Top Markets to Trade for 2023

Happy New Year and welcome to 2023. Today we're going to talk about the top markets to trade and 2023. I spend a bunch of time at the end of every year, examining all the markets, and putting together a game plan of what I think is going to be the top markets for any given year. If you follow me on Facebook, I actually did a review of my top ideas a couple weeks ago, and it was really interesting to see, I always love going back and seeing how did the market actually unfold versus what I thought it would happen. I've learned a tremendous amount over the years actually going through this exercise.

Today, I'm going to take you through it. First of all, let's talk about how do we determine the top markets to trade for any given year? Well, we use a framework that I call the method, and the method is a comprehensive technical framework that allows you to analyze any market, any asset class, any time frame, and do it in a fractal manner. It's, in my belief, the most comprehensive framework out there for understanding markets.

Once you understand the method, you can go into any market in any time frame, and very quickly be acclimated and understand what's going on. We use the method and let's talka little bit about what the method is, the method defines a market environment for every time frame. It defines the levels of support and resistance to actually help define that market environment. One of our core beliefs is understand what the market environment is, and trade in congruence with the market environment. That's the path to easy money. When you fight the market environment, this is where people really get chopped up and struggle.

We want to understand the market environment and we want to understand where it transitions. Not only do we want to understand what the environment is and where it transitions, we want to understand what is the probability? What is the likelihood that we actually will transition. Once we have that, we actually go we incorporate volume, we incorporate momentum, and we incorporate volatility, to determine the expectations in that market environment. They really give us a sense of how strong environment is or how fragile it is. Then we use a multiple time frame structure. What this multiple time frame structure does is allows us to define market environments for various time frames and then see how they relate to one another. A strong market we'll be in an uptrend across several time frames. It also, the multiple timeframes structure, helps us reinforce support and resistance levels across multiple time frames. We'll see yearly support, quarterly support and monthly support, all come into the same level. When we see that happening, we know that we have a very strong support level that is likely to hold. We take all this into account. As we go into the year, let's talk about some of the top trading ideas I see.

One of my favorite themes for 2023 is actually long the soybean complex, and particularly soybean meal and soybeans themselves. There's also soybean oil. Soybean oil looks okay. It looks somewhat strong, making the complex plural. But soybean meal looks very interesting to me. What I'm showing you here, this is a three year yearly chart. I'm looking at what's the price behavior in a three year time frame and what is the behavior in the yearly time frame. We're defining market environments for both. We're using all of these concepts that we've talked about. We're using volatility, we're using volume, we're using momentum, we're actually using trend indicators. The three year soybean meal is in an uptrend and so is the yearly. Volume is confirming the move, momentum is confirming the move. Soybean meal is trading at all time highs. When soybean meal is strong, the soy complex is usually very strong. It tends to be the best. The best soy complex moves happen when they are led by soybean meal. This is what we're seeing. We have a three year, last year we had a three year breakout and a yearly breakout. We're moving into a transition we talk about we have a breakout then we go to transition and then we go to trend. We're transitioning to a trending environment.

We also like soybeans. Soybeans actually broke out last year and they broke out on the three year. They actually have not broken out yet on a three year. Oh yes, they broke out on the three year in 2021. They live very good too. They're near all time highs, they have volume supporting the move, momentum does not support the move as strongly as soybean meal does, but because soybean meal is so strong, we're willing to overlook that a little bit. We like soybeans.

Another market that we really like is the dollar peso. I'm going to show you the future here. This is the Mexican peso future. We like being long the Mexican peso, the Mexican peso is in the midst of a three year breakout. It broke out on the yearly, it's got supporting momentum and it has supporting is a supporting trend and supporting volume. Not only that, thematically, I believe that Mexico is going to be a major beneficiary of all the tension between United States and China. Many US companies are moving manufacturing out of China, back to Mexico. I've had a belief that if Mexico could get its crime problem under control, the country would explode. We really liked the peso.

