🛍️Inflation Reports:“U.S. consumer prices increased more than expected in December, with Americans paying more for shelter and healthcare, suggesting it was probably too early for the Federal Reserve to start cutting interest rates.” (Reuters)
🏦Big Bank Earnings:“A number of big banks reported Friday morning including JPMorgan Chase (JPM), Citigroup (C), Bank of America (BAC), and Wells Fargo (WFC). So what could their results reveal about earnings from Goldman Sachs and Morgan Stanley, both of which report on Tuesday January 16.” (Yahoo Finance)
😤Nat Gas Futures Take Off: “Natural gas futures settle higher in another volatile session, supported by a larger-than-expected draw on inventories in the week through Jan. 5… The EIA reports withdrawals of 140 billion cubic feet last week, versus expectations of a 117-Bcf draw." (Barron's)
🤑More Bank Earnings: “Following a disappointing end of the week for some financial institutions, more national and regional banks will report earnings this week, starting with Morgan Stanley (MS) and Goldman Sachs (GS) when markets reopen on Tuesday. Goldman is looking to improve on a quarter in which its profits shrank by a third, while Morgan Stanley also has been dealing with smaller profits as mergers and initial public offerings slow." (Investopedia)
🌎World Economic Forum Meeting: "The World Economic Forum's Annual Meeting takes place in Davos from 15-19 January 2024… Here's a snapshot of everything you need to know about Day 1 of Davos 2024." (World Economic Forum)
🏠Big Week For Housing Data: “A sharp drop in mortgage interest rates in December may have kickstarted this year’s spring housing market early. Rates are about a full percentage point lower than they were in October, and consumers expect they will fall even more.” (CNBC)
STOCK INDEX FUTURES
The market bulls survived last week's CPI and PPI release and financial sector corporate earnings.
Heading into the Q4 earnings season, consensus EPS estimates have been cut by 6% since September vs. a typical 4% reduction in estimates. However, earnings breadth, which is the total number of companies with positive EPS growth, is expected to improve for the third straight quarter.
The macro picture is a lot more troubling now than it was 12 months ago, and the year-end rally we saw in December likely pulled some potential gains from 2024 into 2023.
Going into 2024, the predominant view still leans bearish, as reflected by net futures positioning data on the S&P 500 that shows 65% of futures contracts are negative or short. However, negative positioning does not always translate to downside price action.
NATURAL GAS FUTURES
February futures are +41% in a month.
Weather forecasts keep getting colder. The nat gas report for Jan.19 is now forecast to show the largest inventory draw in 3 years.
The following week also predicts cold temperatures—the current futures price curve bottoms in April at $2.34. NG bottomed last April at 2.00, but it could easily go there again. That's an 8% downside. Or it could easily go to $4.00 with some cold weather. That’s 70% upside.
When prices are this low in NG, traders should change their primary mental model from the odds of the next move’s direction to the potential sizes of the moves. That’s because the payoff asymmetry is now enormous.
Every Friday afternoon, Topstep Performance Coach John Hoagland fires up his charts and identifies the trends and “areas of importance” futures traders should look out for in the coming week. Read on to see what John’s keeping his eye on this week!
When performing technical analysis, always keep time and market structure in context. What looks good on one timeframe, might not look good on another. Trade what you see.
Jay C.~
NatGas has been one of my favorite trades of the year. Already up ~30%, it’s provided great opportunities to join the trend on shorter timeframes. We are approaching a supply area on the daily chart that may slow the momentum, but I’ll be keeping this on my watchlist.
Brett G.~
Have your trade plan before you enter a trade and follow through with it. Evaluate after the trade is complete and adjust your strategy going forward accordingly.
Dakota~
You can't take every opportunity, but understanding which opportunity to take and which one to pass is risk management!
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