Pre-holiday Volume

Pre-holiday Volume

Tuesday’s anemic price action though bullish, recorded activity that was substantially lower than the pre-holiday volume of Christmas and the New Year.  The pending CPI report Thursday and the big bank reports Friday, both happening before the bell, have raised the market uncertainty understandably high.  We should expect big price moves by the end of the week, but the question is, in what direction will all this wound-tight emotion explode?  Trade wisely because this is a  dangerous market condition for retail traders!

Asian markets mostly rallied overnight, with only Shanghai seeing a modest decline while we slept.  European markets are in rally mode this morning, looking to recover Tuesday’s weakness with uncertainty ahead.  U.S. futures are once again pumping a bullish open, trying to put on a brave face with another day of low volume likely as we wait on the CPI and the official kickoff of earnings.  Buckle up anything is possible by the end of the week.

Economic Calendar

Earnings Calendar

We have a very light day on the earnings calendar, with just one confirmed report coming from KBH after the bell. 

News & Technicals’

Wells Fargo is stepping back from the housing market.  Instead of its previous goal of reaching as many Americans as possible, the company will now focus on home loans for existing bank and wealth management customers and borrowers in minority communities.  As part of its reduction, Wells Fargo is shuttering its correspondent business that buys loans made by third-party lenders and “significantly” shrinks its mortgage-servicing portfolio through asset sales.  Altogether, the shift will result in a fresh round of layoffs for the bank’s mortgage operations, executives acknowledged, but they declined to quantify how many jobs will be lost. 

Fed Chairman Jerome Powell noted that stabilizing prices requires making tough decisions that can be unpopular politically.  In other remarks, the central bank leader said the Fed is “not, and will not be, a ‘climate policymaker.’” 

The World Bank slashed its 2023 global economic growth outlook to 1.7% 2023 from its earlier projection of 3%.  It would mark “the third weakest pace of growth in nearly three decades, overshadowed only by the global recessions caused by the pandemic and the global financial crisis,” the World Bank said. 

Although the indexes held the breakout support, the activity was lower than the pre-holiday volume of both Christmas and New Year trading.  Unfortunately, there is a good chance we could see more of the same with the light earings and economic calendar on Wednesday.  The uncertainty of the Thursday CPI report and the official beginning of 1st quarter earnings as the big banks begin to report on Friday is likely the reason for the anemic volume.  The last couple of weeks of range-bound trading has wound the spring on the indexes very tight, and it’s likely to create some tremendous price volatility at the end of the week.  The big question is, which way will it pop?  Be careful not to overtrade out of boredom, and be prepared for the explosion of emotion just around the corner.

Trade Wisely,

Doug

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