2023 Market Forecast by Solid ECN

[SOLID ECN LLC]

Nvidia Shares Surges after Beating Expenctations

Nvidia (NVDA.US) is gaining nearly 8% ahead of the Wall Street open as revenue and earnings beat analysts' expectations. Wall Street's hopes are being ignited by the data center segment, which could be the beneficiary of increased demand for high-performance graphics chips to drive AI development. Since the beginning of the year, Nvidia's stock price has already risen nearly 45%:​

• Revenue: $6.05 billion vs. $6 billion expectations ($7.64 billion in Q4 2021)​
• EPS: $0.88 vs. $0.81 expectations ($1.32 in Q4 2021)​
• Data centers: $3.62 billion vs. $3.87 billion expectations (up 11% y/y)​
• Gaming: $1.83 billion vs. $1.6 billion expectations (down 46% y/y)​
• Professional visualizaion: $226 million vs. $195 million expectations (down 65% y/y)​
• Automation and robotics (automotive): $294 million vs. $267 million expectations (up 135% y/y)​

Nvidia is beginning to be seen by Wall Street as a chipmaker that can more gently withstand a possible economic downturn thanks to its advanced technology. This is due, among other things, to the production of high-performance graphics chips used to 'train' artificial intelligence (machine learning). AI has enjoyed a surge in investor interest since ChatGPT's debut in November 2022. Nvidia CEO Jensen Huang indicated that the trend is now at a 'tipping point' and the opportunities offered by generative AI are awaiting wide adoption among companies around the world.​

• The company reported that growth in data centers has fueled higher demand from U.S. cloud providers - a segment that can benefit from generative AI, which requires powerful computing power;​
• Gaming revenue fell as expected, as the market saturated in recent years when sales were sharply elevated (the effect of a high base from the pandemic era) - it is now correcting this unsustainable jump in demand, but still gained nearly 100% from Q4 2019;​
• Nvidia indicated that, it is taking fewer orders for chips for gaming consoles (Nintendo, among others) - orders are still dragged down by high inventory of trading partners.​

Nvidia shares (NVDA.US), D1 interval. The SMA100 (black line) crosses the SMA200 (red line) from downside, forming a bullish 'golden cross' formation, the last time this happened in August 2019. The nearest levels of resistance and support are marked by 61.8 and 38.2 Fibonacci abolition, respectively, of the downward wave started in 2021. Pre-opening trading indicates a start to today's session near $221 per share.​

 

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Oil

This week marks the first anniversary of the Russian invasion of Ukraine. While the conflict was expected to be short-lived, the reality turned out to be quite different. Ukraine defends itself thanks to its determination, support from the West and numerous sanctions imposed on Russia. Meanwhile, the invader is still not willing to retreat despite several defeats. Financial markets, meanwhile, have changed markedly over the last 12 months, although some of the price movements were rather surprising. Price movements on many markets reached several dozen or even several hundred percent in the past few months. However, currently the situation stabilized and earlier moves are being reversed on several markets.


Energy commodities

Russia was one of the largest suppliers of energy resources not only for Europe, but also for many nations around the world. Global community feared that outbreak of the conflict at the end of February 2022 would halt exports of key commodities from Russia. The Kremlin itself decided to use gas as a tool to blackmail Europe. However, after initial price shock on gas, oil and coal markets, prices fell and stabilized as Europe found other suppliers of these key commodities. Putin wanted Europe to freeze over the winter but reduced consumption, supplier diversification and warmer than expected weather pushed the prices below pre-war levels.​

• TTF natural gas: -42% y/y​
• US natural gas: -57% y/y​
• Brent: -17% y/y​
• ARA coal: +8% y/y​

This week marks the first anniversary of the Russian invasion of Ukraine. While the conflict was expected to be short-lived, the reality turned out to be quite different. Ukraine defends itself thanks to its determination, support from the West and numerous sanctions imposed on Russia. Meanwhile, the invader is still not willing to retreat despite several defeats. Financial markets, meanwhile, have changed markedly over the last 12 months, although some of the price movements were rather surprising. Price movements on many markets reached several dozen or even several hundred percent in the past few months. However, currently the situation stabilized and earlier moves are being reversed on several markets.


Energy commodities

Russia was one of the largest suppliers of energy resources not only for Europe, but also for many nations around the world. Global community feared that outbreak of the conflict at the end of February 2022 would halt exports of key commodities from Russia. The Kremlin itself decided to use gas as a tool to blackmail Europe. However, after initial price shock on gas, oil and coal markets, prices fell and stabilized as Europe found other suppliers of these key commodities. Putin wanted Europe to freeze over the winter but reduced consumption, supplier diversification and warmer than expected weather pushed the prices below pre-war levels.​

• TTF natural gas: -42% y/y​
• US natural gas: -57% y/y​
• Brent: -17% y/y​
• ARA coal: +8% y/y​

Lockheed Martin and BP gained following the outbreak of the Russia-Ukraine war. Lockheed gained over 20% while shares of BP rallied over 40%.


