Weekly Wisdom: Big Tech Pushes Market Higher; VVIX Gives Warning

Greetings fellow traders and welcome to your February 8th 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, February 5 – 9:

• Markets broke higher this past Friday with the help of solid reports from $META and $AMZN last week, as well as semiconductors including $NVDA continuing to push higher.  
• $SPX futures have finally breached the 5000 level, reaching a high of 5020 on Wednesday which is new all time highs.  
• Data for the week began on Monday with a miss on final services PMI at 52.5 vs 52.9 expected. ISM services PMI was a beat at 53.4 vs 52.0 expected.  
• Wednesday’s trade deficit data was inline at -$62.2 billion. The 10-yr bond auction did not bring much market movement.  
• Thursday’s weekly unemployment claims were lower than expected at 218,000 vs 221,000 expected. Final wholesale inventories m/m were inline at 0.4%. Rates were little changed after the 30-yr bond auction.  
• Friday, February 9 ends the week quietly with no new economic data.

Here’s what we are eyeing next week, February 12 – 16:

Level Highlights:

• $SPX futures, as mentioned above, finally traded above the 5000 level and reached new all time highs of 5020 this week.  
• $SPX itself barely missed the 5000 print with a high on Wednesday of 4999.89.
• Next Tuesday is likely the most important day of the week as we get our latest CPI print, with the Fed watching closely to see how much inflation can come down while deciding when to cut rates for the first time.
• Market participants should now watch 4975 in $SPX futures as the momentum level where bulls do not want to see a close below.  
• Bulls may also want to be a bit cautious with $SPX futures giving about 100 handles of extension on the weekly chart from the weekly 5MA, currently down at 4918.  
• $VVIX is also giving a warning sign and showing divergence once again, which has traded up with the market the past 3 days this week.  
• Bears want to see $VVIX break over 90 which should ignite a better sell off.  
• The $VIX itself failed off 14.50 resistance once again, but should be able to wake up and break higher if the $VVIX continues to push higher. 
• Keep in mind that $VVIX divergence warnings can be anywhere from 3-5+ days early.

Upcoming News:

• Monday, February 12 starts the week off with the federal budget balance at 2:00 p.m. ET.  
• Tuesday, February 13 brings us the latest inflation update with CPI and core CPI at 8:30 a.m. ET. The Federal Reserve is still looking for a path to 2% inflation, but has noted that they do not need it to get there to start easing.
• Wednesday, February 14 does not bring any new data. Happy Valentine’s Day!
• Thursday, February 15 starts off with retail sales, core retail sales, the Empire State manufacturing index, Philly Fed manufacturing index, import prices, and weekly unemployment claims all at 8:30 a.m. ET. We’ll then see industrial production and capacity utilization rate at 9:15 a.m. ET. This is followed by business inventories and the NAHB Housing Market Index at 10:00 a.m. ET. 
• Friday, February 16 ends the week with PPI, core PPI, building permits, and housing starts at 8:30 a.m. ET. We’ll then get the University of Michigan consumer sentiment and inflation expectations index at 10:00 a.m. ET.

Here’s Your Chart of the Week:

Via: EPFR, Haver Analytics, Goldman Sachs Global Investment Research: As you can see on the chart below, tech flows have been pushing the market higher in the beginning of 2024 – many are now looking for rotation out of tech and into the broader market in order to keep the rally going

Source: https://twitter.com/WallStJesus/status/1753608679637537059/photo/1

SPY Daily Update:

$SPY has broken out once again into new all time highs, with 500 as a big psychological level that has yet to trade. Keep in mind the $VVIX is starting to show negative divergence.

SPY Weekly Update:

$SPY weekly chart is working on 14/15 green weeks this week – a run that may see a pause soon if the $VVIX divergence plays out into next week. 

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-Patrick Hawe

Disclosures

Patrick Hawe’s current positions:

*As of 2:51pm ET  February 8, 2024

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