US stock and crypto are down after unexpected Fed and ECB hawkish comments. Tesla drama continues
Written by Moneypig Trading
Hello traders and investors!
Moneypig Trading delivered a great week! Some highlights this week are:
1. Fed SOMA balance and market summary
In our last week’s blog post (https://www.moneypigtrading.com/post/weekly-catalyst-core-cpi-inflation-possibly-start-to-cool-down-fed-fomc-rate-hike-is-also-the-key), we successfully predicted that the core CPI would be lower than expected, which did push up the market higher. However, the stock & crypto markets quickly pulled back because
(1) Powell’s uncertain comments on the going rate hike
(2) Other Fed officials’ hawkish comments. Even the dovish Fed Daly said “if necessary, I'm prepared to maintain peak rate for more than 11 months.”
(3) What really surprised us is the dovish ECB president Christine Lagarde’s super hawkish comments on Dec 15, 2022:(https://www.ecb.europa.eu/press/pressconf/2022/html/ecb.is221215~197ac630ae.en.html)
“Thank you for your question, because it helps me to clarify one thing. Anybody who thinks that this is a pivot for the ECB is wrong. We’re not pivoting, we’re not wavering.
Based on the information that we have available today, that predicates another 50-basis-point rate hike at our next meeting, and possibly at the one after that, and possibly thereafter, but everything will also be determined by the review of data. So don’t assume that it’s a one-shot 50; it’s more than that.”
ECB president Christine Lagarde’s super hawkish comments quickly knocked down $SPY from 398 to 388 on Dec 15, 2022.
Since lots of the US stocks have had heavy losses, just like in 2018, we do expect heavier than usual tax loss harvesting into the end of Dec. We now expect the market to trend lower into the year-end. However, $SPY $QQQ hourly charts are all oversold, plus the S&P500 index rebalancing on Friday, 12/16, we do expect a technical bounce (but likely very choppy) on Monday, 12/19 and maybe Tuesday, 12/20. Then the stock and crypto markets can have downward pressure again into the year-end. The chance of a substantial Santa Rally is very low at this point.
Still, Moneypig Trading expects the CPI reported in Jan 2023 and Feb 2023 to see a significant YoY growth slowdown, which could fuel the market upside at some point in 2023.
2. Some important events in the next 2 weeks:
3. Individual Charts to watch
Downside: 379.95, 374.89, 371.61
Upside: 389.56 breaks, room to 390.48, 391.63
Comment: All the daily EMA support breaks. Leaning toward the downside. Expect a technical bounce and trend lower again. Please see the comment in the “Fed SOMA balance and market summary” section above
Possible Action (no action yet):
We have to see the price action on Monday to decide
Downside: 149.85 breaks, room to 147.14, 144.64, 141.17, 137.44
Upside: 153.4, 156.79
Elon Musk sold more stocks this week, as we spotted and shared in our Discord server before the SEC announcement.
Plus, the Twitter drama gets bigger and bigger. Elon Musk even bans some journalists' Twitter accounts. Even though these accounts have been re-activated, the EU is investigating the incident, and Twitter might face a massive penalty from the EU, causing Elon Musk to sell more Tesla stocks.
The Tesla stock has down 62% year to date. Therefore, we also expect a heavy tax loss harvesting into the year-end, resulting in more downside. Unless Tesla can elect a new CEO or Elon Musk can find a new Twitter CEO and focus on Tesla, Tesla's stock price is likely to drop further.
Update: Elon Musk creates a Twitter poll. If the results make him step down as Twitter CEO, $TSLA might be limited-up on Monday Dec 19, 2022!
Possible Action (no action yet):
149.85 breaks below on the 15 mins or hourly chart, $TSLA 12/23/22 146-145 bear put vertical spread can be considered
If Elon Musk steps down from the Twitter CEO position, long $TSLA
Moneypig Trading is a group of data-driven investors and traders with excellent and consistent investing and trading records, as shown here.
Not financial advisors. Please invest at your own risk.