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Looking ahead into March 2023 (DXY)In February, we saw the US Dollar Index (DXY) reject the 100.85 price area to climb strongly to the upside due to several key events 1) Federal Reserve hiked rates to 4.75%. Although the initial reaction was a big drop to test the low of 100.85, the comments accompanying the rate decision indicated that further rate increases could be expected as inflation has eased but remains elevated. 2) Surprising Non-Farm Payroll (NFP) A massive surprise to the market with a print of 517K (Forecast: 193K) this signaled that the US economy was still performing strongly, despite the ongoing interest rate increases. The DXY shot up to test the 103.75 price level over the next couple of days following the NFP release. 3) Elevated Consumer Price Index (CPI) Markets were widely anticipating that US inflation growth should have slowed down from 6.5% to 6.2%. However, the CPI data was released at 6.4%, which indicated a slight slowdown (just not as much as anticipated). This played to the previous narrative from the FOMC that while inflation was easing, it was still elevated. With an increased likelihood that the FOMC would continue with its interest rate hikes, the DXY climbed steadily to the upside, breaking the 103.75 level to climb steadily up to the 105.50 resistance level. Now as we head into March and the DXY is retracing from the 105.50 price level, where could prices head to? In the lead up to the major news events, the DXY could continue to retrace lower to retest the 104 price level and support area. 1) Will we see a repeat surprise on the NFP? It is probably unlikely that we'll get a massive surprise again for the NFP this month. However, any positive data release could see the DXY renew its climb to the upside. 2) Focus is on the CPI As indicated above, February's CPI was released at 6.4% which was higher than expected. A similar release this month would pretty much cement the Federal Reserve's decision regarding a rate hike, bringing further upside to the DXY. 3) Federal Funds Rate In the recently released meeting minutes, it was highlighted that while all members supported a 25bps rate hike, some would have supported a decision to raise rates by 50bps. This shows a level of hawkishness within the FOMC, which could be crucial in the decision this month. Employment and CPI data would be the deciding factor between a 25 or 50bps rate hike. However, remember that the terminal rate is 5.25% and with rates at 4.75%, we are very close!! We'll have to pay attention to comments regarding a shift in the terminal rates and increased speculation about a pivot to come from the FOMC. Based on the points discussed above, I am anticipating overall further upside for the DXY, but Price could first retest the 103.75 to 104 support area. If the support level holds, this could be a good base for price to rebound and trade back toward the 105.50 resistance area. Beyond that, the next resistance level is at 107. Alternatively, if the price breaks strongly below 104, then the next support level at 102.60 would come into play.
TVC:DXYLong
by JinDao_Tai
6
A Leading Indicator for US EconomyCME: E-Mini S&P Retail Select Industry Futures ( CME:SXR1! ) Last Friday, the U.S. Bureau of Economic Analysis (BEA) released the latest Personal Income and Outlays Report. Personal income gained $131.1 billion (0.6%). Disposable personal income (DPI) added $387.4 billion (2.0%) and personal consumption expenditures (PCE) grew $312.5 billion (1.8%) for the month of January. Data shows that U.S consumer is resilient. Wage gains and inflation pushed spending growth to a two-year high. In the past decade, PCE gained 60% to $18 trillion. More recently, it surged 50% in the three years since the start of the COVID pandemic. The hotter-than-expected data indicated that US economy was nowhere near a recession. Additional data from the Bureau of Labor Statistics showed robust job growth in January and the lowest unemployment rate in half a century. Wary of bigger and longer-lasting Fed rate hikes on the way, all major US stock indexes turned negative in the month of February. As of last Friday, Dow Jones Industrial Average was down 3.8% month-to-date, while S&P 500, Nasdaq 100 and Russell 2000 recorded -2.6%, -0.8%, and -2.4%, respectively. Consumer Spending Outlook Consumer spending accounts for over two-thirds of U.S. economic activity. While PCE shot up more than expected last month, it is a lagging indicator and only confirms what happened in the past. Could U.S. consumers spend out of the peril of