Weekly Trading Update
Weekly Trading Update 21.01.2022
The latest in markets
This last week has seen a number of new highs. From treasuries reaching the highest level since the start of the pandemic, to oil cracking a 7-year high - to Boris Johnson's (dis)approval ratings.
As countries reach the peak of omicron cases, the rollover from growth to value stocks has picked up pace and caused some ruptions. The tech-heavy Nasdaq slipped into technical correction territory and Netflix saw shares plummet 20% after offering a very weak guidance for Q1 2022.
Earnings season also picked up pace, with major banks in America posting better returns, though the reaction in markets has been mixed. The combination of higher interest rates charged to customers and the return of provisions from the covid period has helped support the financial sector. On the M&A front, the big news was Microsoft announcing the acquisition of Activision Blizzard, but the deal is expected to face regulatory hurdles, which could mean no completion until the end of the year, if at all.
A trader’s event watchlist
Big Tech Earnings
Microsoft reports first on the 25th and is expected to adjust its guidance in light of its latest acquisitions, which could shake up its stock price. Traders can draw a resistance line at $328, whereas firm support would be at $280.
Tesla's earnings are due on the 26th, and despite estimates rising, the stock has not performed as expected. Down 18% since this year's high at $1210, the next level of support lies at $940 and then $900. Bulls could meet with resistance at $1100.
Apple is expected to update guidance on all-important iPhone sales, where demand for the new 13 model was possibly stifled due to a lack of chip capacity. Apple reports after the close on the 27th. Traders should highlight support and resistance at $160 and $170, respectively.
Nasdaq correction
The big tech names reporting results offer an opportunity for the Nasdaq to bottom out and start attempting a rebound after dropping 10% from its high – OR - it could be the final nail in the coffin of a new tech bear market.
Fed Meeting
On the macro front, there is the Fed meeting this week on Wednesday. The consensus seems to be that the Fed will leave its policy unchanged and maintain the pace of winding down its purchase program. Depending on Powell, the US Dollar Index (DXY) could see an upward or downward leg towards 96.50 and 94.50, respectively.
US Q4 GDP
The other event that could rile up North American markets is the release of US fourth-quarter GDP and updated forecasts for the rest of the year. Price action will depend on where the Fed leaves market sentiment on the night of the 26th.
Bank of Canada
The BoC also meets this week, and it's getting closer to raising rates. ING is forecasting three hikes in the course of the year. 1% stronger against its US counterpart this year, the Canadian dollar could be poised to accelerate, reaching the next level of activity down below $1.24. In a "sell the news" phenomenon, a correction up to $1.26 could be expected.
Happy trading!
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