Closing changes on the day:

• S&P 500 up 0.2%
• DJIA +0.1%
• Russell 2000 -0.2%
• Nasdaq Comp +0.1%
• Toronto TSX Comp +0.2%

Closing changes on the week:

• S&P 500 down 1.5%
• DJIA -0.6%
• Russell 2000 -3.6%
• Nasdaq Comp -3.25%
• Toronto TSX Comp -0.3%

Coming into this week, the S&P 500 and Nasdaq had rallied for nine straight weeks in a move that highlights the power of the Fed pivot. Some profit taking was probably delayed by the turn of the calendar but it arrived this week. Is there more to come? I could see the argument for that, especially because Fed funds have repriced rate cuts down to 137 bps.

For next week though, the big release will be December CPI. A soft number puts a March cut right back into play.

This article was written by Adam Button at www.forexlive.com.

• Consumer demand remains healthy, though slowing
• Labor market reacceleration at this point seems unlikely
• There is more uncertainty around the path of inflation given that progress over last six months has been so reliant on goods
• Companies still trying to raise prices; need to see how consumers and competitors react
• First quarter will be important given that businesses tend to mark up at the start of the year
• US still at a point where inflation is above target and employment is near max
• Labor market is ’normalizing nicely‘
• No problem ‚toggling‘ rate to more normal levels as you build confidence inflation is falling

I think there is some real insight in these comments. The ‚toggling‘ idea is like the Fed taking out insurance and moving down to around 4.00% if inflation stays low. The comment about Q1 pricing is an important one too, given how strong prices rose in Jan/Feb of last year.

This article was written by Adam Button at www.forexlive.com.

Maybe it was too much to expect a strong rebound on a soft ISM services number.

In the bigger picture, stocks are still on a nine-week winning streak, so that kind overbought momentum isn’t going to be cleaned up by four days of selling. That doesn’t necessarily mean the market needs to tank from here but we might need to see a dovish validation from the Fed to get there and maybe we track a bit lower in the meantime.

This article was written by Adam Button at www.forexlive.com.

Yesterday, the Dow Jones remained on the back foot
as the correction that began last week seems to have more room to go. As of
now, the data has been overall positive with the US ISM Manufacturing PMI beating
expectations and US Job Openings missing
forecasts. Moreover, yesterday we got a beat in the US ADP and US Jobless Claims data. If
the data remains positive, we can expect the market to bounce back once the
froth from the aggressive rate cuts expectations gets unwound. Today, is an
important day as we get the release of the US NFP and the US ISM Services PMI.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones remains
in a negative mood amid a general stock market selloff. The level to watch is
the support around
the 37066 level where we can find the confluence of the
recent swing low and the 21 moving average. This is
where we can expect the buyers to step in with a defined risk below the support
to position for new highs. A break below the support would open the door for a
bigger drop into the 36030 level.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the
Dow Jones has been trading inside a rising channel but the price recently broke
out of it signalling a deeper correction to follow. We can also notice that the
latest leg higher diverged with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. If the price breaks below the 37066 level the reversal would be
confirmed and the 36030 level will be the next target.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action and the divergence with the MACD. Now it’s
just about waiting for the price to come into the 37066 support and see what
happens there as it’s likely to decide the direction for the next few weeks.

This article was written by FL Contributors at www.forexlive.com.

• Should not move towards confrontation because of differences
• Artificial decoupling is moving against the tide and losses outweigh gains
• The need for cooperation is not weakened, but stronger at this time
• No conflict between China and US is the most important peace dividend for the world
• Both sides should make use of foreign affairs, economy, finance to bolster relations

All this talk is mostly still just for show as both sides are not going to actually give in to make any real progress in strengthening ties. A lot of the relationship between the two countries is just for show. And while China has held strong leverage in the past, their recent economic struggles are not making it easy to portray such a strong front. Not only that, the outlook – especially on the demographics front in the next few decades – is one that could see China have to pick their battles wisely.

This article was written by Justin Low at www.forexlive.com.

European indices are down roughly 1% now as stocks are struggling to stay afloat once again. The push lower comes as 10-year Treasury yields are at session highs, up 4.7 bps to 4.038% as bond sellers look to validate a break above the 4% mark on the week. US futures are also struggling, gradually moving lower on the day with S&P 500 futures now down 0.3%:

All of this continues to keep the dollar underpinned with commodity currencies struggling at the moment. AUD/USD is down 0.4% to 0.6680 with the weekly drop now nearing 2%. This will mark six straight days of losses for the pair as it falls to a three-week low at the moment.

This article was written by Justin Low at www.forexlive.com.

