2024.01.22 Weekly


18 min readJan 22, 2024

There’s a lot of cautionary statements circulating among strategists and media pieces — overcrowding in Tech stocks, extreme optimism of a soft landing and rapid rate cuts etc. These are the kinds of risks I’ve been sounding for a good while now, and I think it’s a matter of when, not-if, market expectations will need to come back to reality. This is still very much the theme I’m focused on and I highlight some charts and a few things I’m looking for to gain confidence in expressing that view — particularly in fading the equities rally has the elements of lacking strong foundation and has been primarily a semiconductors/AI rally.

Outside of equities, US retail sales report highlights how strong consumer spending continues to be, but data from other major economies offers evidence of more frugal and carefully planned spending by consumers taking advantage of discounts ahead of the Winter season, particularly in Europe which I wish to express by fading EUR and GBP rebounds, and rallies in European equities.



  • Bets on Soft Landing Push US Stocks to First Record in Two Years (BBG). TSMC Outlook Drives $165 Billion Chip Rally in 2024 Rebound Bet — Chip gearmakers surge after TSMC’s projections beat estimates, thinks 2024 will repower chip sales, expects revenue to grow over 20% this year (BBG). Bad Week for Bonds Worsens With Yields Reaching Year’s Highs (BBG). 10-year Treasury yield hovers near 4.15% on more strong jobs data (CNBC). Bitcoin Retreats to One-Month Low as ETF-Led Enthusiasm Wanes (BBG). Gold falls for the second week in three as rate cut optimism fades (CNBC). European Stocks Slip, Marking Worst Weekly Drop in Three Months (BBG). Foreign Buying of Japanese Stocks Hits Highest Since June (BBG). Japanese Retail Investors Sold Most Stocks Since 2013 Last Week (BBG). HSBC, SocGen Take Contrarian View of Japan’s Blistering Market — Sell signals are flashing as Topix enters overbought territory, Yen volatility is surging on speculation over BOJ’s policies (BBG). China’s Sudden Stock Rally Points to ETF Buying by State Funds (BBG).
  • Big-Tech Rally Heats Up, Breeding Overcrowding Fears — Hedge funds net long Nasdaq 100 futures most since 2016, Positioning means ‘potential downside is bigger’ (BBG). BofA Poll Shows US Stock Optimism at Highest Level Since 2021 — Investors most overweight US stocks since Dec. 2021, Most crowded trades are long Magnificent Seven, short China (BBG). Stocks Are at Record Highs, but Things Will Only Get Harder From Here — Expectations for interest-rate cuts are waning. Some investors say stock gains might be hard-won as a result (WSJ). Goldman Strategists Say Stock-Market Crowding Poses Setback Risk — Bullish positioning with low breadth is “very unusual” (BBG). Bridgewater’s Jensen Says Assets Priced for Perfection a Concern — Asset prices imply Fed will soon cut rates as inflation drops, That’s ‘both impressive and a concern going forward’ (BBG). Wall Street Forecasters Are Rushing to Lift Stock Outlooks — UBS is at least third firm boosting S&P 500 call in past mont, Goldman, RBC have also raised forecasts since mid-December (BBG). Earnings Will Beat Expectations Only Because the Bar Is Low — Fourth-quarter consensus estimate dropped 7% over three months, MS strategist says prior beats came with muted price reaction (BBG). Interest Rate Cuts Aren’t Good News for Profit Forecasts, History Shows — An economic slowdown could lead to lower corporate earnings, Bullish forecasts may be ‘calm before storm,’ SocGen says (BBG).
  • Fed to Begin Rate Cut Discussions But Avoid Teeing First One Up (BBG). Fed’s Daly Says It’s Premature to Think Interest Rate Cuts Are Around the Corner — Need more evidence inflation is ‘consistently’ heading to 2%, San Francisco Fed chief says adjustment isn’t necessary yet (BBG). Fed’s Bostic expects rate cuts to happen in the third quarter (CNBC). Fed’s Christopher Waller advocates moving ‘carefully’ with rate cuts (CNBC). Bond Traders Start to Hedge Against Half-Point Fed Cut in March — Surge of activity seen in dovish SOFR options wagers last week (BBG). Bond Traders Pare Odds of Fed Rate Cut in March (BBG). El-Erian Says Markets Have Overpriced Speed, Depth of Fed Cuts (BBG). Nomura’s Willcox Sees Rates Staying Higher for Longer — Investors wagering on a drop in interest rates this year may be disappointed, “Central banks are going to remain vigilant for longer” (BBG). Surging Debt Supply to Boost Global Yields, Goldman Sachs Says (BBG). The Easy Money Has Already Been Made in Bonds — Bond allocations slump while cash holdings jump: BofA survey, Jupiter is among funds wary of aggressive soft landing bets (BBG).
  • Markets Expect Rate Cuts Soon. Central Banks Say Not So Fast (WSJ). Expectations of ECB interest rate cut in Q2 grow stronger — Reuters poll (RTS). ECB concerned market bets on rate cuts risk derailing disinflation — Minutes show policymakers decided to push back against market expectations of early loosening (FT). Markets getting ahead of themselves on rate cuts and risk being ‘self-defeating’ — ECB arch-hawk Holzmann: threats to the inflationary picture that could mean rates do not move lower at all this year. (CNBC). JP Morgan advances ECB rate-cut expectation to June from September (RTS). Bank of England Faces Growing Calls to Drop Language on Hikes — Guidance needs to catch up with lower inflation, Fed and ECB, Communication complicated by election and forecast confusion (BBG). Traders See Signals From SNB to Bet on a Weaker Swiss Franc — Neutral positioning suggests there’s room for more short bets, Options market signals traders are bracing for franc losses (BBG). BOJ seen keeping policy ultra-easy, focus on rate-hike hints (RTS).
  • Container Rates Soar as Red Sea Chaos Worsens Capacity Crunch (BBG). Air freight volumes soar as Red Sea delays, risks make more big retailers, auto companies nervous (CNBC). European Oil Prices Jump on Red Sea and Libyan Supply Worries — Spot prices for North Sea, Mediterranean grades have climbed, European market also contending with Black Sea bottlenecks (BBG). Global LNG Fleet Avoiding Red Sea With More Tankers Diverted (BBG). African Ports See Higher Refueling Demand as Vessels Round Cape (BBG). European manufacturers and retailers face ‘chaotic’ period after Red Sea attacks — Rerouting of container ships has disrupted supply chains, increasing travel times and transport costs (FT). Italy’s Confindustria Cites Red Sea Turmoil as Economic Threat (BBG). Red Sea Unrest Is Bad News for World’s Fragile Food Supply (BBG). Coffee Trade Flows Are Being Upended by Red Sea Shipping Chaos (BBG). Deep Freeze Forces US LNG Exporters to Cancel, Delay Cargoes (BBG). The Oil Market Is Making Plans for Red Sea Chaos to Last Weeks — Bookings made to send fuel to Asia, crude around Africa, Shipowners and charterers avoiding Red Sea (BBG).


