EU and US futures are consolidating the gains of the beginning of the month.
The exuberance was mainly extinguished by the interventions of two members of the Federal Reserve board.
Mary Day of the San Francisco Fed and Raphael Bostic of the Atlanta Fed reiterated that the campaign against inflation is proceeding without hesitation, and the minimum target is a rate above 5%, from the current range of 4.25%-4.50%.
This is also supported by Fed Chairman Jerome Powell. The same line is supported in Europe.
"Interest rates will still need to rise significantly at a steady pace to reach levels tightening enough to ensure a timely return of inflation to our medium-term target of 2%."
This was stated by Isabel Schnabel, a member of the ECB governing council, speaking at a conference organized by the Riksbank on the independence of central banks.
Nasdaq 100 Futures, S&P 500 Futures, DAX Futures, FTSE MIB, IBEX 35: As written in previous articles, the indices are exhausting their strength, but are still supported by the rise in Chinese stock markets due to the reopening after so many months of containment of the virus.
The recession, which will lead to a drop in profits, is not yet discounted by the markets.
Recession Is Coming
We will therefore see the real collapse of the market, and we must not be fooled by the increases at the beginning of 2023.
EU indices will hold much better than US indices as the ECB is proving more dovish than the Fed.
Furthermore, high inflation in the EU is destined to collapse quickly, thanks to the fall in gas prices.
The ideal instrument in these cases is the VIX, also known as the fear index, which uses options on the S&P 500 index as underlying, with which it has a negative correlation: if the S&P 500 goes up, the VIX goes down and vice versa.
Natural gas
As predicted in previous articles, the natural gas crash has arrived. There is a clear difference between the short and long term profile of the market right now. In the long term, the situation is interesting.
Europe will need even more LNG to replace Russian volumes next summer as the continent reloads storage. Chinese demand recovers from lockdowns and offsets lower imports from other Asian buyers.
In the short term, the situation is negative.
The European danger has vanished, with full inventories in the EU thanks to a very low demand for gas, due to anomalous heat, savings at both an industrial and retail level, and the energy transaction underway.
In summer, however, the situation could be different, with possible difficulty in filling the inventories.
In the USA, demand is low due to the weather and that is creating a domestic excess supply - negative for prices - which adds to the doubts regarding the reopening of some export plants, which have been offline for some time and which contribute to the oversupply.
The Freeport factor will be decisive, one of the most important export plants which should reopen next week. Also the weather could continue to be an issue, as cold temperatures do not seem to arrive at the moment.
In Area 4, 3.50 I still expect a technical rebound from the gas, with a target of 5.
Crude oil
Negative start of 2023 for oil prices due to concern from COVID-19 infections in China.
While prices will suffer in the short term, the situation is positive in the long run for two reasons.
The price cap, although not penalizing for Russia, could lead to an increase in demand for American oil - very positive for prices - and to a collapse in Russian oil production.
Chinese demand for oil, held back by COVID-19, will restart in 2023 thanks to the easing of restrictions at the end of 2022.
All this is combined with the fact that oil stocks are at their lowest in 20 years, with countries like Russia reporting sharply declining production, a factor that is good for prices as there is a shortage of oil.
I remain positive over the long-term with a $85 target.
Tesla (NASDAQ:TSLA): Bad period for the stock destined to continue
There are problems in China, with lower prices, due to a weakening demand which means lower margins, and competition in Europe with Stellantis NV (NYSE:STLA) is increasingly threatening.
Also, Elon Musk is increasingly distracted by Twitter. The statements from Musk, who says that he will leave the post of CEO Twitter once a replacement has been found, were of no use.
As written early in 2022, according to my model, the stock was worth $170 and was already very expensive at the beginning of the year.
In light of the latest data, I am updating my tesla fair value at $85, a level where I will start thinking about buying the stock.
