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The Price Action Lab Report-Week of January 30, 2023 [Premium Articles]

Photo by Burak The Weekender

Market analysis for the week of January 30, 2023. Major market indexes, ETFs, commodities, and forex. This report includes 15 charts and tables. Access to the full report requires a Premium Articles or an All-in-One subscription.

Report contents

  1. Weekly Summary.
  2. Chart of the Week.
  3. Market Performance Recap.
  4. Major Market Indexes.
  5. Commodity ETFs and ETNs.
  6. Strategy ETFs.
  7. Spot Currency Pairs.
  8. Strategic Allocations.

1. Weekly Summary (January 23 – January 27, 2023)

  • Stocks gained, with higher-risk securities leading the advance.
  • Bond prices and yields ended the week unchanged.
  • Commodities were mixed, with energy prices falling.
  • The US dollar fell against most major currencies.

Large-cap stocks ($SPX) ended a volatile week with a gain of 2.5%. The S&P 500 gained 1.2% on Monday, fell slightly on Tuesday, then dropped as much as 1.7% on Wednesday but rebounded from the lows of the day to close unchanged. The rally resumed on Thursday due to expectations of a pause in rate hikes going forward, and the index ended the week with a gain of 2.5%.

The Dow Jones Industrial Average ($DJI) gained 1.8%. Small caps ($RUT) added 2.4%. Most of the buying action was in higher-risk securities: tech stocks ($NDX) and the S&P 500 high beta index ($SP5HBI) surged 4.7%. The S&P 500 low volatility index ($SP5LVI) was up only 0.5% due to risk-on.

US Treasury Bonds ($SPBDUSBT) were unchanged from the previous week. The 10-year note yield closed at 3.52%. The spot price of crude oil (@WTI) fell 1.9% due to forecasts of a recession later this year. Spot gold (@GC) was slightly down for the week. The CRB index ($CRB) fell 0.3%, primarily due to losses in energy. The US dollar index’s ($USDX) downtrend continued with a small loss of 0.1% for the week.

Year-to-date, the S&P 500 high beta index ($SP5HBI) is up 16%, tech stocks ($NDX) are gaining 11.2%, and small caps ($RUT) have risen 8.5%. The US dollar index ($USDX) is down 1.5%, and the S&P 500 low volatility index ($SP5LVI) is down 0.9%.

Year-to-date Top NASDAQ-100 Winners

Year-to-date, 25 stocks in the NASDAQ-100 have gained more than 15%. However, 21 of these stocks are still more than 20% below their all-time highs, and nine stocks are more than 50% below their all-time highs. The top two gainers are 78% and 81% below the all-time highs. More importantly, only seven stocks are within 5% of their all-time highs, and only one stock, VRTX, made new all-time highs last week. Therefore, there is still no clear indication of whether this is a relief rally or a rally after a bear market bottom. Investors are increasing risk in the hope the bottom is already in place since by the time everything is clear, the reward/risk decreases significantly.

The ensemble of our six systematic strategies is nearly flat year-to-date, compared to a 6% gain for the S&P 500 index and a gain of 4.9% for the 60/40 portfolio with SPY and AGG ETFs. Our PSI5TF trend-following strategy with 23 futures contracts (long and short) is down 1.9% after gains of about 24% last year. Trend-following had a slow start this year after a good run last year. For example, the KMLM ETF is down 3.8% year to date (see Section 6 of the report).

2. Chart Of The Week

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Specific disclaimer: This report includes charts that may reference price target levels determined by technical and/or quantitative analysis. No charts will be updated if market condition changes affect the charts’ levels and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.

Disclaimer:  No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.

Charting and backtesting program: Amibroker. Data provider: Norgate Data

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