We also like short fixed income. It was a little bit of a caveat. Fixed income had a huge down year last year, as you know. The two year note had a massive year. The two year note had a three year breakout, it had a yearly breakout, it's got strong momentum structure, it's a little too volatile. That's the one thing I don't like, the move last year was so big, whenever a market has a huge move, it often has a difficult time following through in the next year. I expect fixed income to go make new lows, maybe significant new lows, but I'm not sure it's going to stay down there. I could see us having a choppy year where we would trade all the way down into here, maybe even lower. They basicaly trade in this range through the year. If we go through the different US fixed income, they all look similar. The two year was down the most, it was the most bearish. Five year looks very similar, three year breakout, one year breakout, emerging momentum down really strong momentum structure. If we jump all the way out to the 30 year, we'll see that the third year was much stronger or less weak, however, we want to say it in 2022. It's not broken out on a three year where all the other fixed income contracts have. It does have strong momentum down. It looks like it could go lower. If the long end to me could actually go a lot lower than the short end. I like the long end a little bit better for the short, we'll see. I like the overall US fixed income to go lower, although it may put the low in mid year.

German fixed income is very similar. I don't have this in this chart back. German fixed income looks very similar to US fixed income. Three-year breakouts, yearly breakouts, emerging momentum down supporting Volume and Volatile.

Last is the crude complex. Crude complex had a big year last year. What's really interesting is there's some big conflicting forces going on in the crude complex. I see crude having the potential to go significantly lower this year. Much, much lower and it would be led by US crude. I think US crude could trade all the way down to $53 a barrel and potentially even lower. Now the conflict is that we have Europe, and we have unleaded gasoline. The complex itself is not as weak as crude itself is. We have a situation where this is unleaded gasoline, you had a breakout up on a three year and a breakout up on the yearly, the momentum is reasonably, sorry, the volume is reasonably supportive. There are some divergences, so what I see in the crude complex is it's the whole complex is at an inflection point, or it's either going to go a lot higher, or it's going to go a lot lower. I don't believe it's going to sit here. Because it's going to move there's going to be the potential for some great trading opportunities. I suspect it's lower but I could I but I don't know that yet. It's at this inflection point that we're going to watch really closely. We're going to be watching monthly levels. If monthly levels hold, the crude complex can go much higher. Monthly support holds it, can go much higher. If that support level breaks, the whole complex could collapse.  My favorite idea last year, or

my one of my second favorite idea last year, was DOLLAR YEN. The yen would weaken the dollar rally relative to the yen and sure enough in the dollar exploded, and it gave some back late in the year. The dollar yen had a three year breakout, it had a yearly breakout and it has emerging momentum, but I don't like is it's been very volatile. It's gonna have a difficult time having such a huge move, moving much, much higher, I think it will definitely retest the highs. I think the yen will definitely retest these highs up here, but that may be all there is in it. However, because there is such big range if you want to make money, find range.

Volatility is your friend. This is one of the 10 Irrefutable Laws of trading success we talked about. Volatility is your friend. So, when you see markets with big ranges, there's going to be opportunity to trade, you just got to get clear about what's happening. The dollar yen is either going to go make new highs, or it's going to backfill this whole big move and if it backfills, this whole big move, there's going to be big moves up and down. You might be asking yourself, why do I care about the yearly trend, I'm a day trader or I'm a swing trader, I can go show you the statistical evidence that basically it is much easier to make money, performance goes up in short term trading, swing trading, when it is backed up by long term trends.

Long term trends are where the big money is made. Question is can you identify them and, even if you identify them, can you stay aware of them? Can you be aware that there's a big trend are you just out shopping around? Because a lot of times when people are unaware of this, they'll have a trade that they think they're having a big move, a lot of profit, they're excited they think they've got a great trade on and all of a sudden it reverses hard on them. A lot of times, the reason it reverses hard is the market is running into long term supporter resistance and long term buyers of long term sellers show up to take advantage of the value that's been created by the move. Taking your trade in reversing it hard on you. This is important to understand.

I gave you a lot to think about here. Take my ideas and watch them. Be aware of the long term time frames in your trading and I hope you have an amazing year. I'll see you next Tuesday when I come back with another edition of trader Tip Tuesday where I'm showing you additional ideas to help you take your trading to an elite level. Let's have an awesome year! See you next week. Bye.