Weekly Wisdom: New Year, New Selling

Greetings fellow traders and welcome to your January 4th 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 2 – 5:

• Markets are taking a breather to start the new year off with $SPX futures off their recent highs of mid 4800s, trading down to a low of 4738 so far this week.  
• Fed futures markets seem to be walking back their aggressive rate cut pricing as the new year kicks off.
• Tuesday brought us the final manufacturing PMI which was a miss at 47.9 vs 48.4 expected. 
• Wednesday gave a few data points starting in the morning with ISM manufacturing PMI in-line at 47.4, ISM manufacturing prices a miss at 45.2 vs 49.5 expected, and JOLTS job openings with a slight miss at 8.79M vs 8.84M expected. The FOMC meeting minutes were released in the afternoon with more of the same information laid out regarding possible cuts to come in the second half of the year, despite markets pricing in cuts to start as soon as March.  
• Thursday started off with a beat on ADP non-farm employment change at 164,000 vs 120,000 expected. Weekly unemployment claims were also a beat at 202,000 vs 217,000 expected. Later in the morning we got in-line data for final services PMI coming in at 51.4.
• Friday, January 5 brings us updates for the unemployment rate, non-farm employment change, and average hourly earnings all at 8:30 a.m. ET. Later in the morning we’ll get data for ISM services PMI and factory orders m/m at 10:00 a.m. ET.

Here’s what we are eyeing next week, January 8 – 12:

Level Highlights:

• $SPX futures are lower in the first week of the new year with some of the major tech names like $AAPL coming under some selling pressure, possibly due to sellers waiting until the new year for tax purposes which was spoken a lot about toward the end of 2023.  
• $SPX futures have traded down to give us the first red week in 9 weeks. Momentum bulls are looking for roughly 4750 support to hold, with 4700 and 4650 as better support levels below.  
• Bears can now be playing against 4800 resistance on the upside, but should be careful of a further squeeze should we trade back over 4825.  
• With the sell-off starting in the new year, $VIX has traded back above its 8ema on the daily chart which is curled up again. Bears are looking for a bigger breakout over 14.50 in $VIX for a move toward 16, while bulls are looking for a move back under the current 13 support level. 
• $VVIX is stuck in a bit of a range now, with bulls looking for a breakdown below 86 support and bears looking for a breakout over 92 resistance.

Upcoming News:

• Monday, January 8 starts the week off with data for consumer credit m/m at 3:00 p.m. ET.
• Tuesday, January 9 starts off with the NFIB small business index at 6:00 a.m. ET. This is followed by an update for the U.S. trade balance at 8:30 a.m. ET.  
• Wednesday, January 10 brings us final wholesale inventories m/m at 10:00 a.m. ET. There is also a 10-year bond auction just after 1:00 p.m. ET.  
• Thursday, January 11 is the big data day of the week starting off with the December CPI and core CPI updates at 8:30 a.m. ET. We’ll also get weekly unemployment claims at the same time. There is a 30-year bond auction just after 1:00 p.m. ET and the federal budget balance is released at 2:00 p.m. ET.
• Friday, January 12 ends the week with December PPI and core PPI data released at 8:30 a.m. ET.

Here’s Your Chart of the Week:

Via Nomura’s McElligott: “… you’re simply not gonna get conditions for an Equities “Crash-DOWN” until you get extremely HIGH SKEW again — you need people to be  “forced-in” long-enough to then necessitate hedge demand (i.e. willing to spend premium bc you’re getting positive enough returns from your underlying longs that “you actually have something to hedge”) which then creates the situation where dealers would then get caught shorter -Gamma and -Vega into a hypothetical spot selloff.

Source: https://twitter.com/WallStJesus/status/1742687127559712829/photo/1

SPY Daily Update:

$SPY daily chart is taking a bit of a rest to start the year off, trading down everyday so far this year. Markets are currently attempting to find support off the 468 level, with further support around 465 and 460 below. Some resistance ahead that has given us trouble lately is 471 and 474. 

SPY Weekly Update:

$SPY weekly chart is seeing the first red weekly candle in 9 weeks after a very impressive run in the last two months of 2023. Some backing and filling is healthy for overall trending markets. In the bigger picture, bulls would be disappointed to lose 460 on the downside.

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-Patrick Hawe

Disclosures

Patrick Hawe’s current positions:

*As of 2:38pm ET January 4, 2024

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