire as a victory for Israel. On the other hand, South Africa hailed the ruling as a "decisive victory for the international rule of law and a significant milestone in the search for justice for the Palestinian people."

The case, brought under the 1948 Genocide Convention, alleges that Israel is responsible for genocide by killing Palestinians in Gaza, causing serious bodily and mental harm, and inflicting conditions of life calculated to bring about their physical destruction. South Africa's legal team argued that Israel's assault had resulted in a significant loss of life and injuries in Gaza, pointing to what they described as "genocidal intent" evident from the conduct of Israel's military attack.

Israel has vehemently rejected the claims as "profoundly distorted," maintaining that its forces in Gaza are complying with international law. The conflict escalated after a Hamas attack in October 7, prompting Israel's retaliatory assault on Gaza, resulting in a significant loss of life and displacement of inhabitants.

The court's decisions on emergency measures are legally binding, although it cannot enforce them itself. Despite the legal complexities and ongoing tensions, the ruling has significant implications for the ongoing conflict in the region and the international community's response to it.

As the legal battle continues and international pressure mounts, the case has become a focal point for discussions on human rights, international law, and the broader geopolitical implications of the conflict in the Middle East. The ruling has sparked debates on the responsibilities of states in conflict situations, the role of international institutions in addressing alleged atrocities, and the complexities of seeking justice in a deeply entrenched and protracted conflict.

The ruling by the International Court of Justice in the case brought by South Africa against Israel marks a significant milestone in the ongoing legal battle over the conflict in Gaza. The decision, which addresses emergency measures while the case is being heard, has far-reaching implications for the ongoing conflict and the international community's response to it. As the legal and diplomatic processes unfold, the case continues to draw attention to the complexities of seeking justice in protracted conflicts and the broader implications for international law and human rights.

Source: Financial Times

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Chandan Gupta

Traders' Opinions

Economic

Forex

Fundamental Analysis

In a noteworthy development, the British Pound (GBP) demonstrated resilience against major currencies, including the Euro (EUR) and the US Dollar (USD), driven by robust growth in the British economy for January. Notably, the GBP exhibited notable strength amid the recent upswing in the US dollar.

The S&P Global Purchasing Managers' Index survey unveiled promising expansion in the dominant British service sector, registering a reading of 53.8. This marked an improvement from December's 53.4, surpassing expectations set at 53.2. Furthermore, the Manufacturing Purchasing Managers' Index reported a reading of 47.3, indicating a contraction but surpassing December's 46.2 and consensus projections of 46.7. The Composite Purchasing Managers' Index, offering a holistic view of the overall economy, recorded a reading of 52.5, up from December's 52.1 and exceeding the consensus figure of 52.2.

This comprehensive outperformance contributed to a surge in the GBP/EUR exchange rate, reaching its highest level in four months at 1.1715. The Pound found additional support from below-par Purchasing Managers' Index readings in the Eurozone, signaling economic contraction. Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics, interpreted the data as a sign of the UK economy swiftly emerging from the mild recession experienced in the second half of the previous year.

Recent results imply that the British economy is firmly in an expansionary phase, mitigating the necessity for aggressive interest rate cuts by the Bank of England. The analyst noted that while the PMI data aligns with the Monetary Policy Committee's capacity to cut interest rates this year, it suggests a more gradual approach than current investor expectations. The projection anticipates a 75-basis point reduction in the bank interest rate this year, slightly less than the 100 basis points indicated by the Statistics Office.

In essence, the potential for sustained high-interest rates in the UK supports yields and bolsters demand for the sterling, underlining the currency's robust position in the global economic landscape.

Technical Analysis

In the dynamic world of forex trading, the GBP/USD price exhibited an upward trajectory, reaching towards the resistance level at 1.2775 and settling around 1.2715 at the time of this analysis. A closer look at the daily timeframe chart reveals the continued ascendancy of the GBP/USD pair, with the critical resistance at 1.2775 providing steadfast support for bullish control.

