Weekly Wisdom: First 2024 FOMC Meeting Approaches

Greetings fellow traders and welcome to your January 25th 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, January 22 – 26:

• Markets broke higher through the 4825 range resistance level given last week, continuing higher last Friday and further this week, reaching a new high of 4933 before pausing on Wednesday. $SPX futures are now basing around the 4900 level.  
• Data for the week started on Tuesday with a miss on the Richmond manufacturing index at -15 vs -7 expected.
• Wednesday brought us some beats with flash manufacturing PMI coming in at 50.3 vs 47.6 expected and flash services PMI at 52.9 vs 51.4 expected.  
• Thursday was a busy day for data, starting off with advance GDP q/q giving a solid beat at 3.3% vs 2.0% expected. Advance GDP price index q/q was a miss at 1.5% vs 2.3% expected. Weekly unemployment claims were a miss at 214,000 vs 199,000 expected. Durable goods orders were a miss at 0.0% vs 1.2% expected, while core durable goods orders was a beat at 0.6% vs 0.2% expected. The goods trade balance was -$88.5 billion vs -$88.7 billion expected, while preliminary wholesale inventories m/m was a miss at 0.4% vs -0.2% expected. New home sales were a beat at 664,000 vs 648,000 expected.  
• Friday, January 26 ends the week with the December headline and core PCE price index m/m, personal spending, and personal income m/m at 8:30 a.m. ET. We’ll then see pending home sales m/m at 10:00 a.m. ET.

Here’s what we are eyeing next week, January 29 – February 2:

Level Highlights:

• $SPX futures were trading in a 4750-4825 range last week and finally broke higher on Friday, trading up through 4825 and giving a solid measured move up over 4900 this week.  
• Bulls remain in control with the uptrend in the market still very much intact. 
• 4800-4825 is now a key support area for the market that would potentially end the market’s uptrend should we close back below.  
• Momentum bulls should watch the 4850 level as well now with momentum set to die down should we close back under 4850 in the coming days.  
• Bulls were looking for $VVIX to trade back under 85 this week and they got exactly that with the 4825 $SPX breakout higher.  
• $VVIX traded down to a low of 74.65 this week, briefly breaking below the huge 75 level given a couple weeks ago here before rallying back higher to close over 80 that same day.  
• We are back to the similar story seen just two weeks ago where bulls are looking solid and remain in control, but $VVIX has approached some dangerous support levels where bulls may want to be careful pressing for too much higher. 
• $VIX overall is in a 12 – 14 range since late November, with bears looking for a move over 14 to ultimately get to a 16+ level. There are many events next week including big tech earnings and the FOMC which could be catalysts for this.

Upcoming News:

• Tuesday, January 30 starts off data for the week with the Conference Board’s consumer confidence index and Labor Department JOLTS at 10:00 a.m. ET.  $MSFT, $AMD, and $GOOGL are set to report earnings after the close.  
• Wednesday, January 31 is the big data day next week with the first Fed decision of the year. The day begins with ADP non-farm employment change at 8:15 a.m., followed by the employment cost index q/q at 8:30 a.m. ET. Next is Chicago PMI at 9:45 a.m. ET.  The FOMC statement and rate decision will be released at 2:00 p.m. ET, followed by the Fed Chair’s press conference at 2:30 p.m. ET. 
• Thursday, February 1 starts February off with Challenger job cuts y/y at 7:30 a.m. ET. This is followed by weekly unemployment claims, preliminary non-farm productivity q/q, and preliminary unit labor costs q/q at 8:30 a.m. ET. We’ll then see final manufacturing PMI at 9:45 a.m. ET, followed by ISM manufacturing PMI, ISM manufacturing prices, and construction spending m/m at 10:00 a.m. ET. $AMZN, $AAPL, and $META are set to report earnings after the close. 
• Friday, February 2 ends the week with the January jobs report which includes non-farm payrolls, average hourly earnings, and the unemployment rate at 8:30 a.m. ET. The University of Michigan consumer sentiment and inflation expectations index plus factory orders m/m will be released at 10:00 a.m. ET.

Here’s Your Chart of the Week:

Via CNN Business: A familiar chart that has appeared before in the past couple of months; CNN Fear/Greed meter is now back on “extreme greed” levels, which we last saw at the end of December before a before pull back in the new year. The last time before that was back in the summer where we had extreme greed for almost a month before a much larger and longer pull back took place into October.

Source: https://www.cnn.com/markets/fear-and-greed

SPY Daily Update:

$SPY daily chart broke through 477 resistance at the end of the week last week and continued higher this week. There is some resistance forming at new levels here at 488. Momentum bulls should look for 483 to hold, while the real trend is not in trouble until a close back under that 477 breakout level.

SPY Weekly Update:

$SPY weekly chart continues to be as strong as can be, seeming to slow down a bit after a strong 3 weeks. Extreme greed reading on the Fear/Greed meter may keep bulls cautious for now until a bit of a better correction takes place.

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-Patrick Hawe

Disclosures

Patrick Hawe’s current positions:

*As of 2:44pm ET January 25, 2024

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