a recession? Retailer stock prices are forward-looking and reflect collective market consensus of how much free cash flow the retailers could earn, discounted by their cost of capital. There are indications that the shopping spree may be ending soon. Last week, Walmart said its U.S. consumer spending started the year strong, but that it expects households to back off through the year, producing weak fiscal-year U.S. sales growth of 2% to 2.5%. Home Depot said consumer spending is holding up, but that it expects a flat sales-growth year overall, with declining profits. This is a troubling signal. Retailers are supposed to benefit the most from growing consumer spending, but their stock prices have been losing steam in February. As of Friday, Home Depot ( NYSE:HD ) has a year-to-date return of -6.1%, while Walmart ( NYSE:WMT ) is mostly flat (-0.8%). Other retailers with declining stock prices include Dollar General ( NYSE:DG ), -13.2%; Walgreens Boots Alliance ( NASDAQ:WBA ), -3.7%, and Casey’s General Stores ( NASDAQ:CASY ), -3.8%. Walmart reported Q4 and FY2023 (ending January) revenue growth of 7.3% and 6.7%, respectively. Its operating income fell 5.5% and 21.9%, for the same periods. Digging deeper into Walmart’s earnings release, I find that it keeps sales growing by expanding its grocery business, but those sales are less profitable than general merchandise categories, where consumer spending is leveling off or shrinking. In theory, the growth of the biggest US retailer could be attributed to one of the following: • General growth of consumer spending (economic expansion); • Good business strategy and market share growth (economic trend unknown); • Consumer downgrades spending from department stores (economic downturn); • Price increases (inflation). My interpretation: 1. Consumers tend to keep up with the same living standards. When inflation hits, they maintain the same purchasing habit. Higher price drives spending growth. 2. As inflation deepens, consumers get fewer merchandises with the same budget. 3. Consumers downgrade purchases from department stores to discount stores, and switch to generic products from brand-named products. 4. In a downturn, higher-ended stores get hit first, and discount stores get hit last. While Walmart manages to grow revenue by doubling down on grocery and online businesses, the weakness in general merchandizes uncovers the real trend of consumer spending leveling off. We may disagree on whether a recession will be coming, however, data from Walmart and Home Depot indicates that the U.S. retail sector is in trouble. S&P Retail Select Industry Index S&P Retail Select Industry Index may be a better benchmark for the U.S. retail sector, comparing to the lagging government data and company specified performance metrics. The index comprises of stocks in the S&P Total Market Index that are classified in the GICS retail sub-industry. Total-10 constituents by index weight are: • Carvana (CVNA) • Wayfair (W) • Sally Beauty (SBH) • Stitch Fix (SFIX) • Boot Barn (BARN) • Children’s Place (PLCE) • Qurate Retail (QRTEA) • Leslie (LESL) • EVgo (EV) • Abercrombie & Fitch (ANF) One-year chart above shows that CME E-Mini S&P Retail Select Industry (SXR) Futures tracks the trend of S&P 500 but illustrates higher volatility in the first two months of 2023. Each SXR contract is notional at $10 times the index. At Friday settlement price of 7004, one March contract (SXRH3) is valued at $70,040. Each futures contract (long and short) requires an initial margin of $5,700. When the underlying index moves 1 point, trader’s futures account would gain or lose $10. At present, I do not foresee a decisive trend of the S&P 500. It could trend up, go down or move sideways depending on how the Fed rate hikes, inflation, unemployment and geopolitical crises play out. However, this does not prevent me from expressing a bearish view on the US retail sector. Establishing a SXR short futures position would be appropriate in the negative outlook. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
SShort
by JimHuangChicago
Bitcoin Looks like its gonna pull back, BTC had a nice run!Bitcoin looking to pull back.... inverse Cup and Handle. Measured move down to $22K area... <---- CAUTION here! Would like to see it bounce off the $23k support or if it can't hold there $22K of course... CPI came in better for Risk On but Unemployment came in lower to conflict the CPI data... Looks like Bears are winning the battle so far! More Market Moving Data tomorrow, PCE and New Home Sales. Expect Volatility. Will be watching.... Good Luck Out There!