• Prior +2.4%
• Core CPI +3.4% vs +3.5% y/y expected
• Prior +3.6%

Headline annual inflation may show a jump in price pressures but core annual inflation actually eased slightly further in December to 3.4%, down from 3.6% in November. As such, this still reaffirms the ECB’s case to remain in pause mode at least for the time being. However, if price pressures start to become stickier in and around the 3% mark, that may see policymakers struggle to sell any talk of an imminent pivot. So, we’ll see.

This article was written by Justin Low at www.forexlive.com.

Yesterday, the S&P 500 remained on the back
foot as the correction that began last week seems to have more room to go. As
of now, the data has been overall positive with the US ISM Manufacturing PMI beating
expectations and US Job Openings missing
forecasts. Moreover, yesterday we got a beat in the US ADP and US Jobless Claims data. If
the data remains positive, we can expect the market to bounce back once the
froth from the aggressive rate cuts expectations gets unwound. Today, is an
important day as we get the release of the US NFP and the US ISM Services PMI.

S&P 500 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the S&P 500
yesterday broke below a key support where we
had the confluence of the
recent swing low and the 21 moving average. This
has opened the door for an even bigger drop into the next support around the
4547 level. The sellers should have even more conviction now while the buyers
will need the price to rise back above the 4700 level to regain some control.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that the
price has been trading inside a rising channel but the price eventually broke
not only below the lower bound of the channel but also below the key support
around the 4700 level where we had also the 38.2% Fibonacci
retracement level for confluence. We can also notice
that the latest leg higher diverged with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, we got a reversal signal and the target should be
right at the 4547 level.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see more
closely the current price action with the recent break below the 4700 support.
The sellers should keep piling in around these levels with the lower high
around the 4726 level as the last line of defence. In fact, if the price breaks
above the 4726 level, the recent downtrend would be broken and the buyers
should regain control.

This article was written by FL Contributors at www.forexlive.com.

The trading year for Japan officially began today after an extended new year’s holiday, and we are seeing the yen drop further. It seems like domestic banks are fueling the fire in saying that the supposed impossible task by the BOJ to perform an early policy pivot, has now just became even more impossible. In referring to the Ishikawa earthquake, this is what they have to say:

„Although there must be quite a few foreign investors who have been anticipating the end of negative rates in January, under these circumstances, the BOJ will almost certainly not move this month. Should negative rates not be lifted in January, ending it in the first half of 2024 will also become doubtful.“ — Mizuho Bank

„The January move seems even more impossible. The earthquake is likely to depress production activity while the government may have to set up a supplementary budget for recovery measures.“ — Daiwa Securities, also revising forecast for exit from negative rates to April from January previously

„Any lingering expectation for an end to negative rates in January is completely shattered.“ — SMBC Nikko Securities

Meanwhile, Morgan Stanley MUFG Securities also revised its call for a change to the BOJ rate decision this month and sees the central bank leaving policy unchanged instead. Adding that any exit from negative rates will only come on April at the earliest. Besides that, Nomura Holdings also chimes in by saying that the earthquake may delay the BOJ’s plans to exit from negative rates in January although it also depends on the extent of the economic damage from the incident.

This article was written by Justin Low at www.forexlive.com.

Copper has been on a
retreat since last week as the US Dollar strength coupled with year-end flows
might have weighed a bit on the market. The sentiment around the Chinese
economy remains weak and the recent data from the US doesn’t look good either.
In fact, yesterday the inside data of the US ISM Manufacturing PMI report painting a weaker picture
compared to the headline beat and the upbeat comments. Moreover, the US Job Openings missed expectations with the hiring
rate now below the pre-pandemic levels which could be a bad omen.

Copper Technical Analysis –
Daily Timeframe

On the daily chart, we can see that Copper is
bouncing near a key trendline where we
can also find the confluence with the
Fibonacci retracement levels and the
red 21 moving average. This is
where the buyers are stepping in with a defined risk below the trendline to
position for a rally into the 4.03 resistance.

Copper Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
bounce around the trendline as we have a strong support zone with many
technical confluences. The sellers will want to see the price breaking below
the trendline to invalidate the bullish setup and position for a drop back into
the 3.55 support.

Copper Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price has been diverging with
the MACD
falling into the key trendline. This is generally a sign of weakening momentum
often followed by pullbacks or reversals. We can also notice that the recent
downtrend got broken after the price breached the trendline. The buyers should
have even more conviction for a rally now while the sellers will need to wait
for the price to break below the key trendline.

Upcoming Events

Today we will have another slate of US labour market
data with the release of the US ADP and Jobless Claims figures. Tomorrow, we
conclude the week with the NFP report and the ISM Services PMI. Weak data is
likely to weigh on Copper due to lower future demand fears while strong data
should keep the market supported.

This article was written by FL Contributors at www.forexlive.com.