Disclosure: I hold a Buy position in natural gas, VIX, and a US stock with big upside potential. For information on my services and investment strategies, you can write me on my TW
The exuberance was mainly extinguished by the interventions of two members of the Federal Reserve board.
Mary Day of the San Francisco Fed and Raphael Bostic of the Atlanta Fed reiterated that the campaign against inflation is proceeding without hesitation, and the minimum target is a rate above 5%, from the current range of 4.25%-4.50%.
This is also supported by Fed Chairman Jerome Powell. The same line is supported in Europe.
"Interest rates will still need to rise significantly at a steady pace to reach levels tightening enough to ensure a timely return of inflation to our medium-term target of 2%."
This was stated by Isabel Schnabel, a member of the ECB governing council, speaking at a conference organized by the Riksbank on the independence of central banks.
Nasdaq 100 Futures, S&P 500 Futures, DAX Futures, FTSE MIB, IBEX 35: As written in previous articles, the indices are exhausting their strength, but are still supported by the rise in Chinese stock markets due to the reopening after so many months of containment of the virus.
The recession, which will lead to a drop in profits, is not yet discounted by the markets.
Recession Is Coming
We will therefore see the real collapse of the market, and we must not be fooled by the increases at the beginning of 2023.
EU indices will hold much better than US indices as the ECB is proving more dovish than the Fed.
Furthermore, high inflation in the EU is destined to collapse quickly, thanks to the fall in gas prices.
The ideal instrument in these cases is the VIX, also known as the fear index, which uses options on the S&P 500 index as underlying, with which it has a negative correlation: if the S&P 500 goes up, the VIX goes down and vice versa.
Natural gas
As predicted in previous articles, the natural gas crash has arrived. There is a clear difference between the short and long term profile of the market right now. In the long term, the situation is interesting.
Europe will need even more LNG to replace Russian volumes next summer as the continent reloads storage. Chinese demand recovers from lockdowns and offsets lower imports from other Asian buyers.
In the short term, the situation is negative.
The European danger has vanished, with full inventories in the EU thanks to a very low demand for gas, due to anomalous heat, savings at both an industrial and retail level, and the energy transaction underway.
In summer, however, the situation could be different, with possible difficulty in filling the inventories.
In the USA, demand is low due to the weather and that is creating a domestic excess supply - negative for prices - which adds to the doubts regarding the reopening of some export plants, which have been offline for some time and which contribute to the oversupply.
The Freeport factor will be decisive, one of the most important export plants which should reopen next week. Also the weather could continue to be an issue, as cold temperatures do not seem to arrive at the moment.
In Area 4, 3.50 I still expect a technical rebound from the gas, with a target of 5.
Crude oil
Negative start of 2023 for oil prices due to concern from COVID-19 infections in China.
While prices will suffer in the short term, the situation is positive in the long run for two reasons.
The price cap, although not penalizing for Russia, could lead to an increase in demand for American oil - very positive for prices - and to a collapse in Russian oil production.
Chinese demand for oil, held back by COVID-19, will restart in 2023 thanks to the easing of restrictions at the end of 2022.
All this is combined with the fact that oil stocks are at their lowest in 20 years, with countries like Russia reporting sharply declining production, a factor that is good for prices as there is a shortage of oil.
I remain positive over the long-term with a $85 target.
Tesla (NASDAQ:TSLA): Bad period for the stock destined to continue
There are problems in China, with lower prices, due to a weakening demand which means lower margins, and competition in Europe with Stellantis NV (NYSE:STLA) is increasingly threatening.
Also, Elon Musk is increasingly distracted by Twitter. The statements from Musk, who says that he will leave the post of CEO Twitter once a replacement has been found, were of no use.
As written early in 2022, according to my model, the stock was worth $170 and was already very expensive at the beginning of the year.
In light of the latest data, I am updating my tesla fair value at $85, a level where I will start thinking about buying the stock.
Disclosure: I hold a Buy position in natural gas, VIX, and a US stock with big upside potential. For information on my services and investment strategies, you can write me on my TW