by BuddaCo_LifeStyle
EURUSD EURUSD It is so clean! These are my favourite kind of set ups, it has been a choppy week but you wait till next week V day! We in for big treat CPI For US! Now Jobs have been great all is well in US it seems, lets see if this continues! Technically if we go below 50 EMA expect 200 EMA as your TP - I am short it's a positive swap as well - that's another great thing about holding euro short. Highs: 1.08180 Lows: 1.06680 Break of lows: 1.05470 target areas Break of highs: 1.09190 target areas It's really as simple as that, there's two ways you can play this put a small % position in and let it run, add alerts in and orders! Whatever suits your trading plan. Have a great weekend Trade Journal - There will be a FX week ahead video coming out this week!! Stay tuned.
by Trade_Journal
$USDJPY: Dollar reversal?I suspect we are seeing a large scale reversal in the dollar, which will be further confirmed if CPI favors renewed hawkishness surpassing current consensus estimates (consensus was already shaken by NFP yesterday, and would be further shocked if CPI allows Powell to keep hiking for longer than expected, or even do larger hikes as well). The BOJ governor change is looming as well, and with it the retirement of YCC apparently (yield curve controls). Overall, a decent trade if you need to hedge some equity risk in your portfolio or if you are an avid Forex trader already. Best of luck! Cheers, Ivan Labrie.
Long
by IvanLabrie
2
Nasdaq Bullish Entry - S&P500 has broken higher, which is great for the broader markets - DJIA is up 2.57% already in 2023, if January closes higher, that bodes well for the rest of the year - FTSE100 is racing ahead of everyone and everything that I follow, apart from the DAX(Ger40), mostly due to the weighting of the index towards Oil majors - DAX is up >7% - VIX is trading near April 2022 lows, now volatility or fear in the markets according to this asset - US dollar is getting crushed - Bitcoin is pushing back towards 20k All risk indicators are pointing to a push higher in equities as the headline US CPI print today came in as expected and lower than the previous month. Core CPI notched up 0.1% so it isn't crystal clear that inflation is coming down due to the Fed's monetary policy. We also have a weakening US dollar as traders move into the safety of the US Treasuries, which in turn drops the yield of the 10-year note. US10Y is about to test the December 2022 low, and a close below would signal further downside potential. The eurodollar curve is massively inverted as are the US yield curves, signaling that the larger money markets are expecting something is up and that the Fed will have to change policy sooner rather than later. The US has a new speaker and part of the concessions made was along the lines of not lifting the debt ceiling. This could have negative consequences before the new fiscal year starts in October, but is more likely to be a problem in Biden's final year, should we not get a bigger Federal Budget spending program. For now, inflation is waning, which is obviously good news for any asset that was suffering under the rate hike cycle. eg. risk assets like Bitcoin and Nasdaq. Levels on the Nasdaq I am watching include: TP2 = 12570 TP1 = 12221 Resistance at 11605
 With a hard stop at 11080
ULong
by Macrobriefing
USDCAD 3H: 21/02/2023: Short opportunity Daily TA: Well, you can see all the information on the chart. If you have questions feel free to ask. 💥💥💥Important note: At first I should mention that it's not investment advice then as you know, today's CPI for Canada will be published so it's a high-risk trade, and as always we need a low time frame confirmation. Last but not least, if you look at daily TA you can see price can move higher and then fall. So be aware!💥💥💥
Short
by VahidTradingCR
5
XAUUSD Potential Forecast | Thursday 16th February 2023Hi guys, we are back on the charts again! Today I will be talking about GOLD and upon the recent fundamental backdrop that has taken place. Fundamental context 1. US data has came out very resilient and strong 2. Last month labour market and NFP data proves to be extremely resilient 3. CPI came out hot, signifying inflation has a longer runway for it to cool down 4. Yesterday's retail sales data m/m came out at a whopping 3.0% which is much better compared to forecast 5. Everything spells that the economy in the US is resilient and the Fed might need to increase the terminal rate or take on a more hawkish stance at the next FOMC meeting. Technical context 1. GOLD is in a bearish trend 2. Lower lows and highs are being formed 3. Point of target at 1823 odds for price to come lower to form a yearly lower wick 4. Anticipating for price to continue lower 5. Will only be looking for longs at our stipulated area (blue zone) Gold has the potential to continue bearish. Thanks alot for tuning in. Regards, Chern Yu
