The S&P 500 bounced back, and our prediction was spot on.

WEEK 13/01/2025 to 17/01/2025
🚨What you need to know this week🚨

• December Jobs Report: The U.S. added 256,000 jobs in December, surpassing expectations of 155,000. The unemployment rate dipped to 4.1%.

• Economic Strength & Fed Policy: Robust economic indicators make Federal Reserve rate cuts for January and March unlikely. Goldman Sachs and JPMorgan now anticipate only two cuts this year, while Bank of America suggests potential hikes.

• Earnings Season Volatility: Options traders project an average stock move of 4.7% post-earnings, reflecting uncertainty due to inflation and geopolitical concerns.

• Chip Stocks Decline: Nvidia and peers dropped after U.S. export restrictions targeting AI technology, raising competitiveness concerns.

• Crypto Moves: Tether relocated to El Salvador, leveraging its favorable crypto regulations. Trump is expected to sign crypto-focused executive orders early in his presidency.

• Inflation and Market Reaction: December PPI showed softer-than-expected price increases. Core CPI slowed to 3.2% YoY, fueling optimism for Fed rate cuts in 2025 despite remaining above the 2% target.

• Fiscal Concerns: The government’s budget deficit rose 40% YoY to $710.9 billion, highlighting fiscal challenges.

• Middle East Update: Israel and Hamas agreed to a ceasefire ahead of Trump's inauguration.

19/01/2025
🔎 Insights on the market 🔎

The SPY behaved exactly as we expected. In last week's newsletter, we mentioned that SPY was in a double-bottom zone, but also noted that as long as it stayed above $580, it remained within a range. On Monday the 13th, SPY broke below but closed above, leaving a green reversal candle. The same happened the following day: it attempted to break down but failed to close below $580.

With this confirmation, we saw SPY open strongly to the upside the next day, leaving a gap — this happened on Wednesday, coinciding with the inflation data release. The same pattern followed on Friday, resulting in a very bullish weekly candle that engulfed the previous week's candle.

However, remember that the range was at $602. We need to see a break above this level to confidently say we're heading toward new highs. So far, it hasn’t made a higher high (which would require breaking above $602).

Why is it a bullish candle on the weekly chart? It's a candle that opens below the previous one and closes above it, with strong volume.

Chinese stocks also gained momentum following the news of a positive start to talks between China and the US, boosting optimism about trade relations.

BTC also looks good. After invalidating a head and shoulders pattern, it appears interesting and seems poised to break new highs at $105k. This week, we’ll see if it retraces or breaks out aggressively. It’s a tricky spot to determine, and it’s often better not to trade in these situations since buying might mean buying at a high price, and selling could mean missing out on the momentum. Of course, it’s always important to consider your current profit/loss and the risk-reward ratio.

📜 Historical Perspective 📜

• In 2003, the U.S. faced a similar scenario with strong job growth and moderating inflation. Market optimism rose as the Federal Reserve held rates steady, signaling a potential pause in monetary tightening. That year, the S&P 500 gained over 26%, driven by economic resilience.

19/01/2025
✍️Market Lessons ✍️

Investors should avoid overreacting to single economic reports. A robust labor market doesn't always signal prolonged inflation, particularly when other indicators show moderation.

💸 Common Mistakes 💸

Misinterpreting geopolitical tensions or government policy announcements as immediate market triggers can lead to over-trading or panic selling.

📅Next Week’s Economic Calendar (20/01 to 24/01):📅

New York time zone

Monday, January 20, 2025

• All Day:

  • Holiday: United States - Martin Luther King, Jr. Day

Wednesday, January 22, 2025

• 10:00 AM

  • US Leading Index (MoM) (Dec): Actual: -, Forecast: -0.1%, Previous: 0.3%

• 1:00 PM

  • 20-Year Bond Auction: Yield: 4.686%

• 4:30 PM

  • API Weekly Crude Oil Stock: Previous: -2.600M

Thursday, January 23, 2025

• 8:30 AM

  • Continuing Jobless Claims: Forecast: -, Previous: 1,859K

  • Initial Jobless Claims: Actual: 220K, Forecast: 217K

• 12:00 PM

  • Crude Oil Inventories: Forecast: -, Previous: -1.962M

  • Cushing Crude Oil Inventories: Forecast: -, Previous: 0.765M

• 1:00 PM

  • 10-Year TIPS Auction: Yield: 2.071%

• 4:30 PM

  • Fed's Balance Sheet: Forecast: -, Previous: 6,834B

Friday, January 24, 2025

• 9:45 AM

  • S&P Global Manufacturing PMI: Forecast: -, Previous: 49.4

  • S&P Global Composite PMI: Forecast: -, Previous: 55.4

  • S&P Global Services PMI: Forecast: -, Previous: 56.8

• 10:00 AM

  • Existing Home Sales (Dec): Actual: 4.19M, Forecast: 4.15M

  • Existing Home Sales (MoM) (Dec): Forecast: -, Previous: 4.8%

  • Michigan 1-Year Inflation Expectations (Jan): Actual: 3.3%, Previous: 3.3%

  • Michigan 5-Year Inflation Expectations (Jan): Actual: 3.3%, Previous: 3.3%

  • Michigan Consumer Expectations (Jan): Actual: 70.2, Previous: 70.2

  • Michigan Consumer Sentiment (Jan): Actual: 73.2, Previous: 73.2

• 1:00 PM

  • U.S. Baker Hughes Oil Rig Count: Forecast: -, Previous: 478

  • U.S. Baker Hughes Total Rig Count: Forecast: -, Previous: 580

• 3:30 PM

  • CFTC Crude Oil Speculative Net Positions: Forecast: -, Previous: 306.3K

  • CFTC Gold Speculative Net Positions: Forecast: -, Previous: 279.4K

  • CFTC Nasdaq 100 Speculative Net Positions: Forecast: -, Previous: 10.5K

  • CFTC S&P 500 Speculative Net Positions: Forecast: -, Previous: -30.5K