We’re writing this report a day earlier than usual, but with most traders simply closing their trades in low liquidity conditions ahead of the New Year, we don’t expect much in the way of notable news or price action ahead of the weekend.
Nasdaq 100 near 2022 lows as Tesla tanks
The biggest story from the past week is the big selloff in US stocks, specifically former market darling Tesla (TSLA) and the tech-heavy Nasdaq 100 index. As we go to press, Tesla is winding down a brutal month wherein it’s lost around 40% of its value. Speculation abounds that the selloff is related to mercurial CEO Elon Musk’s new acquisition of Twitter, ranging from whether Twitter is merely distracting him from his auto company to concerns about his increasingly erratic tweets to worries that Musk is being forced to sell his stake in Tesla in margin call to support those who bankrolled the Twitter acquisition. Regardless of the exact catalyst, Tesla is at its lowest level since August 2020, and the broader Nasdaq 100 (see “Chart of the Week” below) has fallen to test similar lows in sympathy.
Forex
By comparison to equities, the forex market was relatively sedate over the last week as traders continued to digest the fallout from the Bank of Japan’s big decision to loosen its Yield Curve Control (YCC) program the previous week. Despite the mixed performance of other markets (most major indices flat, yields ticking up, oil down, gold up, etc), there’s been a bit of a “risk on” move in the forex market, with the New Zealand and Australian dollars among the strongest major currencies, while the yen and US dollar have ticked lower on a relative basis. Overall, we wouldn’t read too much into the past week’s price action and will instead take our cues from the moves we see in the coming week, especially in reaction to the top-tier data releases toward the end of the week.
Economic Data
Befitting the start of the year, the coming week’s economic calendar starts off slowly before picking up dramatically by the end of the week. Most traders will be away from their desks Monday and the meat of the economic data doesn’t start until Wednesday, when traders will get top-tier reports like the US ISM Manufacturing PMI report and the minutes from the FOMC’s December meeting. Thursday brings the latest Eurozone PPI reading, as well as the US ADP Employment report, followed by a series of high-impact reports on Friday, including the Eurozone Flash CPI release, jobs reports out of the US and Canada, and the US ISM Services PMI reading. These reports should provide a clear picture of how major economies in North America and Europe are faring heading into the start of year when many analysts expect growth to slow dramatically.
Key economic data to watch this week include the following releases:
Monday
- Eurozone Final Manufacturing PMIs
Tuesday
- Japan Final Manufacturing PMI
- Chinese Caixin Manufacturing PMI
- German Preliminary CPI
- Swiss Manufacturing PMI
- German Unemployment Report
- UK Final Manufacturing PMI
- Canadian Final Manufacturing PMI
- US Final Manufacturing PMI
Wednesday
- Swiss CPI (Dec)
- Eurozone Final Services PMIs
- US ISM Manufacturing PMI
- US JOLTS Jobs Openings
- FOMC Meeting Minutes
Thursday
- Chinese Caixin Services PMI
- Eurozone PPI (Nov)
- ADP Employment Report
- US Initial Unemployment Claims
- US Final Services PMI
Friday
- Chinese Trade Balance
- German Factory Orders and Retail Sales
- Swiss Retail Sales
- UK Construction PMI
- Eurozone Flash CPI Estimate
- Canadian Employment Report
- US Non-Farm Payrolls Report
- Canadian Ivey PMI
- US ISM Services PMI
Chart of the Week: Nasdaq 100
As we noted above, the Nasdaq 100 has fallen in sympathy with Tesla, leaving it near October’s multi-year lows as of writing. From a technical perspective, the 10,500 area is a critical level; in addition to marking the 2022 lows, it also represents the 61.8% Fibonacci retracement of the entire post-Covid rally. While bulls would certainly like to see a big rally off this support confluence, the bigger picture outlook for the index will remain bearish as long as it continues to put in “lower highs” on the daily chart. Meanwhile, a confirmed break below support in the 10,500 area would open the door for a continuation down to the pre-Covid high at 9,700 or even the 78.6% Fibonacci retracement near 8,900 as we move through the first quarter of 2023.
Source: Tradingview, StoneX
Here’s to a happy, healthy, safe New Year’s celebration for all of our readers, and hopefully the most profitable trading year yet in 2023!