OANDA:XAUUSDShort
by Jon_Jones_Junior
5
SPX: Watch These Stocks to CASH IN on EGGS 🥚Hi Traders, Investors and Speculators of the Charts 📈📉 The SPX Chart is looking bullish as we see another very clear pattern form - the higher lows. Previously, this has been a sign that we can expect more upside movement from the stock market. But not all stocks are equal during this time... Have you bought some eggs recently? Forget high gas prices. If you've tried to buy eggs lately, you've paid up or done without. But some investors are finding a way to cash in. Shares of one of the largest publicly traded egg producers, Cal-Maine (CALM) is up 39% in past 12 months. That's impressive as while the S&P 500 was down more than 7% during that time. Egg prices are on fire — even more so than oil. The price of a dozen grade-A eggs was $4.25 nationally in December 2022, says the Bureau of Labor Statistics, up 138% from the same period a year ago. In some places, like California, eggs sell for even more. Egg prices are becoming the new face for runaway inflation. Millions of hens died last year in an outbreak of disease. That sharply cut the supply of eggs. Cal-Maine is even considered a meme stock now, landing in the Roundhill Meme ETF (MEME). The avian flu's effect on supply will ease, analysts say. But investors who look closely will see that corporate profits at egg companies are booming, too. And that's not seen easing anytime soon. "Energy prices fell 4.5% in December on a 9.4% decline in gasoline prices. Food prices rose 0.3%, with food at home up 0.2% and food away from home up 0.4%, " said Bill Adams, chief economist for Comerica Bank. "Egg prices rose 11.1% on the month, pushed higher by an avian flu outbreak that has hurt supply." So when you're ready to cough up the big bucks to buy eggs, at least know there's a way to profit, too. HEY👀 Interested in Bitcoin? Here's my take for the SHORT TERM : _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck
SP:SPXLong
by CryptoCheck-
35
AUDUSD:Potential Breakout due to strong USD envrionmentHey Traders, based on the last strong NFP numbers that were out of expectations with 517,000 new jobs created in January, retail sales smashing expectations of 1.9% with 3%, CPI and other strong USD data we can notice that the market is pricing more rate hikes, and we expect the USD to continue outperforming until the next fed decision on March that will clarify more the USD path. in case of a breakout on AUDUSD chart i would monitor a retrace around 0.685 zone. i would also like to give a risk management advice to traders, i personally risk between 0.5% to 2% per trade so even if i'm in the wrong path that would take me a bunch of consecutive losing trades to get my account marginated which is too far. so for example if you risk 1% per trade that will take you more than a hundred consecutive losing trades to lose your account. but if you risk 10 times the recommended amount for example a 20% risk per trade that means 4-5 consecutive losing trades will knock your account out from the market. Please feel free to ask me questions regarding fundamentals and technicals in the comment section! Trade safe, Joe. source of USD data: www.forexfactory.com
Short
by JoeChampion
26
BTC (1h) vs CPI and PPI announcementsBTC price action on the days of #CPI and #PPI announcements for Oct 2022 through Jan 2023. Yellow = #CPI announce dates Pink = #PPI announce dates Oct announce (for Sept) #CPI = BTC up #PPI = BTC up Nov announce (for Oct) #CPI = BTC up #PPI = BTC up Dec announce (for Nov) #CPI = BTC up #PPI = BTC down Jan announce (for Dec) #CPI = BTC up #PPI = BTC down *** Notes December PPI was announced before CPI, probably due to holiday season for gov . Used hashtags to prevent TV from auto linking #CPI and #PPI to charts for indexes/stocks with same ticker
COINBASE:BTCUSD
by CryptoKujira
