Weekly Wisdom: Rate Cuts, Again, Pushed Back

Greetings fellow traders and welcome to your May 30th 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, May 27 – May 31:

• Markets have backed off of the recent all time highs made after last Thursday’s post NVDA earnings open, with higher interest rates putting pressure on equities markets this past week. 
• Equities were closed on Monday for Memorial Day.
• Data for the week started off on Tuesday with a beat for CB consumer confidence coming in at 102.0 vs 96.0 expected. Fed’s Kashkari also had some hawkish speak in the morning, saying to both not pencil in more than two rate cuts for the 2024 year, but also saying to not completely rule out further rate hikes.  
• Wednesday brought us a beat for the Richmond Manufacturing Index which came in at 0 vs -6 expected. The Beige Book did not bring anything new/meaningful to the overall market rhetoric.
• Thursday’s weekly unemployment claims were roughly in-line at 219,000 vs 218,000 expected. Prelim GDP q/q was a slight beat at 1.3% vs 1.2% expected – this is lower than the previous print of 1.6%, which is the second print in a row of a lower level. Prelim GDP price index q/q came in at 3.0% vs 3.1% expected. The goods trade balance was a miss at -99.4 billion vs -91.9 billion expected. Prelim wholesale inventories m/m was also a miss at 0.2% vs 0.0% expected. Later in the morning, pending home sales m/m saw a big miss at -7.7% vs -1.1% expected.  
• Friday, May 31 ends the week with core PCE price index m/m, personal income m/m, and personal spending m/m at 8:30 a.m. ET. We’ll then see Chicago PMI at 9:45 a.m. ET. We’ll tentatively get an update for the Treasury currency report at some point in the afternoon, with past reports being released around 3:00 p.m. ET. 

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

Level Highlights:

• $SPX futures have cooled off further this week following the rejection at new all time highs after last week’s NVDA earnings report, which gave us a new high at 5368 last Thursday but closed that same day down at 5285.  
• Since then, $SPX futures managed to bounce back to end last week and start this week up to last Thursday’s 5340 open but have rolled back down to a low of 5250 this week. 
• The main culprit for the further weakness this week comes from the sharp rise in interest rates, with the US-10 year yield bouncing from just above 4.3% in mid May to a high of 4.63% this week, putting further pressure on equities as the Fed stays hawkish and data dependent.  
• Bulls are now seeing 5250 support being tested, with further support below coming in at 5225 and 5200.  
• Bears would regain “full control” on a further move lower with a close below 5200
• $VIX got to a high of just under 15 this week, which also helped the selling ensue with the move over 14. Keep in mind that 15 was a big level back in April, which helped trigger the mid-April sell off after it broke higher.  
• Going forward, bulls will want to see the $VIX close back below 13.50, while bears will look for 13.50 to hold as support on any further market bounces.

Upcoming News:

• Monday, June 3 starts the first trading week of June off with final manufacturing PMI at 9:45 a.m. ET. Later in the morning we’ll get data updates for ISM manufacturing PMI, ISM manufacturing prices, and construction spending m/m al at 10:00 a.m. ET.  
• Tuesday, June 4 brings the latest update for JOLTS job openings, as well as factory orders m/m at 10:00 a.m. ET.  
• Wednesday, June 5 kicks off with ADP non-farm employment change at 8:15 a.m. ET. We’ll then see final services PMI at 9:45 a.m. ET, followed by ISM services PMI at 10:00 a.m. ET.  
• Thursday, June 6 delivers our weekly unemployment claims, revised non-farm productivity q/q, revised unit labor costs q/q, and trade balance data all at 8:30 a.m. ET.  
• Friday, June 7 ends the week with data for average hourly earnings m/m, non-farm employment change, and the unemployment rate all at 8:30 a.m. ET. These are followed by final wholesale inventories m/m at 10:00 a.m. ET, with data for the week ending on the update for consumer credit m/m at 3:00 p.m. ET.  

Here’s Your Chart of the Week:

Via Bloomberg: A powerful chart here following NVDA’s consecutive, large earnings beats over the past year – chip stocks relative to the S&P500 have now exceeded the March 2000 peak.

Source

SPY Daily Update:

$SPY managed to stage a bounce after last week’s warning candle but has since turned lower to make a lower high and lower low. 525 is now resistance again after dropping back below the level, with 521 and 517 showing as support levels below for bulls to attempt to hold.

SPY Weekly Update:

$SPY weekly chart in the big picture still looks ok, further consolidating the large 500-530 move from mid-April. A close back under 515 would be concerning for the bulls on the bigger picture.

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-Patrick Hawe

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Patrick Hawe’s current positions:

*As of 2:34pm ET May 30, 2024

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