Trade The Journey

Trade The Journey

Markets Rise!!

Top of the Morning to Fellow Traders! I trust you’re all making the most of the weekend, getting set for an interesting trading week ahead. Last week, we navigated through some intricate market patterns, despite the overall volatility staying relatively low. It’s quite evident that the intraday movements were nuanced, offering valuable lessons in trading and momentum. I’ve captured some key insights in this week’s trade analysis.

Gold’s Market Activity Last week, we saw a notable shift in Gold, descending from its high of $2152 back to the $2000 level. This was an intriguing phase, particularly in how open interest surged as Gold neared its peak, before leveling off post the high. As traders, these movements offer us critical insights into market sentiment.

U.S. Dollar Trends The U.S. Dollar showed some resilience last week. Starting from a pivot low of $102.438, it climbed above its 200 SMA. Currently, with its 50 SMA at $105.267 and the Dollar floating around $103.267, I’m keenly watching for its next significant move, particularly towards a pivot high of $104.689.

Crude Oil Market Dynamics Crude oil certainly made its presence felt in the market, dropping 4% but then showing signs of recovery. Currently, it’s facing resistance at $72.46. With the ongoing production cuts and the U.S. crude production in play, it seems poised to test the support at $66.90, a crucial level for us traders to monitor. The recent low at $63.64 also adds to the narrative. Copper, in contrast, is still struggling in a sideways pattern, unable to fully recover.

Bond Market Fluctuations In the bond market, yields across various maturities saw a drop, but a notable gap emerged towards the week’s end, likely influenced by a surprise employment report indicating higher-than-expected job additions. Since hitting a low in October, bonds have rallied significantly. This movement aligns with the growing market consensus anticipating potential rate cuts by the Fed in 2024.

Economic Data: A Trader’s Perspective

Factory and Manufacturing Insights

The Factory Orders Report for October showed a 3.6% decline in new orders for manufactured goods, marking a yearly low. Particularly, orders for manufactured durable goods fell by 5.4%, almost unchanged from the previous month, and nondurable goods orders decreased by 1.9%. The significant drop in orders for transportation equipment, likely influenced by the Auto Union strikes, is a key data point for market analysis.

ISM Non-manufacturing Index

The services sector’s performance, as per the ISM Non-manufacturing Index for November, remained in expansion, increasing to 52.7%, up 0.9% from October. This resurgence, especially after the decline in October, is significant. The index reflects a sustained period of expansion, now at its 42nd month. An interesting aspect is the rise in Business Activity to 55.1%, suggesting heightened economic activity in the services sector.

New orders maintained a steady pace, virtually unchanged from the previous month. The expansion in employment activity by 0.5% to 50.7% indicates a tightening labor market, which is something we as traders keep a close eye on. Sectors like construction, accommodation & food services, and retail & wholesale trade are showing an upward employment trend. The increase in supplier deliveries to 49.6% and inventories to 55.4% also speak volumes about the current market dynamics, especially as businesses ramp up for holiday demand.

This comprehensive economic data, when viewed through the lens of a seasoned trader, provides a rich tapestry of information. It not only guides our immediate trading strategies but also helps in understanding broader market trends and potential shifts. As we step into the new trading week, these insights will be pivotal in navigating the market’s ebbs and flows.

The Employment Landscape

JOLTS – Job Openings

The Job Openings and Labor Turnover Survey (JOLTS) revealed a decrease in job openings to 8.7 million, falling short of market expectations. This shift is particularly interesting in sectors like health care, social assistance, finance, and insurance, where we saw a reduction, while information sector openings increased. As traders, we understand that these sector-specific changes can significantly impact market sentiments and sector-specific stocks.

Initial Claims for the Week of December 2nd

The slight rise in initial jobless claims, coming in just below forecasts, was another key point last week. The four-week moving average settled at 220,750. The drop in continuing claims to 1.861 million is a positive signal, indicating that the job market remains dynamic – an important factor when considering consumer spending and economic health.

 

ADP Employment Report

The private sector’s addition of 103,000 jobs indicates continued growth in employment, albeit at a slower pace. The decline in job creation in the goods-producing sector, contrasted by the significant job additions in the service-providing sector, underscores the evolving employment landscape. The slowdown in pay gains for both job-stayers and job-changers is a trend worth keeping an eye on, as it could influence consumer spending and, in turn, affect various market sectors.

Employment Situation Report: November

The addition of 199,000 jobs in November, with the unemployment rate dipping to 3.7%, is below the twelve-month average but still a positive sign for market stability. The distribution of job gains across sectors like healthcare, government, manufacturing, and social assistance provides a nuanced view of the current economic environment. The stability in the labor-force participation rate and the rise in average hourly earnings are indicators I’m tracking closely, as they play a significant role in shaping market trends and consumer behavior.

Consumer Credit and Sentiment: A Trader’s View

Consumer Credit: October

The decline in both revolving and nonrevolving credit in October is a notable development. It suggests a more cautious consumer behavior, possibly influenced by the current interest rate environment. This trend in consumer credit utilization is something we monitor closely, as it can be a precursor to changes in consumer spending patterns, which in turn affects the broader market.

Consumer Sentiment: December

The improvement in consumer sentiment in December, although still below pre-pandemic levels, is an encouraging sign. As a trader, understanding the pulse of consumer sentiment is key, as it directly impacts market dynamics. The shifts in both short-term and long-run outlook, along with changes in inflation expectations, are critical data points that help in formulating a comprehensive market strategy.

Review of Cash Flow for the Past Week:

The cash flow scenario this past week was somewhat constrained, with an uptick in my overall expenses. Thankfully, I managed to exercise restraint over my discretionary spending. My strategy to reduce my credit balance remains firm, though I must admit, I didn’t make the expected payment towards reducing my credit account as originally planned. Looking forward to the upcoming week, I anticipate a further reduction in discretionary expenditures. I’m optimistic that this will free up some funds, which I intend to allocate towards lowering my credit balance.

Performance Rating: C

Justification for Rating: I would classify this week’s financial management as showing minor improvement. While I successfully managed discretionary expenses, the primary goal of reducing my credit balance wasn’t achieved as anticipated. This mixed outcome reflects a need for more focused financial discipline in the coming weeks.

Technical Levels:

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