Sanctions, economy, inflation and China

Conflict between Russia and Ukraine is still ongoing. The West is providing massive support for Ukraine, by providing it with weapons, training for its military personnel as well as economic relief. Apart from that, a number of sanctions have been levied on the Russian finance sector and key export commodities. The Russian economy has benefited from sky-high energy commodity prices and it has allowed it to experience a smaller hit than the Ukrainian economy.

Commodity price increases and shutdown of some communications lines boosted inflation around the world. However, it should be said that inflation was on an uncontrolled, upward trajectory even before the outbreak of war. It seems that central banks have achieved at least a partial success but it should be said that a bulk of current deceleration in price growth is driven by a drop in commodity prices.

One should not also forget about China, whose ambition it is to change the direction of dependence on Russia. Current Russian commodity sales revenue is generated mostly via sales to Asia. On the other hand, China has not decided on a similar move as the Russian and refrained from invading Taiwan as it could be a massive disruption to global supply chains.


Will the end of war trigger a market bull run?

Investors have been hoping for months for any signals suggesting a potential cease fire or peace negotiations. Currently, such a scenario seems neither quick, nor likely. Markets got used to war. One cannot rule out the possibility of Russia further restricting flows of energy commodities given that numerous countries embrace price caps that Russia opposes. On the other hand, it does not seem to be the base case scenario. The end of the war would be good news primarily for Ukraine but would unlikely be a breakthrough from a market point of view. However, it could pave the way for a quicker solution to issues like inflation or risk of economic recession. On the other hand, financial markets have been flooded with negative news as of late and such good news like the end of the Russia-Ukraine war could be a trigger for the return of the bull market.​

 

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EUR TRY: CBRT Cuts Rates by 50 bp, TRY Weakens

Central Bank of Republic of Turkey announced its latest rate decision today at 11:00 am GMT. Median expectation among economists surveyed by Bloomberg was for a 100 basis point rate cut while median expectation in Reuters poll was for 50 basis point rate hike. CBRT decided to go with a 50 basis point rate cut, slashing the one-week repo rate from 9.00 to 8.50%. The Bank said that decision was allowed by improvement in inflation trends and that scale of rate cut is adequate to support recovery. Central bank said that it is assessing the economic impact and damage of recent earthquakes that hit Turkey and Syria.

EURTRY gained following a 50 bp rate cut from CBRT.​

 

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ADAUSD

This week, the ADAUSD pair corrected downwards from the 0.4000 area (50.0% Fibonacci correction) but failed to break below the middle line of Bollinger bands (0.3845). The quotes are trying to change the current short-term uptrend, which is indicated by the reversal of Bollinger bands to horizontal movement after growth, the downward direction of Stochastic and the decrease in the MACD histogram in the positive zone.
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Also, the price chart and the histogram have signs of a “bearish” divergence, which also implies the possibility of negative dynamics. The resumption of the decline is possible only after the breakdown of the important support 0.3660 (Murrey level [7/8], Fibonacci correction 38.2%), and then its targets will be 0.3418 (Murrey level [6/8]) and 0.3173 (Murrey level [5/8], Fibonacci retracement 23.6%). If the quotes consolidate above the key “bullish” level of 0.4000, the upward movement may continue to 0.4395 (Murrey level [+2/8], Fibonacci retracement 61.8%), which seems less likely so far.

Resistance levels: 0.4000, 0.4150, 0.4395 | Support levels: 0.3660, 0.3418, 0.3173​

 

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EURTRY: CBRT Cuts Rates by 50 bp, TRY Weakens

Central Bank of Republic of Turkey announced its latest rate decision today at 11:00 am GMT. Median expectation among economists surveyed by Bloomberg was for a 100 basis point rate cut while median expectation in Reuters poll was for 50 basis point rate hike. CBRT decided to go with a 50 basis point rate cut, slashing the one-week repo rate from 9.00 to 8.50%. The Bank said that decision was allowed by improvement in inflation trends and that scale of rate cut is adequate to support recovery. Central bank said that it is assessing the economic impact and damage of recent earthquakes that hit Turkey and Syria.

EURTRY gained following a 50 bp rate cut from CBRT.​

 

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US500 Reverses Early Gains!

US equities at new session lows, while strengthens amid broad risk off sentiment.

Major Wall Street indices launched Thursday's session higher, however upbeat sentiment faded away later on and stock resumed recent downward correction, while the dollar index firmed up near 104.7, hovering near its strongest levels in seven weeks.

