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The first trading week of the year is nearly in the books, and investors have a lot to digest. Below are five key takeaways from week #1:
1. Some 2022 Pain Trades Continued
Many stocks that were pummeled in 2022 picked up where they left off in the first week of 2023. As of Friday morning, Tesla (TSLA - Free Report) was down more than 10% on the week. Sellers came into the stock as the EV maker released delivery numbers that narrowly missed expectations and cut prices in China amid slowing demand. The stock is working on its sixth straight down week and is nearing its most oversold levels in history.
Image Source: Zacks Investment Research
Pictured: TSLA is at extreme oversold levels.
Perhaps the most painful trade of 2022 was the crypto trade. Unfortunately for investors, 2023 is off to a brutal start as well. Silvergate , a crypto-friendly bank, saw shares nearly get sliced in half Thursday before finishing the day down 42.73%. Recently, revelations emerged that the crypto lender received $1 billion in deposits from doomed crypto exchange FTX. Amid a brutal bear market and fear of losing funds, crypto-associated deposits fell by more than 70% in the fourth quarter.
Image Source: Zacks Investment Research
Pictured: SI's debt-to-equity ratio is on the rise as the troubled crypto lender suffers a bank run.
2. Sentiment Shift
Each week since 1987, The American Association of Individual Investors (AAII) conducts an investor sentiment survey. This week, the bullish sentiment observed ranks among the 60 lowest in the survey’s history. Meanwhile, neutral sentiment is on the rise and is the highest since early last year, while bearish sentiment remains above average. While the major market indices are stuck in debilitating, drawn-out downtrends, the news is a welcome sign for contrarians. Before getting too excited, investors should be on the watch for price rotation (higher highs and lows) and more favorable earnings expectations moving forward.
3. The Resurgence of China
Like U.S. equity markets, Chinese markets suffered in 2022. The strict government enforced Covid lockdowns, a real estate crisis, and a weak global economy were behind the sell-off. However, recently, Chinese stocks have begun to turn the corner. This week, a plethora of Chinese-related stocks outperformed as Covid numbers peaked and regulators stepped in to help struggling domestic real estate developers. Stocks such as Alibaba (BABA - Free Report) and Pinduoduo (PDD - Free Report) shot higher by more than 15% on the week as of Friday morning.
Image Source: Zacks Investment Research
Pictured: EPS estimates suggest that high quality Chinese names like PDD are turning the corner.
While the stocks are performing well, they are stretched in the short-term. Investors should monitor Chinese securities for constructive pullbacks moving forward.
4. Friday Jobs Number
Nonfarm payroll measures employment for construction, goods, and manufacturing companies (does not measure farm workers) in the U.S. Friday morning at 8:30 EST, the December number was released. For the month, payrolls rose by 223,000 versus estimates of 203,000 additions. The S&P 500 Futures ripped higher by nearly a percent immediately following the release.
5. Oil vs. Oil Stocks: An Interesting Divergence
Crude oil fell by more than 5% on the week. Knowing that information, one would expect that oil-related stocks such as Halliburton (HAL - Free Report) ,Schlumberger (SLB - Free Report) , and Exxon Mobil (XOM - Free Report) also fell sharply. However, this was not the case - the stocks were nearly flat on the week. The type of resiliency seen in oil stocks this week should be watched closely by investors. Any rebound in oil prices may lead to breakouts in oil-related stocks.
Image Source: Zacks Investment Research
Pictured: If oil prices can rebound, several oil stocks like HAL are likely to breakout.
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Week #1 Recap: 5 Key Takeaways
The first trading week of the year is nearly in the books, and investors have a lot to digest. Below are five key takeaways from week #1:
1. Some 2022 Pain Trades Continued
Many stocks that were pummeled in 2022 picked up where they left off in the first week of 2023. As of Friday morning, Tesla (TSLA - Free Report) was down more than 10% on the week. Sellers came into the stock as the EV maker released delivery numbers that narrowly missed expectations and cut prices in China amid slowing demand. The stock is working on its sixth straight down week and is nearing its most oversold levels in history.
Image Source: Zacks Investment Research
Pictured: TSLA is at extreme oversold levels.
Perhaps the most painful trade of 2022 was the crypto trade. Unfortunately for investors, 2023 is off to a brutal start as well. Silvergate , a crypto-friendly bank, saw shares nearly get sliced in half Thursday before finishing the day down 42.73%. Recently, revelations emerged that the crypto lender received $1 billion in deposits from doomed crypto exchange FTX. Amid a brutal bear market and fear of losing funds, crypto-associated deposits fell by more than 70% in the fourth quarter.
Image Source: Zacks Investment Research
Pictured: SI's debt-to-equity ratio is on the rise as the troubled crypto lender suffers a bank run.
2. Sentiment Shift
Each week since 1987, The American Association of Individual Investors (AAII) conducts an investor sentiment survey. This week, the bullish sentiment observed ranks among the 60 lowest in the survey’s history. Meanwhile, neutral sentiment is on the rise and is the highest since early last year, while bearish sentiment remains above average. While the major market indices are stuck in debilitating, drawn-out downtrends, the news is a welcome sign for contrarians. Before getting too excited, investors should be on the watch for price rotation (higher highs and lows) and more favorable earnings expectations moving forward.
3. The Resurgence of China
Like U.S. equity markets, Chinese markets suffered in 2022. The strict government enforced Covid lockdowns, a real estate crisis, and a weak global economy were behind the sell-off. However, recently, Chinese stocks have begun to turn the corner. This week, a plethora of Chinese-related stocks outperformed as Covid numbers peaked and regulators stepped in to help struggling domestic real estate developers. Stocks such as Alibaba (BABA - Free Report) and Pinduoduo (PDD - Free Report) shot higher by more than 15% on the week as of Friday morning.
Image Source: Zacks Investment Research
Pictured: EPS estimates suggest that high quality Chinese names like PDD are turning the corner.
While the stocks are performing well, they are stretched in the short-term. Investors should monitor Chinese securities for constructive pullbacks moving forward.
4. Friday Jobs Number
Nonfarm payroll measures employment for construction, goods, and manufacturing companies (does not measure farm workers) in the U.S. Friday morning at 8:30 EST, the December number was released. For the month, payrolls rose by 223,000 versus estimates of 203,000 additions. The S&P 500 Futures ripped higher by nearly a percent immediately following the release.
5. Oil vs. Oil Stocks: An Interesting Divergence
Crude oil fell by more than 5% on the week. Knowing that information, one would expect that oil-related stocks such as Halliburton (HAL - Free Report) , Schlumberger (SLB - Free Report) , and Exxon Mobil (XOM - Free Report) also fell sharply. However, this was not the case - the stocks were nearly flat on the week. The type of resiliency seen in oil stocks this week should be watched closely by investors. Any rebound in oil prices may lead to breakouts in oil-related stocks.
Image Source: Zacks Investment Research
Pictured: If oil prices can rebound, several oil stocks like HAL are likely to breakout.