Options Trading Newsletter - Issue #96
2023 - Year of the Water Rabbit, how will it fare in the stock markets?
2023 - Year of the Water Rabbit, how will it fare in the stock markets?
With the Chinese Lunar New Year only a week away, lets see what 2023 is in store for us. 2023 is the year of the Water Rabbit. Rabbit symbolises longevity, peace and prosperity. What does this mean for us on the stock market though? After a year of turbulence and disaster for many stocks, it looks that the new year may be a better one. One year loss is another year of gain? According to the Chinese feng shui technicals, we have outlined the sector performance based on the 5 elements.
According to the five elements, the sectors which are good would be those related to Fire which are oil and gas, fashion and tech. Sectors related to Wood element, healthcare, education and plantation will still be fairly good. Water element related industries such as travel, transportation and property/constructions will fare averagely only. Lastly, Metal element related industries such as financials and auto sector will have pressures during the year.
What’s your take on the above predictions? Oil and gas would still continue strong after 1st quarter from the reopening of China which may offset the weaker demand in the US due to the economic situation. Tech would be fit for some recoveries after going down 30-90% in 2021 especially after the Fed starts to stop increasing interest rate expected before end 1st quarter of the year. Fashion would probably come alive after years its largest customers ie. China has been locked down with restrictive travels.
Healthcare as one of the defensive sectors would still be relevant during uncertain times. Education and plantation would also come back to normality as demand and prices stabilises. The travel sector which has seen huge price swings after reopening of the world end 2021 would start to taper down as even China has now reopened. Transportation which experienced super profits during the pandemic have seen prices falling as supply chain starts to normalise globally. Property/constructions would slow down amidst high interest and slowing global economy.
As for which companies could benefit or lose the most, look at the respective companies within the sectors which could have the highest reversal to its fate compared to 2021. ie. highest decline would have higher possibility of bigger reversals and highest increments would likely slow down or decline in prices.
SPX (3999)
SPX is sitting on top of the trend line and we are waiting if it breaks up or retraces back down. In the past 3 rounds, it failed to breach the resistance trend line.
Last week after the CPI data came out as expected 6.5% the market continued to run up continuing last Fridays, Non-Farm bullish price action. The market may continue to runup but likely lose steam before the next Fed rate hike decision on 1 Feb. The consensus is still a hike of 0.25%. Besides that, the 4100 and 4200 levels will be the next round of resistance.
Nothing much on this week except the retail data and producer price index on Wednesday. The earnings season has started last week and major earnings to be out this week is as follows:-
If you are in any trade, may be a good time to exit to avoid huge movements during earnings.
Market is closed on Monday. The trading range for the week is between 3900 and 4050.
NDX (11541)
4.5% or 501 points up for the week. It has been almost 2 months since we have seen such big weekly move where it collapsed thereafter. Will we see it happen again considering this up move is in its 3rd week now. With earnings season in, the start of bad numbers and forecast will quickly cave down the momentum. So keep a big eye open on the earnings and the signals.
The trading range for the week is between 11200 and 11850.
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there might be just too much chasing on individual China stocks and most runup 30% at the minimum since Nov. so u wouldn't know when one can do a big retracement. so protective plays with price buffer would be safe. alternatively index plays on hang seng (HSI) and hang seng tech (hstech) on downdays is working well since Oct. nx week china market will be closed for the new year. too much uncertainty still in the us. lets see what earnings season brings.
I agree that the reopening of China will affect the entire world. That, coupled with the ongoing Ukraine/Russia war, could send already-high energy prices even higher.