  • Strong US retail sales underscore economy’s momentum heading into 2024 — Retail sales increase 0.6% in December, Core retail sales jump 0.8%; November sales revised up (RTS). Improved Inflation Views Lift US Sentiment to Highest Since 2021 — Short-term inflation outlook fell to 2.9% in early January, University of Michigan sentiment index rose 9.1 points to 78.8 (BBG). Rising Defaults May Give Misleading Picture on Consumer Health — Many credit measures are still being driven by the pandemic’s effects on household finances (WSJ). Weekly jobless claims post lowest reading since September 2022 — initial claims fall 16,000 to 187,000, continuing claims drop 26,000 to 1.806 million (CNBC). Labor Supply Helped Tame Inflation. It Might Not Have Much More to Give — Further cooling in price pressures might require an easing of demand and weaker growth (WSJ).
  • US existing home sales fall in December, supply shows signs of improvement (RTS). US Home-Purchase Applications Climb to an Almost Six-Month High (BBG). US Mortgage Rates Fall to Lowest Level Since May — Affordability remains a hurdle for many would-be homebuyers, Higher demand pressures already-tight supply, economist says (BBG). US single-family housing starts plunge in December — new construction remains underpinned by a shortage of previously owned houses for sale (RTS).
  • Use of Fed Funding Tool Jumps Most Since April to Fresh Record — Demand up $14.3 billion to $161.5 billion in week to Jan. 17, Top Fed policymakers have suggested BTFP will shutter in March (BBG). US Prepares Rule Forcing Banks to Tap Fed Discount Window — OCC chief says his agency, Fed and FDIC are crafting plan (BBG). NY Fed finds lower-incomes facing more financial stress (RTS). Most Americans Who Failed to Pay Student Loans Say They Can’t Afford to Keep Up (BBG).
  • Trump’s Legal Woes Splinter GOP Unity — Former president is on a glide path to the nomination, but a criminal conviction would cost him Republican votes in November (WSJ). The veepstakes heats up as Trump pulls away — Republicans are rushing to make a good impression on Trump (Politico) Trump: Haley ‘probably … is not going to be chosen as the vice president (Politico). Haley doubts Trump’s mental fitness for presidency — The remark came after Trump mistakenly said she was in charge of Capitol security on Jan. 6, 2021 (Politico).
  • Canada Inflation Accelerates to 3.4% in December (WSJ). Canada Retail Sales Rebounded in December After Slowdown (BBG). Canadian home sales jump in December; 2023 sales fall 11.1% (RTS).


