Daily Alert – Tuesday 25th January 2022: Febrile equities worry me

Mark NugentDaily Alert, Jan 2022

Daily Alert – Tuesday 25th January 2022: Febrile equities worry me

Good morning.

The risk register is lengthy: Russia/Ukraine, inflation, Fed over-reaction to inflation, some surprising corporate earnings and outlooks, QE tapering and Covid-19 (note to most countries – it’s over, it really is.)

Yesterday, equities plunged by around 4 percent before recovering to end at the starting price on the daily candle. Normally I’d see the resulting pin bar (small body, huge wick to, in this case, the downside) as a buy signal, but the magnitude of the move was unnerving. I did nothing and so far, this morning, the asset class is taking another leg down.

Oil clings to resistance, which is now acting as support, as it so often does.

The JPY/commodity currency dynamic is behaving in accordance with risk-off sentiment. The USD, EUR and GBP are choppy.

I think the markets are too febrile to trade. This may produce my first “no result” month since January 2016 and I feel the need to avoid that, but good sense says I shouldn’t trade for the sake of generating a result purely for appearances.

The next risk event is the Fed tomorrow night. Let’s hope they can take one variable off the risk register by assuring us all (again) that they can tame inflation without trashing the US economy. That would be calming.

We’ll be back tomorrow.

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