How to trade this week - Sunday Brief

January 07, 2024

Afternoon team.

Coming at you again with another market report before the trading week ahead.

We have a big week of news this week with CPI, unemployment claims, and PPI so plenty of volatility lined up.

Let’s go over how we’ll be looking to trade…

Impact Snapshot

  • U.S. CPI Inflation - Thursday

  • Unemployment Claims - Thursday

  • PPI Inflation - Friday

  • Earnings - Friday 

Market Evaluation

After nine-straight weeks of gains, the S&P 500 had a negative week to start 2024. 

The index was eyeing record highs last week amid easing inflation data that helped curb fears of another rate increase by the Federal Reserve's policy-setting committee.

Reports from some of the nation's largest financial institutions and a crucial reading on inflation will greet investors in the week ahead.

A surprise December jobs report showed the US labor market ended 2023 on largely solid footing. The unemployment rate held steady at 3.7%, a historically low level.

Economic data will be on the lighter side early next week, followed up with the all important CPI inflation on Thursday and PPI inflation on Friday.

Fourth quarter earnings season will kick off with heavy hitters. JPMorgan, Citi, Wells Fargo, Bank of America, and BlackRock are all set to report on Friday morning.

Markets Breakdown

Market understanding begins by looking at a broader number of things rather than just price itself.

Right at the begging of the year, we’ve seen downside continuation which has tested the extremes of the accumulation zone.

Profit taking is expected.

Ask yourself this. Who wants to take profits late in the year? If they take profits late in the year they have to pay taxes on them for last year. 

Once the new year rolls over, you can take profits because now you’ve got all year.

This downside continuation right at the start of the year was very likely a consequence of that.

Many holders of these upside positions wanted to take profits while at the same time not wanting to subject themselves for the tax consequences of 2023.

The market is contained within the multi-day balance and meaningful change in the market will need to see a hold below our key pivot, the FOMC lows.

As long as we can contain activity and build value inside the multi-day balance, we can target the opposite extremes of the distribution on the upside.

Thursday and Friday will offer catalyst for key directional movement to keep an eye on.

The immediate focus on Monday’s open will be to clear the poor structure at 4760 and print an excess at least a few ticks higher.

ES

Key points of reference for next week:

  • Upside Levels: 4776/4792/4816

  • Downside Levels: 4696/4678/4647

That’s all we got.

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We’ll see you again on Tuesday!

-The QuantVue Team