US100 Price Breakout with Strong Support, But All Eyes on CPIThe US100, also known as the Nasdaq 100 index, has been making some significant moves recently that are worth keeping an eye on for traders. Specifically, there have been a few key levels that have been broken which are often seen as indicators of price momentum and potential future price movements. One of these key levels is the 4-hour trendline. Trendlines are often used to help identify potential areas of support or resistance for a given security or index. When prices break above or below a trendline, it can signal a potential shift in price momentum. In this case, the US100 broke above a key 4-hour trendline, which is a bullish signal that suggests prices may continue to rise in the short term. In addition to the trendline, the US100 also recently broke through a strong resistance zone. Resistance zones are areas where prices have struggled to break through in the past. When prices do finally break through a resistance zone, it can suggest a shift in market sentiment and a potential increase in buying pressure. In this case, the US100 broke through a key resistance zone and then retested that area as support, which is another bullish signal for traders. However, despite these bullish signals on the charts, there is an important upcoming event that may have a significant impact on future price movements for the US100. This event is the release of US CPI (Consumer Price Index) data, which is scheduled for 5:30am PST. CPI is a measure of inflation, which is one of the most important factors that the US Federal Reserve takes into account when making decisions about interest rates and monetary policy. Inflation that is too high can be a sign of an overheating economy, which can lead to increased borrowing costs and reduced economic growth. Therefore, the Fed is constantly monitoring inflation levels and using policy tools to try to keep inflation within a certain range. The upcoming CPI release is expected to be a major market-moving event for the US100, as well as for other markets such as currencies and bonds. If the CPI data comes in below expectations (a "miss"), this may suggest that inflation is not as much of a concern as previously thought, which could lead to increased buying pressure for the US100. On the other hand, if the CPI data comes in above expectations (a "beat"), this may suggest that inflation is a bigger concern than previously thought, which could lead to increased selling pressure for the US100. In either case, it is important to note that the Fed's next moves will likely be shaped by the CPI data. If inflation continues to be a concern, the Fed may take steps to raise interest rates or reduce asset purchases in order to try to curb inflation. This could have a significant impact on the US100 and other markets in the short and long term. In summary, while the US100 has recently shown some bullish signals on the charts, traders should be cautious and pay close attention to the upcoming CPI release. The data from this release is likely to shape the Fed's next moves and could have a significant impact on future price movements for the US100 and other markets.
U
by natron
2
GOLD SHORT TERM INTRADAY IDEAIntraday Analysis - ( 16 FEB 2023 ) Strong retail sales did not hold any weight yesterday which was not expected. Overall dollar has made new intraday highs and is in a retest for better buy side liquidity for further upside to targeted region of 105.5. Gold is in a retest as seen to better sell zones as marked out based off FM key levels. There will be PPI tonight and if it comes out as per forecast, we would see another leg down on gold. Overall my bias for gold stands with it being bearish and dollar being dominant. HRHR SELLS AT 1850-1852 MRMR SELLS AT 1836 SAFEST SELLS BELOW 1830 TARGET LOOKING AT 1820 POSSIBLY EVEN 1810s region
OANDA:XAUUSD
by CJ_GOLDPIPS
2
