Weekly Wisdom: Futures Attempt 4050 Breakout

Greetings fellow traders and welcome to your March 30th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

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

Taking a look back on this week, March 27 – 31:

• Markets remained more or less trendless until this past Wednesday when bulls were able to charge $SPX futures higher from 4000 to break 4050 and close up at 4057, reaching as high as 4087 on Thursday before stalling out a bit. Based on this range break, $SPX futures technically should have a measured move to the 4150-4200 area, unless the breakout fails due to further economic data over the coming weeks.  
• Interest rates have stayed stable more or less with the 2YR Yield trading at 4.1%, roughly the same as last week. $TNX, the 10YR yield, has been a bit more volatile but is more or less in the same place as last week at 3.55%.
• Fed futures continue to be volatile. The likelihood for a 25bps hike in May is down to about 47%, with May being the peak in rates On top of that, focus has shifted toward the expected year-end rate, which is projected to be 4.35%, suggesting 2 to 3 rate cuts before the end of the year. 
• $VVIX has worked its way back below 90 just as bulls needed as $SPX futures break over 4050. $VVIX made a low in the upper 86s on Thursday before finding some temporary support.  
• $VIX managed to fall under 20 with the market’s up move, reaching as low as 18.85 before finding some support and attempting a rally with the market’s up move on Thursday.

Here’s what we are eyeing next week, April 3 – 7:

Level Highlights:

• With $SPX futures breaking over 4050, bulls should be looking for a measured move to around 4150 based on the 3950-4050 range we are breaking out of.  
• Interesting action took place Thursday morning as the $VIX began to rise with the $SPX, rising from a low of the upper 18s pre-market on Thursday to a high of just over 20 . While the VIX was rising throughout the morning, $SPX was trying to grind higher and hold up – a possible sign of bearish divergence.  
• Going forward now, bulls really need to see 4000 hold on $SPX futures with 3980 being a line in the sand. A close back below 4025 may signal a failed breakout and bulls should take some caution. The next big resistance levels for bears to deal with are 4100 and 4150.   
• Pay very close attention to $VVIX and $VIX as some possible bearish divergence has started to build out with $VIX rising with the market Thursday morning. If this bearish divergence is building out, bears will want to see $VVIX reclaim 91 as well as $VIX 22.

Upcoming News:

• Monday, April 3 we’ll get final manufacturing PMI at 9:45 a.m. ET, then ISM manufacturing PMI, ISM manufacturing prices, and construction spending m/m at 10:00 a.m.  
• Tuesday, April 4 is a big day with JOLTS and factory orders m/m at 10:00 a.m. ET.
• Wednesday, April 5 we’ll get ADP’s March private employment report at 8:15 a.m. ET, followed by final services PMI at 9:45 a.m., then ISM services PMI at 10:00 a.m.
• Thursday, April 6 weekly unemployment claims data is released at 8:30 a.m. ET.  
• Friday, April 7 markets are closed in observance of Good Friday but the official March jobs report will still be released by the Labor Department at 8:30 a.m. ET.

Here’s Your Chart of the Week:

Via FRED Economic Data / St. Louis Fed:  Federal Reserve Member Bullard pays close attention to this chart while watching for stress in financial markets – this has been relatively calm throughout the 2022 bear market but has seen an uptick over the past week with the banking drama

Source: https://fred.stlouisfed.org/series/STLFSI4

SPY Daily Update:

$SPY has jumped over 400 as futures look to breakout over 4050, clearing the 3/22 daily candle with a close over 400 for a big improvement in the daily chart. 405 and 408 serve as resistance levels ahead.

SPY Weekly Update:

Although $SPY daily has broken the key 400 level, our weekly chart is still a bit uncertain here as we remain below the big 405 resistance level. Bulls need a close over 405 to try to negate that weekly breakdown candle still – but they are making a good attempt at it this week.

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-Patrick Hawe

Disclosures

Patrick Hawe’s current positions:

*As of 2:52pm ET March 30, 2023

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