1/3 Trading Plan - Last Week Recap and Wednesday Trading Plan

📊 Market Sentiment: Cautiously Watchful

The market is cautiously watchful today, reflecting the recent volatility and key support breaches. The focus is particularly on 4778 and 4767-70 as major supports. Traders are vigilant of these levels for signs of continued bullish momentum or a deeper bearish shift.

📝 Recap: Volatility and Supports Tested

Yesterday witnessed a volatile trading day ending with a classic failed breakdown of the 4773ish morning low. Despite the noise, the market remained in the broad 4795-4838 range. Key supports 4816 and 4795-98 are less attractive for longs now, with attention shifting to 4778 and 4767-70 for today's bids.

🌜 The Markets Overnight

Asian Markets

Asian markets closed lower, with major indices reflecting a cautious sentiment among investors. The downturn can be attributed to a mix of regional economic data and geopolitical tensions that continue to influence market dynamics.

European Markets

European markets are also on a downward trajectory this morning. The decline comes amid concerns over inflationary pressures and the potential for continued policy tightening by the European Central Bank, which could dampen growth prospects in the region.

US Index Futures

US index futures are indicating a lower open, suggesting that Wall Street may follow the global trend. Investors are weighing the latest economic data and earnings reports, which could set the tone for trading sessions ahead.

Crude Oil

Crude oil prices have surged strongly, reflecting heightened geopolitical risks and supply concerns. The market is reacting to the latest developments in the Middle East and the potential impact on global oil supply chains.

US Dollar

The US dollar is showing a strong performance, buoyed by the risk-off sentiment driving investors towards the safety of the greenback. The dollar's strength is also being supported by expectations of a more hawkish Federal Reserve stance in response to persistent inflationary pressures.

Yields

Yield on government bonds are up significantly, as investors adjust their portfolios in anticipation of higher interest rates. The rise in yields reflects a market recalibration in the face of potential monetary policy shifts and inflation expectations.

Crypto

The crypto market is undergoing a pronounced downturn, with major cryptocurrencies like Bitcoin and Ethereum experiencing substantial losses. This decline may be attributed to a mix of elements, including institutional disinvestment and market skepticism.

🌏 Major Global Catalysts

• Global Economic Growth Forecasts:

  • J.P. Morgan: Predicts U.S. slowdown, avoiding recession.

  • Goldman Sachs: Foresees global economy outperforming expectations due to income growth, factored-in rate hikes, and manufacturing recovery.

  • Central banks might cut rates as a recession safeguard.

• Interest Rate Environment:

  • Federal Reserve held rates steady; potential cuts expected in 2024.

  • Anticipated cuts could influence borrowing, investing, and market dynamics.

• Inflation Trends:

  • Inflation cooling, yet core inflation remains above Fed's target.

  • Persistent inflation may lead to sustained higher rates, risking an earlier economic contraction.

• Market Performance and Outlook:

  • S&P 500 rose 24% in 2023; concerns of overbought conditions and market correction loom.

  • Analysts wary of potential disappointments in earnings and impact of geopolitical risks.

• Geopolitical Risks and Commodity Prices:

  • Conflicts in Ukraine, Middle East, and high energy prices pose financial stability risks.

  • These factors could slow global economic growth and affect commodity markets.

📷 Snapshot

• Daily Data Sentiment Analysis: EMA readings suggest a neutral to bearish sentiment.

• 4-Hour Data Sentiment Analysis: Bearish sentiment is indicated by EMA readings.

📉 Support Levels

Major supports for today include 4778, 4767-70, 4757, and down to 4655. The 4778 and 4767-70 zones are critical after being tested extensively, with traders wary of their reduced freshness.

📈 Resistance Levels

Resistance levels to watch are 4784, 4793, and up to 4908-10. Particular attention is on 4793 for a potential sell reaction if the market sees a sustained upside.

📝 Trading Plan

• Bull Case: Bulls aim to hold above 4778 and 4767-70, with 4793 a short-term target if we base build under it overnight.

• Bear Case: A failure of 4767 might signal a more substantial bearish move, with 4744/4736-38 the next focus for longs.

• Today's Strategy: Discipline and level-to-level trading are critical in the current choppy market. Watch 4778 and 4767-70 for early indications, with 4744 and 4736-38 as potential long zones if deeper dips occur.

Disclosure

This is not financial advice and is for informational purposes only. Always consult a professional financial advisor before making any trading decisions. Strategy and market sentiment are subject to change.