  • UK Inflation Unexpectedly Rebounded in December, Raising Questions for Bank of England (WSJ). UK Inflation Shock Sets Gilts Up for Worst Ever Start to a Year — Bloomberg aggregate gilt index is down more than 3% this month (BBG). UK retail sales slump points to new risk of recession — Retail sales slump 3.2% in December, biggest drop since Jan 2021, Sales volumes now at lowest ebb since May 2020 (RTS). London transport fares frozen to ease cost-of-living pressures (RTS). UK wage growth slows again, offering some relief to BoE (RTS). Morgan Stanley Scraps Call For UK Housing Market Slump — Bank no longer sees house prices falling 10% from 2022 peak (BBG).
  • European wage demands could stymie early rate cuts, analysts warn — Coming months of pay deals will be critical in determining when policymakers can start easing interest rates (FT). Euro zone consumers slash inflation expectations — ECB survey (RTS).
  • German union pay demand of 21% raises inflation fears (FT). German economy dodges recession despite shrinking 0.3% in 2023 (RTS). Germany was worst-performing major economy last year — Rising rates and high energy costs contributed to 0.3% contraction that points to fourth-quarter decline in eurozone (FT). Germany to stick to debt brake in $518 billion budget draft for 2024 (RTS).
  • Swedish Lender Resurs Plunges as Losses Mount on Consumer Loans (BBG). Sweden’s Housing Crunch Sparks Peab Selloff After Profit Warning (BBG).


  • Japan’s Slowing Inflation Supports Case for BOJ to Wait Longer — Services prices continue to rise at fastest clip in 30 years, Slide in electricity prices deepens; costs of lodging soar (BBG). Japan’s wholesale inflation flat in December, eases pressure on BOJ (RTS).
  • ‘Rampant’ Naked Shorts Found in Just 0.001% of Korea Trades (BBG). South Korea Says Illegal Short Sales Had ‘Big Impact’ on Stocks — Some stocks saw over 20% illegal trades to daily turnover: FSS, FSS responds to earlier Bloomberg story on naked short ratio (BBG).
  • Australia jobs engine slows as labour market loosens — net employment dived 65,100 in December from November, when it surged a revised 72,600. Market forecasts had been for an increase of around 17,600; jobless rate was unchanged at 3.9% from November, holding at the highest reading since May 2022, participation rate dropped sharply to 66.8%, from a record high of 67.3% (RTS). Australians pulled back spending in Dec after Black Friday splurge -CBA data (RTS).
  • New Zealand Monthly Net Immigration Slows to 15-Month Low — Trend shows the recent population surge may have peaked — RBNZ watching impact on demand, inflation from new arrivals (BBG).
  • China’s Mutual Funds Implode at Fastest Pace in Five Years as Stocks Sink (BBG). China’s Biggest Broker Curbs Short Sales After Stock Rout — Citic Securities suspended securities borrowing for investors, China stocks heading toward worst start to a year since 2016 (BBG). Weak data, limited stimulus keep investors away from China (RTS). New Foreign Investment Into China Drops to Three-Year Low (BBG). China’s property market slide worsens despite government support (RTS).


MSCI All Countries World Index is almost flat at -0.1% mtd with very few equity markets having registered gains so for this year.

ACWI put in a strong bounce in the latter half of last week but Daily RSI remains below the mid-line while Weekly momentum is slowly turning over. The bounce puts brings us back to a key pivot area also seen in the Developed and Emerging market indices which have followed through lower from their topping pattern with the last rebound retesting the neckline area.

