Weekly Briefing 1/30/22 - The Forecast

Weekly Briefing 1/30/22

Weekly Briefing 1/30/22

A strong rally into the second half of February should occur as markets rebound from extremely oversold conditions. A second significant sell-off is expected between late February and late March. Institutional capitals deleveraging over the past 20 trading days was the primary reason for the recent correction as risk is reduced into an expected Fed hiking cycle in H1, 2022.

The crypto space has likely bottomed and is preparing for a choppy rally into early March. One last test of support, BTC $33,000-$35,000, is possible this week before the rally take hold. Altcoins may experience greater gains than BTC and ETH during this period which will be covered in our weekly crypto briefings. Sentiment is recovering from several oversold conditions from late January and should work its way back up to early December levels in the next four weeks.

Market Recap:

Major indexes witnessed spike lows last Monday led by tech’s mini crash. Last week’s spike low is expected to hold as a reactive 1-3 week rally ensues in the coming days. Consumer confidence numbers and 4th quarter GDP numbers both came in strong. However, the fundamentally important manufacturing and service PMI’s both missed, painting an ugly picture of underlying economic strength. Equally disturbing were the significant misses by the Richmond manufacturing index, Durable Goods Orders, Personal Income, and Wholesale Inventories.

The technical outlook for major indexes remains weak with all of them trading beneath their 50-day moving averages and some still beneath their 200-day moving averages. The VIX remains elevated, but signs of fear dissipating are becoming more evident.

Upcoming Data this week:

This coming week will see plenty of action with major tech giants Amazon, Google, Facebook, AMD, and Qualcomm all reporting earnings followed by biotech leaders Eli Lilly and Merck. Key economic reports are expected in the ISM manufacturing and Jolts Job openings Tuesday followed by ADP payrolls on Wednesday and ISM services on Thursday. The European Central Bank’s monetary meeting will take place Thursday and the unemployment numbers will be the last and most important piece of data for the coming week on Friday.