Weekly Wisdom: Powell Delivers Hawkish Pause

Greetings fellow traders and welcome to your September 21st edition of Weekly Wisdom: Levels to Know and Moves to Look For!

Now 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, September 18 – 22:

• This was a rough week for equities as Powell delivered a pause on rates hikes but still came with a hawkish lean to his wording, hinting that there could be room for another rate hike before the end of the year and pushing back projections of forward rate cuts to come possibly next year.  
• Monday started off with a miss for the NAHB housing market index coming in at 45 vs 50 expected.
• Tuesday’s data for building permits was a beat at 1.54 million vs 1.44 million expected, while housing starts was a miss at 1.28 million vs 1.44 million expected.  
• Wednesday saw the Fed hold rates steady at 5.25% – 5.50%. As mentioned above, markets sold off as the Fed left the door open to an additional rate hike this year and pushed back on expected rate cuts to come next year, signaling higher for longer. 
• Thursday’s weekly unemployment claims number was a beat at 201,000 vs 224,000 expected. The Philly Fed manufacturing index was a miss at -13.5 vs -1.1 expected. The current account deficit was a beat at -$212 billion vs -$220 billion expected. Later on in the morning, existing home sales was a miss at 4.04 million vs 4.10 million expected, while the Conference Board’s leading economic indicators index m/m was a slight beat at -0.4% vs -0.5% expected.  
• Friday, September 22 ends the week with flash manufacturing PMI and flash services PMI at 9:45 a.m. ET.

Here’s what we are eyeing next week, September 25 – 29:

Level Highlights:

• $SPX futures sold off hard this week on Powell’s FOMC remarks Wednesday afternoon, with the selling beginning last Friday for the September options expiration. Since the open last Friday, $SPX futures have traded down from 4550 to as low as 4393 on Thursday. Bulls are now getting into a bigger support zone between 4380-4350 which goes back to the big pivot we made in early August. Should we eventually break that 4350 pivot, $SPX futures may have a date with the 200SMA down at 4220 which would also be a retest of the big breakout area of 4250-4200 which we launched from back in the Spring. Given that we are getting short term oversold, many would expect to see some sort of bounce before trading straight down into 4200.  
• $VIX traded higher this week with the market’s sell off, jumping off of the 13 support area we mentioned last week and trading through the 15 level that held as resistance for the month of September, up to a high of 16.68 on Thursday. These are levels not seen since the August pullback. Bears are now looking for 15 to turn to support on any $VIX pullbacks going forward, with the next levels of resistance targets being 18 and then 20. A move over 19 would bring new highs for the summer and levels not seen since last Spring. 

Upcoming News:

• Tuesday, September 26 we get the S&P Case-Shiller home price index y/y update at 9:00 a.m. ET. We’ll then get the Conference Board’s consumer confidence index, new home sales, and the Richmond Fed’s manufacturing index at 10:00 a.m. ET.  
• Wednesday, September 27 at 8:30 a.m. ET we’ll receive data for durable goods orders and core durable goods orders.
• Thursday, September 28 starts off with weekly unemployment claims as well as final GDP q/q and final GDP price index q/q at 8:30 a.m. ET. These are followed by pending home sales m/m at 10:00 a.m. ET. Fed Chair Powell is also set to speak at 4:00 p.m. ET.
• Friday, September 29 brings us updates for the CPE price index m/m, core PCE price index m/m, personal income m/m, personal spending m/m, goods trade balance, and preliminary wholesale inventories m/m all at 8:30 a.m. ET.  This is followed by Chicago PMI at 9:45 a.m. ET, then the University of Michigan’s consumer sentiment and inflation expectations index at 10:00 a.m. ET.

Here’s Your Chart of the Week:

Via IBOXX, SG Cross Asset Research/Credit: As some of our macroeconomic data has begun to weaken, High Yield Defaults have been rising throughout the second half of this year

Source: https://twitter.com/WallStJesus/status/1703224741744595408/photo/1

SPY Daily Update:

$SPY daily chart selling off hard this week, breaking through multiple previous support levels and below our inside week last week. We are now testing 433 support going back to the low from August – below here we have 431-429 as a support zone, then 426 below that.

SPY Weekly Update:

$SPY weekly chart broke the inside week last week to the downside this week after two red weekly candles. We are now risking going into a weekly downtrend after this week with a lower high formed now followed by a lower low. 425-420 is a big support area going back to the breakout from this past Spring. 

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-Patrick Hawe

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*As of 3:10pm ET September 21, 2023

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