Weekly Wisdom: Sensitive Markets Await Economic Data

Greetings fellow traders and welcome to your January 5th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

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, January 3 – 6:

• $SPX remains stuck in the 3800-3900 range we have been in for three weeks now since mid-December. The upper and lower boundaries have been tested multiple times over the course of the past few weeks, but the market remains stuck. The last lines of defense for a breakup or breakdown are at 3790 and 3920 – have alerts out for these levels to be ready for the next possible big market move.
• $VIX is trading in the mid-22s and has spent the past three weeks wedging out and building a symmetrical triangle (higher lows and lower highs) as $SPX has chopped sideways. Bulls should be looking for a breakdown below 21 in the $VIX. Bears should be looking for a breakup over 24.
• $UUP, the ETF for $DXY, has found a base around the 28 level and is trading at highs for the week. Currency headwinds have been a big impact on earnings forecasts and bulls won’t like it if $DXY starts to trend higher.
• $TNX, the CBOE 10YR Treasury Yield, remains off year highs but also off the lows made in early December, currently showing 3.75%. The Fed futures peak terminal inched over 5% after strong data from ADP Non-Farm Employment Change and Unemployment Claims updates Thursday morning. That data shows too many people are still working, which hurts the Fed’s fight in taming inflation. A higher peak terminal rate will hurt equity markets if it keeps getting adjusted higher as new data about the evolving economy comes in.
• On Friday, January 6th we’ll get important labor market data in the U.S. The Labor Department releases the official December jobs report at 8:30 a.m. EST. We’ll also get the December ISM Services PMI at 10:00 a.m. EST.

And here’s what we are eyeing next week, January 9 – 13:

• As said above, $SPX has been stuck in the 3800-3900 range for the past three weeks. We have alerts set as this sideways range won’t last forever. The last lines of defense or “trigger” levels for a potential bigger market break are 3790 on the downside and 3920 on the upside. Big picture, we are in a downtrend below moving averages that are sloped down, so “technically” this should resolve downwards – but a squeeze can certainly occur on the upside if a positive catalyst shows up.
• $VVIX is back near lows of the year around the 77 level – this area has shown to bottom and give bounces to VVIX going back to late October. With the $VIX forming a symmetrical triangle and $VVIX back at “support”, this adds to the potential bearish set up that has formed – be aware of this 
• On Monday, January 9, we’ll get consumer credit m/m data at 3:00 p.m. EST. This has been worth watching along with the fast depletion in personal savings rates.
• On Tuesday, January 10, Fed Chair Jerome Powell Speaks at 8:00 a.m. EST.
• Thursday, January 11 is a big day next week with the December CPI report being released at 8:30 a.m. EST. 
• On Friday, January 12th, we’ll get the University of Michigan’s early January consumer sentiment index and inflation expectations at 10:00 a.m. EST.

Here’s Your Chart of the Week:

via Bureau of Economic Analysis & JP Morgan

Chart speaks for itself: the personal savings rate has plunged lower, while credit and debt has been rising.

Source: https://twitter.com/WallStJesus/status/1609364018170580993/photo/1

SPY Daily / Weekly Update:

A storm is brewing in the market here with SPY stuck between roughly 376 and 386 for about three weeks now. Have alerts out for these levels as this market will break one way or another eventually.

Big picture, SPY remains in a downtrend and therefore is likely to have this consolidation break down below 376. There is room to 400 if a positive catalyst breaks us higher over 386.

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-Patrick Hawe

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Patrick Hawe’s current positions:

*As of 1:35pm ET January 5, 2023

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