Momentum Monday...Relief!
Howard Lindzon
January 17, 2023
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Good morning...
Earnings season is upon us. Today Goldman Sachs is reporting 'earnings' which we know is silly because they sit around and scheme all quarter, every quarter. While Bitcoin has not hurt the banks, Apple has and will. Goldman is Apple's plaything in consumer banking and eventually will be the company the banks compete with for the easy money.
But enough about criminal organizations...today is Momentum Monday.
You can watch this weeks episode right here on YouTube. It is easy to subscribe and if you do every Sunday you will get an alert when we post the show to YouTube.
A couple charts below to bring home a few points Ivanhoff and I chatted about in today's show about the risk on moment markets are enjoying. JC has a good chart and explanation of the recent change in direction...
I would not be suprised to see the US dollar firm up a bit at least short term.
Back in October, I blogged about the financial media fawning over the STRONG US dollar as each publication had a headline similar to this from Bloomberg...
These magazine covers were literally the top for the US dollar.
Investing is not easy. Making snazzy, pithy magazine covers is!
Here are Ivanhoff’s thoughts:
There was a whole lot of buying in the market in the past week or so. The bulls have been on fire ever since January 6th, when the employment report showed a slowdown in wage growth. It’s an important metric for the Fed and it might signal a potential pivot down the road.
The price action is bullish so I’ve been trading mostly on the long side. I am skeptical that this is anything more than a bear market rally but I am not going to argue with the market. I’ll dance until the music is playing. You might be wondering why is the stock market rallying. Aren’t people still talking about the possibility of a recession later in the year? A big reason behind the equities rally is the weakness in the US Dollar. The bullish scenario is that China is reopening and stimulating its economy, Europe didn’t fall apart due to high energy prices, the Fed is likely to significantly slow down its rate increase and likely stop the raises soon, and the economy might get a soft landing – meaning very low growth instead of a recession.
So what’s the bearish scenario, you might be wondering? China’s reopening, Europe still keeping interest rates low, still low unemployment in the US despite massive layoffs, and the stock rally that we are currently experiencing can lead to sustained inflation or at least the perception of one. If nothing is broken in the economy and inflation is not back under 2%, the Fed has no reason to pivot. It is likely to remain hawkish longer which historically hasn’t been favorable to stock prices. We will worry about that when it matters which is when prices start to fall again.
In the meantime, the earnings season has just begun. Banks like JPMorgan, Bofa, and Citi beat estimates on Friday. Initially, they gapped down 3-4% on comments about a potential slowdown in the economy, but the dip was quickly bought. The market reaction is an indication of the current sentiment. Let’s see what Netflix and Goldman Sachs bring this week.
Here is this weeks Stocktwits momentum lists. Last year it was all energy...but to start 2023 it is a little bit of everything.
Have a great week.
Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.