Disinflation – Fact or Fiction?CME: S&P Technology Select Sector ( CME_MINI:XAK1! ) The U.S. consumer price index (CPI) rose 0.5% in January and +6.4% year over year, reported the Bureau of Labor Statistics (BLS) on Tuesday. Excluding food and energy, Core CPI increased 0.4% monthly and 5.6% yearly. Economists surveyed by Dow Jones expected the headline CPI to grow 0.4% monthly and 6.2% yearly. Expectations for core CPI changes were 0.3% and 5.5%, respectively. On Tuesday, US stocks fell at open in response to the hotter-than-expected CPI report. But major indexes recovered somewhat at the close of the day. The Dow Jones Industrial Average slipped 156 points, or -0.46%, after initially losing over 300 points. The S&P 500 was flat at 4,136 (-0.03%), and the Nasdaq 100 gained 68 points to 11,960. US Treasury yields ticked higher. 2-year yield went up 94 ticks to 4.628%, while 10-year yield lifted 36 points to 3.755%. Bond investors widely expected the Federal Reserve to raise rates by 25 basis points to the 4.75%-5.00% range in March. Mega Trend in US Inflation While we usually focus on the percentage changes in inflation, CPI data are constructed as indexes, each using 1982-84 price data as a baseline at 100. January CPI reading of 299.170 is 0.8% above December of 296.797. It is up 6.4% from 281.148 in January 2022 (Data in this section is from Table 1 in the January CPI release). Interpretation: Today, the average price of goods and services in the U.S. is about 3 times as high as the price level from nearly four decades ago. This translates into a compound annual growth rate (CAGR) of 2.93% for the past 38 years. Insights: Long-run inflation rate is almost one percentage point higher than the Fed policy target. With less restrictive monetary policy on one hand, but more expansive fiscal policy on the other, the 2% goal appears to be far fetching. Barring a major recession, I expect the US inflation to stay above its 3% historical average in the foreseeable future. In the past four decades, cost of many consumer goods tripled in price, including Food (+219%), Energy (+183) and Core CPI (+202%). But there are noticeable outliners: • Tobacco and smoking products, +1289% • Motor vehicle insurance, +559% • Medical care services, +502% • New vehicle, +77% • Apparel, +28% January CPI Readings Before diving into the data, we should know that when BLS releases CPI data in February, it readjusts the weighting to account for the latest changes in the cost of living. For 2023, CPI weights are updated annually based on a single calendar year of consumer expenditure data. This reflects a change from prior practice of updating weights biennially. The changes of weighting by product and service category in the January report: CPI Category Old Weight New Weight Change Housing 46.40% 44.40% +2.0% Entertainment 5.70% 5.40% +0.3% Food 14.50% 14.40% +0.1% Clothing 2.50% 2.50% 0.0% Other 2.60% 2.70% -0.1% Medical 7.70% 8.10% -0.4% Education 5.20% 5.80% -0.6% Transport 15.30% 16.70% -1.4% Rising shelter costs accounted for nearly half the monthly price increase. The component accounts for more than one-third of the index and rose 0.7% on the month and was up 7.9% from a year ago. Energy also was a significant contributor, up 2% month over month (M/M) and 8.7% annually, while food costs rose 0.5% M/M and 10.1% annually. Food: Up 0.5% M/M in January from 0.1% in December. Annualized inflation is 10.1%. Energy: Up 2.0% M/M in January from -3.1% in December. Annualized gain is 8.7%, of which, gasoline (+1.9%), diesel (+27.7%), electricity (+11.9%), and natural gas (+26.7%). Shelter: Up 0.7% M/M in January from 0.8% in December. Up 7.9% Y/Y. Transportation: Up 0.9% M/M in January from 0.6% in December. Up 14.6% Y/Y. While the headline CPI ticks down from 6.5% to 6.4% on an annualized basis, January price increase of 0.5% is significantly higher than the December reading of +0.1%. Overall inflation level is undoubtedly on the way down, but price increases from food, shelter and transportation are very sticky and don’t normally go down once moving up. Is disinflation a fact or fiction? I think we are somewhere in between, in the Twilight Zone. The US Stock Market Narratives In the past three years, the stock market narratives have changed several times: • After the initial pandemic hit in March 2020, US stocks staged a very impressive bull run. Growth drivers were US companies innovating with new products and services and catering for “work-from-home” employees and “play-at-home” consumers. • 2022 started with a major geopolitical crisis, pushing stocks sharply down. Fed rate hikes from March 2022 dragged major stock indexes into bear market territory. • Since inflation peaked in July and the Core CPI reading confirmed it in October 2022, US stock market began to rebound, centering on the notion of “Fed Pivot”. More recently, investors are caught by conflicting economic data. • Unemployment at 50-year low vs. Big Techs pushing rounds of massive lay-offs; • Lower inflation rate