European equities has been considerably weaker — DAX has been losing some support levels but holding up with the late week bounce in global equities; technical weakness has been more pronounced in STOXX indexes and this week should reveal more about whether it is a classic a-b-c consolidation for a bull leg higher, or that it is indeed rolling over. Given the flow of data and pushback from the ECB, the former bull-leg scenario would seem the less likely.

Asian equities is showing a very mixed picture — NIKKEI continued to shoot higher and remains extremely overbought, KOSPI is finding support around a key pivot after selling off sharply coming into the new year, and HSI continues to give out and finds itself at the bottom of the channel with a 13 demark countdown on print for today.

US equities have rallied to new record highs while and at an interesting spot — Dow’s broadening (megaphone-ish) consolidation, SPX once again back to testing the trendline running through the Mar-Oct lows and Sep pivot and breakdown level, and NDX storming higher into upper fib extensions. US equities have been out of sync with the move in rates, and with OPEX out the way, I would think it is likely to pullback/consolidate to realign with yields which should hold up given the flow of strong data; it probably would have if not for the rally in semiconductors.

SPX %deviation from 5/20/50/100dmas
% of SPX stocks above the 5/20/50/100dmas

SPX remains overbought against 50 and 100dmas while it has largely mean reverted to its 20dma. It’s found a bounce off the 20dma last week but the majority of stocks (46%) still sit below the 20dma despite the index making new ATH — suggesting the rally has not been broad based.

XLK %deviation from 5/20/50/100dmas
% of XLK stocks above the 5/20/50/100dmas

US equities rally has been driven by tech stocks with XLK stretched against all the moving averages once again.

Interestingly, SPX and NDX vs their equal-weights have printed a demark 9 countup last Friday, which has done a decent job of marking turns historically.

Semiconductors driving the bulk of the NDX XLK rally. TSM put out very strong revenue guidance for the year ahead, while AAPL bouncing 6% off the lows last week from BofA’s upgrade helded to contribute to the tech rally.

Looking at the high-flying semis, one would have to question how easily it can hold onto gains. I’ve mentioned jokingly with my peers, that “we’ll just have to wait til NVDA takes out 600” to fade the rally, which it has done in pre-market as I write this. So I find it particularly interesting that we now have a demark sequential daily 9 countup on stocks that have been doing all the heavy lifting e.g. SMH MSFT NVDA with, so-far, bearishly divergent higher highs. Also, across the 4h charts for those names including SPY and QQQ are showing various demark countup combinations which hints the possibility of the rather fading earlier than later in the week.

As far as setups and chart signals go, I think there is every chance that we could get a strong signal via reversal-bar prints and fakeouts of trendline running on the highs. Even a -0.5% lower close in NYFANG would begin to give us such signals.

On the flip side, a chart that does make me concerned about shorting the rally in this index of the most-shorted-stocks. It’s stalled a hinting a turn at key support, and when this rallies, you can almost be certain that the broader market will rally as well. Certainly a possibility if the broader market decides to play catchup to the semis.

The $SPX McClellan oscillator is at -35. The last time it was negative while SPX was making new all time highs after a long pause was in late August 2020 when it broke above the pre Covid high. That was followed by a 10% correction in September 2020.

Meanwhile there are lot of technical observations being made on twitter like this one from @CyclesFan

as well as examples of market strength when SPX does make new ATHs.

Hedge funds remain concentrated in bubble-cap M7 stocks at 17.5%, a few percentage points short of their peak 20% in July-August.
The John Holmes of positioning

In the near-term however, the crowded long-Tech positioning is a big risk especially if we see developments pointing to further delays in rate cuts and a higher-for-long rates environment.

Looking at the options market, GEX remains very positive …

though the trend is easing off while DIX trending lower so far this month suggests some dark pool selling.

Put option premiums have pulled back into last week’s OPEX but the trend turn to the upside remains in tact and I would expect that to stay true for the coming weeks with some big data points and central bank meetings on the calendar.

VIX is marginally up last week by half a vol-point but remains very low while Implied correlation hasn’t really picked up, and the Put/Call ratio is back to the lows. I would like to see both of these pick up this week to support bearish trades.

A very low VIX as SPX makes new ATH’s signals a durable bull-market?

