"What's going on... 1/25/23"
US Futures Markets Morning Update
January 25, 2023
Equity Index Futures
Asia passed a quiet and steady session with both the Hang Seng and Shanghai Comp closed for holiday. The Nikkei (27,394 +0.35%) opened under a bit of pressure although the session posted a one-month high while the Kospi (2,428 +1.39%) gapped higher but settled down into a tight range. Europe opened under pressure and the DAX (15,042 -0.34%) and FTSE (7,730 -0.50%) both eroded into the western sunrise, leading to much weaker calls into the open.
I’m trying not to look too deeply into today’s action so early in the session, however following up on yesterday’s thoughts of the “January Effect” entering the late innings, strong hands must step up and support the action. Last week’s lows remain quite a bit off but if this price develops into a two or even multi-day reversal of past two session confidence with take a hit; conversely a return to Monday’s highs and I suspect it will be “game on” once again but short lived unless the bids are fresh. This messy action also supports what the chart action shows; besides minor trends, prices are trading within wide/sideways trading ranges. So, apparently the micro and macro divers are too cloudy…and that’s not opinion or narrative, that’s what sideways/indecisive price action suggests…and price says it all.
Fixed income Futures
In the early going, the complex is higher and following thru on yesterday’s gains. Perhaps there’s a bit risk-off trading coming in here with equity weakness. Still, there’s a lack of energy and uncertainty seeping into the current trend; however, none of the product prices appear out of line so there’s no specific tone change. Yet, upon a closer look my new favorite spread, the Micro futures 10Y-2YY (-0.694) inversion hit its widest since mid-December (at time of writing). European fixed income futures are steady along with their counterparts across the Atlantic.
For all the hoopla being seen across the equity index complex, the US Dollar is rather quiet. GBPUSD (123.50 +0.10%) seems unsure about next steps. EURUSD (108.93 +0.05%) remains extended and still fighting for additional gains; AUDUSD (70.70 +0.35%) comes across as the best of the bunch and a trend that’s maintaining strength (and supportive fundamental drivers from the latest CPI report) however it’s partner in crime NZDUSD (64.55 -0.80%) isn’t sure what it wants to do. A reminder, the steep slope of these up-trends does not leave much room for error and a lengthy pause may lead to corrections. USDJPY (129.50 -0.50%) weakness doesn’t suggest much as it’s in-line with the larger trend; pre-BPC USDCAD (134.40 +0.31%) seemed to suggest lower, but a shift in central bank tone led to a reversal.
The complex, particularly gold and copper, is struggling to find bids willing to challenge new highs. Still, there’s an underlying strength to these trends that appear to be reaching points of exhaustion. We’ll see. It’s rarely the case that silver leads however it was the first of the three to begin struggling and eventually turn lower this time around so I’ll look here for broader tone and outlook in the short-term.
The complex is under a bit of pressure this morning as distillate weakness appears to be weighing on crude. However, oil spreads are steady-to-higher so I won’t look too much into the indecisive outright action. Distillate spreads are again under pressure with LTD approaching and winter premium being sucked out; spring RBOB spreads are also posting some losses although they’re minor and the backwardation remains impressive. Natural gas prices are under pressure as another round of liquidation hits both outright and spreads with each passing day of winter; it’s time to start looking further out the curve as summer spreads are showing some recent lift, but nothing to note.
Both wheat and soybeans are catching up to corn’s steadiness in the early going. Wheat again teased the shorts with a price move to new lows that’s seen zero follow-thru and has now reversed; strength behind the move lower was lacking the entire time. Soybeans are trying to steady-up following a five-session losing streak as underlying strength in the trend hasn’t really wavered. Finishing up with corn, it’s quietly steady with strength seen in the summer spreads.
Yesterday’s pause brings today’s weakness which again is almost perfectly correlated to Nasdaq weakness. BTC (22,630 -1.90%) and ETH (1,545 -4.50%) can return some gains without damaging the larger uptrends; however, I still fear the buying may be too much FOMO speculation (and sucked up into January Effect type buying) rather than something real.
Good luck today!
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