vs. “Eggflation” and “Shrinkflation” that consumers experience; • Whether the Fed is hawkish or dovish depends on the next dataset. While investors try to make sense of all these, stock market moves sideways. The 30-day returns for Dow and the S&P are -0.83% and +3.20%, respectively. Are we at the beginning of a new bull market? Or is it a bear relief, a temporary rebound from a bear market? To make an assessment, you need to know how many more rate hikes could be (pick a number between 1 and 4), and what the terminal rate would be (5.0%, 5.25%, 5.5%, 5.75%, or 6.0%)? I have no idea. When uncertainty becomes the dominant narrative, it’s time to explore opportunities that promise more certainties. AI - New Engine for Economic Growth One visible exception is Nasdaq 100, which gained 8.9% in the past month. S&P Technology Select Sector Index (XAK) had an even higher return at 9.5%. Most Big Tech companies were vastly overstaffed during the pandemic years. With stock prices cutting by two thirds or more, they are forced to live within their cash flow. Cutting off unprofitable divisions and laying off redundant staff help them survive in leaner years. This is certainly very painful for the tech workers and their families. To investors, Big Tech may have transformed itself from lofty Growth Stock to reasonably priced Value Stock. For Nasdaq 100, its trailing 12-month price/earnings ratio was 34 one year ago. It is 23.63 as of February 10th, according to Birinyi Associates. Technological breakthroughs have always powered the US economy to growth for the long run. Personal computers in the 1980s, Internet for the 1990s, smart phones and mobile internet in the 2000s, and electric vehicles in the 2010s, just to name a few. In my opinion, Artificial Intelligence will be our economic growth engine in 2023. While AI is nothing new, the viral success of ChatGPT has sensationally changed the game. Its popularity among mainstream consumers helps form strong support for all publicly traded companies in the AI sector, not just for OpenAI and its parent Microsoft. While writing this report, I asked ChatGPT one question: “Please show me the top-10 publicly traded stocks in the AI field.” Below is his/her/its answer: 1. Alphabet Inc. (GOOGL) - Google's parent company, which has been investing heavily in AI technology and applications. 2. NVIDIA Corporation (NVDA) - A leading company in graphics processing units (GPUs), which are commonly used in AI training and inferencing. 3. International Business Machines Corporation (IBM) - A company that has been developing AI technologies for several years and has a range of products and services, including the Watson AI platform. 4. Microsoft Corporation (MSFT) - Microsoft has invested heavily in AI technologies, and its Azure platform provides a range of AI tools and services. 5. Amazon.com, Inc. (AMZN) - Amazon's AI capabilities are used in a variety of products and services, including the Alexa voice assistant and its recommendation algorithms. 6. Baidu, Inc. (BIDU) - A Chinese company that has been investing heavily in AI technologies, including natural language processing and autonomous driving. 7. Alibaba Group Holding Limited (BABA) - A Chinese company that has also invested heavily in AI technologies and has been developing AI applications for e-commerce, logistics, and finance. 8. Intel Corporation (INTC) - A company that has been developing hardware specifically for AI, including custom processors and FPGA chips. 9. Twilio Inc. (TWLO) - A company that provides cloud-based communication services and has been investing in AI technologies to improve its services. 10. Advanced Micro Devices, Inc. (AMD) - A company that develops CPUs and GPUs for AI applications and has been investing heavily in machine learning and other AI technologies. This is very impressive. ChatGPT not only gives me a list of the companies, but also highlights each company’s involvement in the AI field. Since ChatGPT doesn’t have data beyond 2021, we come back to our trusty TradingView to pull out 1-year return charts. What a brutal year! Only Microsoft manages to gain 5.3%. The rest in the list had negative returns from -10% to 40%. Twilio is the loss leader, yielding -66.8% in the last 12 months. This drives home the two major risks in new technology investing: Firstly, at an early stage, you have no idea which technology will win out at the end. Is it