Investors remained cautious as recent US economic data pointed to a still-tight labor market. At the same time, minutes of the Federal Reserve’s last meeting showed that US policymakers largely agreed to keep fighting inflation with more interest rate hikes. Also rising geopolitical tensions weigh on market sentiment. Ahead of the first anniversary of the Russian invasion of Ukraine, NATO Chief Stoltenberg said that the alliance has observed indications that China is perhaps considering sending weapons to Russia. Meanwhile Germany’s Chancellor Scholz informed Chinese representatives that sending weapons to Russia is not acceptable.

US500 fell below psychological support at 4000 pts and is trading at its lowest level since the end of January. If current sentiment prevails, next support to watch can be found at 3920 pts, which is marked with previous price reactions and 200 SMA (red line).

EURUSUD pair extends downward move and is currently testing crucial support at 1.0570, which coincides with 38.2% Fibonacci retracement of downward wave launched in May 2021. Break lower may provide additional fuel for the bears.​

 

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NZDCAD​

The NZDCAD pair continued to provide correctional bearish tracs due to facing strong negative pressures caused by stochastic crawl below 50 level, to suffer additional losses and settle near 0.8360 level.

We notice the price consolidation within the bullish track that depends on 0.8390 level forming strong support line that allows us to wait to gather the additional positive momentum to manage to start activating the bullish track and expect to rally towards 0.8430, followed by attempting to breach 0.8485 obstacle in order to ease the mission of reaching additional stations in the upcoming period.​

 

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Crude Oil - The price is in a correction and may grow.

If the assumption is correct, the asset will grow to the area of 85.00–93.60. In this scenario, critical stop loss level is 73.50.

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Silver - Growth is possible.

If the assumption is correct, the XAGUSD pair will grow within the wave v of 1 to the area of 24.58 – 26. In this scenario, critical stop loss level is 20.36.

 

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US100​

• Indices from Asia-Pacific traded lower at the beginning of a new week. Nikkei dropped 0.1%, S&P/ASX 200 traded 1.1% lower, Kospi slumped 0.9% and Nifty 50 moved 0.8% lower. Indices from China traded 0.2-0.8% lower​
• DAX futures point to a slightly higher opening of the European cash session​
• US index futures little changed compared to Friday closing prices​
• UK prime minister Sunak is set to meet with EC President von der Leyen today to discuss the Brexit deal (Northern Ireland protocol). UK deputy PM Raab said that great progress has been made and that long-standing issue is close to be solved​
• ECB President Lagarde said that a 50 bp rate hike at the March meeting is not certain and remains data-dependent. ECB Visco said that peak rate could be 3.75% but it remains data-dependant​
• BoJ Governor nominee Ueda said that CPI growth will slow below 2% in fiscal-2023 but it will take time for the 2% target to be met sustainably and stably. He also said that current monetary easing conducted by Bank of Japan is appropriate​
• Conway, RBNZ chief economist, expects New Zealand official cash rate to peak around 5.5% around the middle of the year (4.75% currently)​
• Russia halted pipeline oil deliveries to Polish refiner PKN Orlen over the weekend​
• New Zealand retail sales dropped 0.6% QoQ in Q4 2022​
• Australian business inventories dropped 0.2% QoQ in Q4 2022 (exp. 0.0% QoQ)​
• Cryptocurrencies trade lower - Bitcoin drops 0.3%, Dogecoin trades 0.7% lower while Litecoin pulls back 0.4%. Ethereum gains 0.1%​
• Energy commodities trade mixed at the beginning of a new week - oil drops 0.9% while US natural gas prices jump 1.4%​
• Precious metals pull back slightly amid USD strengthening - gold trades 0.1% lower, silver drops 0.2% and platinum pulls back 0.5%​
• USD and EUR are the best performing major currencies while NZD and AUD lag the most​

Nasdaq-100 futures (US100) climbed back above the 12,000 pts mark but some selling pressure appeared as the European trading drew close and another pull back cannot be ruled out.​

 

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NATGAS

US natural gas prices once again launch a new week with an upward move. NATGAS continues upward movement launched on Friday. This move was triggered by forecasts for colder weather in key US heating regions over the next two weeks and therefore higher demand for natural gas.

US natural gas prices dropped around 70% between mid-December 2022 and mid-February 2023. While there were some upward corrections during this downward impulse, the one we are observing currently deserves a note. Taking a look at NATGAS chart at H4 interval, we can see that price broke above the 50-period Exponential Moving Average at the end of the previous week and it was the first such breakout since mid-December. This may hint that a large upward correction may be on the cards. A break above the upper limit of a market geometry at 2.816 would confirm bullish momentum.​