Earnings expectations continues to recede but remains very optimistic…

Earnings Will Beat Expectations Only Because the Bar Is Low — Fourth-quarter consensus estimate dropped 7% over three months, MS strategist says prior beats came with muted price reaction (BBG).

The bar is lower but the declining trend in earnings is unlikely to change while the fiscal boost and revenue inflation wears out while latent wages/cost inflation lingers. If Q3 was any guide where we had a lowered bar and far from impressive earnings guidance, equities may not have much to gain from the Q4 earnings results.


Commodities were broadly lower last week continuing its month-to-date declines. There has been slight pick up in the Agriculturals sub-index while the rest has been trading heavier.

Gold found support above the 2k handle as it came out of oversold extremes. I still favour shorts as the Fed will stay pressured to keep real rates higher, but it’s now unclear which way the direction of travel is stuck between the 20 and 50dmas. Monday action should reveal more clues about whether we could see a brief break either way.

I’m still like buying Crude on dips the more I see a resilient bottom with the action leaning towards a break higher than lower from here. Further, the US has seen a surge in production but the rate of change has begun to roll over.

Meanwhile, although the impact has been minimal so far, tensions along shipping routes is likely to be an ongoing headache for Europe and price risks are probably higher than lower. NatGas is looking like a nasty avalanche of stops and at attractive levels to look long though seaonality tends to be weak at the start of the year. Apart from NatGas, Energy commodities does tend to be quite strong in the first few months of the year, and commodities broadly.


Yield curve has been shifting upwards since the beginning of the month (Green line), with most of that mtd move seen last week. Longer end has risen by 30bps so far this month which is a sizeable move.

Rate vol is picking up a tad. Bloomberg had a piece on the options market that makes me wonder whether markets short vol exposure could be setting the scene for higher rate vol. Should we see continued strength in economic data and Fed pushback, I can certainly see top side pressure for bonds.

Fed cut expectations has dialed back, but the market is still looking for 6 cuts this year while FOMC consensus stills appears to hover around 3 cuts to begin in the 2nd half of this year. Bostic still has 3 cuts penciled in, Waller is strongly emphasizing a slow and cautious approach to rate cuts, and Daly commenting that it is “premature to think rate cuts are round the corner, and an adjustment cut isn’t necessary yet. It would be reasonable to assume that the risk is somewhere in the middle and markets are still overly optimistic.

We’ve also had some very strong data, in particularly retail sales of which the huge beat in the control group is meaningfully shifting GDP and real Q4 PCE expectations. Thus the risk of higher yields should persist into PCE at the end of the week. BoJ BoC and ECB also meet this week which I will comment on for my tactical FX views below.


  • USD +1.21% was the strongest last week responding to the stronger data and higher yields. The USD index is flirting with a key resistance area, and I expect it to test higher levels based on the rate views above.
  • CAD +1.01% had a good week on the back of strong December data that may result in the BoC to stay firm on Wednesday.
  • GBP +0.79% broke out on the back of strong inflation data and paring back in BoC cut expectations. Combination of sticky inflation with muted growth implied by data trends makes GBPUSD a sell on rallies.
  • EUR +0.63% perhaps the more compelling sell on rallies given the big slump in industrials, housing and household spending. Europe still looking the one in G8 with the greatest stagflation/recession risk.
  • AUD -0.33% found strong support last week despite the softening in labour market and consumer spending. It appears the strong rebound has followed US equities higher.
  • CHF -0.79% is looking increasingly tired. Swiss inflation has been the lowest in G8 and though I do not expect the SNB to move any time soon, I think the risk is lower given the CHF appears to be tracking NDX strength, upside risk to USD and EUR from policymakers pushing back, and options market is recognizing those risks coming into the new year:
  • NZD -1.10% is rolling over which I think is in part seasonal which is tracking the strong seasonal strength in Q4 and weakness in Q1. Given the strong bullish momentum in risk, I look to short the NZD on the crosses such as against the AUD and USD. NZDCAD short and EURNZD long is under consideration for a trade going into the BoC and ECB meetings this week.
  • JPY -1.44% was the weakest as bond yields got a lift from stronger than expected December inflation data. I still favour JPY shorts and remain long USDJPY as latest data has not fueled the case for an earlier NIRP exit while US short-term rates are at risk of repricing from overly optimistic cut expectations. Likely to be profit taking risks and volatility around the BoJ which I hope to take advantage of by adding to my position.

That’s all for now. Good luck trading!