Weekly Wisdom: Momentum Stalls; VIX Finding a Floor

Greetings fellow traders and welcome to your December 7th 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, December 4 – 8

• Markets have stayed tight and stable this week, failing to break higher after a very impressive run up in November, but also holding recent support with a firm and steady bid still present. 
• Data for the week started off on Monday morning with a miss for factory orders coming in at -3.6% vs -2.7% expected.  
• Tuesday started off with final services PMI coming in at 50.8, as expected. We then had a beat on ISM services PMI at 52.7 vs 52.2 expected, while JOLTS was a miss at 8.73 million job openings vs 9.31 million expected.  
• Wednesday brought us a miss on ADP non-farm employment change at 103,000 vs 131,000 expected. We also got revised nonfarm productivity q/q at 5.2% from 4.8% previously, as well as revised unit labor costs q/q at -1.2% vs .0-9% expected. Trade balance was inline at -$64.3 billion vs -$64.1 billion expected.  
• Thursday’s weekly unemployment claims were inline at 220,000. Final wholesale inventories m/m were a beat at -0.4% vs -0.2% expected.  
• Friday, December 8 ends the week with the November jobs report which includes average hourly earnings, non-farm employment change, and the unemployment rate 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 what we are eyeing next week, December 11 – 15:

Level Highlights:

• $SPX futures remain in roughly the same range we have been trading back and forth in since Wednesday, November 22 – going on over two weeks now of sideways, time corrective action.
• We are now in a very long bull flag with bulls looking to break up higher through resistance at 4600, while bears are looking for a breakdown through support at 4545.
• $VIX has managed to finally find some support at 12.50 and has been holding that level since Friday November 24th. This has since formed a higher low on the daily chart – bears are looking for a breakout higher back over 14 here,
• $VVIX continues to show some divergence as well, trending higher on the daily chart with the $VIX stuck sideways since finding a bottom at 80 back on Tuesday November 21st. Bears are looking for a $VVIX breakout over the 90 level for new month highs.  
• Ultimately, it looks like markets are waiting for the jobs number on Friday, followed by Tuesday’s CPI report and Wednesday’s Fed decision before making any bigger moves. 

Upcoming News:

• Tuesday, December 12 starts the week off for economic data with the November CPI and core CPI coming at 8:30 a.m. ET. Looks like markets are expecting a 3.2% print for CPI y/y and 0.0% for CPI m/m. Later in the afternoon there is a 30-yr bond auction just after 1:00 p.m. ET. We’ll then see an update for the federal budget balance at 2:00 p.m. ET.  
• Wednesday, December 13 brings us further inflation data with PPI and core PPI released at 8:30 a.m. ET. We’ll then get our December interest rate decision at 2:00 p.m. ET, where the Fed is expected to hold rates steady at 5.25% to 5.5%. Powell then gives his press conference and Q&A at 2:30 p.m. ET.  
• Thursday, December 14 kicks off with retail sales, core retail sales, weekly unemployment claims, and import prices m/m all at 8:30 a.m. ET. We’ll then get the update for business inventories m/m at 10:00 a.m. ET.
• Friday, December 15 ends the week with updates for the Empire State manufacturing index at 8:30 a.m. ET, followed by updates for industrial production m/m, and capacity utilization rate at 9:15 a.m. ET. Data for the week ends with flash manufacturing PMI and flash services PMI at 9:45 a.m. ET.

Here’s Your Chart of the Week:

Via Bloomberg:  With easing financial conditions helping give markets a boost, many are wondering what the Fed will do / say at their December meeting with futures betting on rate cuts coming as soon as January – keep in mind those futures have been wrong for nearly a year now, previously betting on cuts that were supposed to come this past September about a year ago.

Source: https://www.bloomberg.com/opinion/articles/2023-12-04/-everything-rally-upends-powell-s-hopes-markets-will-do-fed-s-work?embedded-checkout=true

SPY Daily Update:

$SPY daily chart has been stuck sideways since November 22 – going on over two weeks now of sideways time corrective action. Bulls are looking for a breakout over 459 and bears are looking for a breakdown below 454.

SPY Weekly Update:

$SPY weekly chart is forming an inside week with the market still stuck in a daily sideways time correction – there are a lot of big events next week that may bring the catalyst needed to break us either higher or lower from here.

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-Patrick Hawe

Disclosures

Patrick Hawe’s current positions:

*As of 2:03pm ET December 7, 2023

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