Weekly Wisdom: Levels to Know and Moves to Look For

Greetings fellow traders and welcome to the first edition of Weekly Wisdom: Levels to Know and Moves to Look For!

This newsletter is meant to tell you what we’re currently seeing in these crazy markets and what we have our focus on going forward.

So let’s get started!

Taking a look back on this week, October 3-7:

• SPX briefly makes a new low on the year for a new low of 3,584 before quickly reclaiming the year low 3,636 to begin a rally.
• Last week we pointed out positive divergence building in the VIX with no new highs on the year for VIX despite lower lows on the SPX – this was a possible warning sign for bears that new SPX lows would not see much follow through, and could reverse if the VIX fails to push to new highs.
• TNX – the 10-year yield has remained under year highs of 4% made before the Bank of England made their move last Wednesday morning, but also remains over the previous year highs of 3.5% – be very careful if TNX is able to make a new high on the year.
• DXY – the US Dollar Index also topped out the same day as TNX, just shy of 115 and has also remained below those recent highs – caution would certainly be needed if DXY were to make a new high on the year.
• Although VIX has briefly topped out, it still remains elevated with SPX giving 2-3%+ moves nearly every day. SPX should be able to “melt” higher if the VIX can begin a real downtrend – levels to watch below for bounces are 27, 25, and 23.
• On Friday 10/7 we get numbers for Non-Farm Employment Change, Unemployment Rate, and Average Hourly Earnings m/m. Although it sounds counterintuitive, the Fed will want to see slower numbers in hiring.

And here’s what we are eyeing next week, October 10-14:

• SPX has resistance higher at 3,800, 3,850, 3,900, 3,960, with a gap over 4,037 to 4,100.
• Going forward, bulls need to hold 3,700 on SPX with 3,650 being a line in the sand.
• Bears do not want to see SPX over 3,900 or they risk losing control on the bigger, weekly picture.
• Also keep on eye on VVIX, the CBOE VIX Volatility Index (i.e. the volatility of volatility) – back over the 95 level could be an early warning sign from VVIX, which failed to give another leg higher over June highs similar to VIX.
• Economic data points remain important to watch going forward as we are in a “good news is bad news” environment, as the Fed wants to see the economy cool off with their fight to tame inflation.
• As an example – On Wednesday 10/5, we had an ISM Services PMI number of 56.7 beating forecasts of 56 which gave the market a down move intraday
• Wednesday, October 12 we get September PPI m/m and core PPI m/m at 8:30am EST.
• Thursday, October 13 we get the ever-so hyped September CPI inflation numbers at 8:30am EST – will we finally see some cooling here?
• Friday, October 14 we’ll get numbers for September Retail Sales at 8:30am EST.
• Bulls are going to be desperately looking for a cooler CPI number next week for an all clear move toward 3,900 SPX in hopes the Fed can begin backing off and dropping their full hawkish tone.

Here’s your Chart of the Week (via RBC):

Bottoming takes time, especially in times of rising tightness in financial conditions.

Source: https://twitter.com/WallStJesus/status/1577081035287801857/photo/1

SPY Daily / Weekly Update:

Disclosures

Patrick Hawe’s current positions: Long PINS

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