Weekly Wisdom: All Eyes On FOMC Meeting

Greetings fellow traders and welcome to your September 12th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

Now let’s get to what we’re currently seeing in these volatile markets and what we have our focus on going forward.

Taking a look back on this week, September 9 – 13:

• Markets had a very volatile week this week yet again, but a bit different from last week’s pure selling that took place on the first week of September.
• $SPX futures started the week off consolidating sideways ahead of Wednesday’s CPI inflation number, with Wednesday seeing a huge range for intraday trading. 
• The CPI results were mixed, with markets selling off lower in a heavy way in the morning, only to fully reverse back higher and end Wednesday’s session strong for a 150+ handle intraday reversal higher. 
• Bulls have now taken back control of the market following Wednesday’s candle.
• Data for the week began on Monday with final wholesale inventories m/m showing a beat at 0.2% vs 0.3% expected.
• Tuesday delivered the update for the NFIB Small Business Index which was a miss at 91.2 vs 93.6 expected.
• Wednesday was the big data day this week, bringing out latest CPI inflation updates, which were a bit mixed and slightly leaned to the hotter side. CPI y/y came in at 2.5% vs 2.5% expected, with CPI m/m also coming inline at 0.2%. Core CPI y/y was 3.2% vs 3.2% expected, while core CPI m/m was slightly hotter than expected at 0.3% vs 0.2% expected. These numbers seem to have solidified a 25bps rate cut to come at the next FOMC meeting which takes place next week, as opposed to the 50bps many are thinking is needed. However, markets finished Wednesday’s trading session strong and bullish.
• Thursday delivered more inflation data with the latest PPI updates, which also were mixed and leaned to the hotter side. PPI y/y came in at 1.7% vs 1.7% expected, while PPI m/m came in slightly hot at 0.2% vs 0.1% expected. Core PPI y/y was inline at 2.4%, while core PPI m/m was also slightly hot at 0.3% vs 0.2% expected. These numbers didn’t move the market much besides put a pause to the buying that was seen on Wednesday afternoon. We also got our weekly unemployment claims before Thursday’s open which came in at 230,000 vs 227,000 expected.
• Friday, September 13 brings the update for import prices m/m at 8:30 a.m. ET. We’ll then see the latest for University of Michigan consumer sentiment and inflation expectations at 10:00 a.m. ET.

Here’s what we are eyeing next week, September 16 – 20:

Level Highlights:

• $SPX futures started the week off slow and sideways, with much of the week’s action taking place throughout the Wednesday trading session.
• Wednesday’s CPI numbers initially hit markets lower in the morning, but bulls stepped in mid day and reversed us higher for a 150+ handle V bottom to new highs on the day and the week.
• After Wednesday’s session, bulls have now taken back control with a solid close above both the 5500 and 5550 levels. 
• Last week we wrote that bulls would need to take back 5600 for control, but that was before Friday had another huge leg lower, so those levels moved down a bit – we have since negated and closed back over Friday’s big down candle.
• Bulls are now back in control and must hold the 5500 level going forward, or we risk slipping back down to new lows, ideally holding 5525 on any short term weakness.
• Markets are now back up to approaching the 2 week range that we broke down from at the start of September, roughly between 5580-5660.
• Bulls are currently doing some battle around the initial 5580 resistance level, with further resistance on more upside coming at 5600 and then the 5640-5660 zone.
• Bears may start to get a little excited should the $VIX retake the 19 level, but 20.50 is the bigger breakout for them to go after.

Upcoming News:

• Monday, September 16 starts the week off slow with the update for the Empire State Manufacturing Index at 8:30 a.m. ET.
• Tuesday, September 17 delivers new data for retail sales and core retails sales m/m at 8:30 a.m. ET.
• Wednesday, September 18 is the big day with the FOMC statement and federal funds rate update at 2:00 p.m. ET, with Powell delivering his press conference at 2:30 p.m. ET. Before that in the morning, we will see data for building permits and housing starts at 8:30 a.m. ET.
• Thursday, September 19 brings weekly unemployment claims, the Philly Fed Manufacturing Index, and the current account updates at 8:30 a.m. ET. These are followed by existing home sales and the CB Leading Index m/m update at 10:00 a.m. ET.
• Friday, September 20 does not bring any meaningful US data to end the week.

Here’s Your Chart of the Week:

Via Bloomberg:  Markets have priced in a 25bps cut for next week’s FOMC meeting, with 26bps of cut premium priced into September and 105bps by the December FOMC meeting.

Source

SPY Daily Update:

$SPY daily chart had a very large intraday range with a very strong close on Wednesday, negating last Friday’s sell candle. Bulls now have 557, 560, and 564 resistance ahead of them.

SPY Weekly Update:

$SPY weekly chart giving a strong inside week this week – bigger picture bulls still need a close back above 560 / last week’s open to fully gain back control.

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-Patrick Hawe

Disclosures

Patrick Hawe’s current positions:

*As of 1:58pm ET September 12, 2024

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