Technically speaking, a move towards the resistance level of 1.2850 is anticipated to fortify the current trend, concurrently heightening expectations for the psychological resistance at 1.3000. Conversely, a deviation from this trajectory and a potential shift in the trend would necessitate the GBP/USD price approaching the support level of 1.2600 within the specified timeframe. Absent such a move, the prevailing upward trend is expected to persist.

Navigating the intricacies of forex markets involves a delicate dance between support and resistance levels, with market participants closely monitoring these key indicators. The resilience of the GBP/USD pair is indicative of the prevailing market sentiment and underscores the significance of technical analysis in shaping trading strategies. As traders brace for potential shifts, the delicate balance between upward momentum and potential corrections becomes a focal point in market discussions.

In essence, the GBP/USD's journey is not merely a numerical fluctuation but a reflection of broader market dynamics, economic factors, and geopolitical influences. Amidst this complexity, traders remain vigilant, responding to the nuanced movements of currency pairs, with an eye on both the current trend and potential inflection points. The interplay between technical analysis and real-world events is the tapestry upon which forex traders navigate, seeking opportunities and managing risks in the ever-evolving landscape of global currency markets. Struggling GBP/USD Faces Persistent Battle Against Strengthening Dollar Forces_1

Struggling GBP/USD Faces Persistent Battle Against Strengthening Dollar Forces_1

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Ukadike Micheal

Political

The ongoing negotiations between Senate Republicans and Democrats over a conservative border security bill have been overshadowed by the increasing influence of former President Donald J. Trump on the Republican Party's legislative agenda. Despite the potential for a once-in-a-generation opportunity, the timing of these discussions has become increasingly complicated as Trump solidifies his position as a presidential nominee and asserts his hard-line immigration policies at the forefront of the party's priorities.

The emergence of Trump's dominance within the Republican Party has significantly impacted the legislative landscape, leading to internal divisions and complicating the prospects for bipartisan agreements. His vocal opposition to the emerging border compromise has all but extinguished its chances in a divided Congress, as he pushes for his own immigration policies to take center stage in the upcoming presidential campaign.

The influence of Trump's "America First" approach to foreign policy has further strained Republican support for providing aid to Ukraine in its conflict with Russian aggression. This has led to demands for a border crackdown in exchange for further funding for Kyiv, a compromise that Trump has now rejected. As a result, the political terrain surrounding the border deal has become increasingly treacherous, reflecting the broader challenges faced by a Congress grappling with internal divisions and the looming specter of the 2024 election.

Senate Minority Leader Mitch McConnell, a proponent of the bipartisan border deal, has acknowledged the growing influence of Trump within the party, highlighting the challenges posed by the former president's stance on the border issue. As the negotiations have progressed, Trump's accumulating delegates and push for party unity behind his agenda have intensified the pressure on lawmakers, further complicating the path forward for the border deal.

Trump's influence over the legislative agenda has not only impacted the border issue but has also extended to other policy areas, including foreign aid to Ukraine and government spending. His uncompromising approach has emboldened like-minded politicians in Congress, leading to ongoing impasses and exacerbating the challenges faced by a Congress struggling to function effectively in an election year.

While Trump's ability to derail legislative efforts has been evident, his influence has also posed challenges for lawmakers seeking consensus. His sway over the party's direction has made it increasingly difficult for Republicans to navigate the legislative landscape, particularly as they grapple with the implications of aligning with Trump's policies in the lead-up to the 2024 election.

This has presented the key points and details of the situation, emphasizing the impact of Trump's influence on the Republican Party's legislative agenda. It has outlined the challenges faced by lawmakers as they navigate internal divisions and the looming specter of the 2024 election, particularly in the context of the ongoing negotiations over a conservative border security bill.

The evolving dynamics within the Republican Party, shaped by Trump's influence, have significantly impacted the legislative landscape, presenting formidable challenges for lawmakers seeking bipartisan agreements. The broader implications of Trump's dominance within the party raise questions about the future of legislative efforts and the ability of Congress to effectively address pressing policy issues in the midst of an election year.