direct current (DC) or alternative current (AC)? Airship or Aircraft? VHS or Betamax? Cable TV or satellite TV? And TDMA or GSM for cellular signal? Secondly, you do not know which company will become a leader in a winner-take-all market. If you go back in time and invest in the new automobile industry in 1908, you have a 99% chance of losing money, unless you luckily picked Ford, General Motors, or Chrysler out of the 253 publicly traded automakers. Likewise, if you invested in mobile phone companies in early 2000, you likely picked Motorola, Blackberry, Ericsson, or Nokia. However, when an outsider Apple launch a breakthrough product, iPhone 1 in 2007, it knocked out all leading cellphone markers and became the ultimate winner. Right now, I predict that most electric vehicle makers will go out of business in five years, except for Tesla, and maybe BYD. The Case for S&P Technology Select Sector Index Consistently picking winners in emerging technologies is extremely difficult. Even the smartest stock picker could not beat the market. Take Cathy Wood’s Ark Innovation ETF (ARKK) as an example, its cumulative returns comparing to the Nasdaq 100 were: • 1-year: -42.8% vs. -12.4%; • 5-year: -2.1% vs. +85.1%; • Since Inception (8-year): +100.3% vs. +203.5%. Diversification is a very powerful concept in investing, notably in times of uncertainty. Concentrating on stock picking, many active managers tend to cloud objective assessment with their own conviction and lose sight of potential market leaders amid emerging mega trends. Passive investment via index futures focusing on the high-tech sector allows us to express our conviction and capture emerging trends. XAK is one of the 11 sector indexes in the S&P 500. Its top holdings are Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Visa (V), Mastercard (MA), Broadcom (AVGO), Cisco (CSCO), and Adobe (ADBE). My research shows that S&P Technology Select Sector (XAK) outperformed many Big Tech stocks and ETFs in both short-term and long-term. According to Fact Sheet published by S&P, as of January 31st, the annualized historical returns are -15.22% (1Y), 13.82% (3Y), 16.22% (5Y) and 18.48% (10Y). Total returns since inception are 6,425.9%. You may invest in one of the technology sector ETFs, such as SPDR XLK, iShare IYW, and Vanguard VGT. But CME E-Mini S&P Technology Select Sector Index Futures (XAK) has distinguished features over ETFs. Firstly, XAK has five quarterly contracts to choose from: March, June, September, December and March 2024. This allows us to evaluate strategies focusing on expected future value of the index, up to 1 year ahead. Secondly, you could place either Long or Short position, allowing both bullish and bearish strategies to implement. Thirdly, initial margin of placing 1 contract is approximately 35% of the notional value. This built-in leverage could enhance the returns if market moves in the right direction. Finally, by holding a long position on the quarterly futures contract and rolling it each quarter, investors could replicate the strategy of holding the stocks or the ETFs. Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trade set-ups and express my market views. If you have futures in your trading portfolio, check out on CME Group data plans in TradingView that suit your trading needs www.tradingview.com
CME_MINI:XAK1!Long
by JimHuangChicago
3
US CPI Data Release PreparationTraders Watch Out! The DXY is likely to see significant volatility with the US CPI for January due today (9:30pm GMT+8), with the current forecast expecting data to be released at 6.2% (Previous: 6.5%). A slowdown of inflation growth could reinforce the Fed's view of disinflation and could lead to the DXY trading significantly lower. This is because investors would increase on bets that the Federal Reserve would be less likely to continue with its hawkish comments and over-the-top interest rate hikes. With the DXY currently trading along the 103.20 price level, weakness in the DXY could see the price slide lower toward the key support level of 102.650. However, before the retest of the 102.65 price level, the price would have to first break through the round number support of 103. However, it would be foolish to rule out the possibility that the data surprises markets, with a higher-than-expected release. (Considering that energy prices traded higher in January) Trade with Caution
TVC:DXYShort
by JinDao_Tai
1