Weekly Wisdom: Volatile September Start

Greetings fellow traders and welcome to your September 5th 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, September 2 – 6:

• Markets had a very rocky start for the beginning of September, with $SPX futures starting the month off at the top of the 2 week range we have been building out up at 5660 resistance.
• $SPX futures proceeded to sell off the entire day on Tuesday, marking a high of 5669 in the early morning and trading all the way down to a low of 5516 for a 150+ handle reversal lower. 
• The weakness in the morning was not helped by a rising yen as Bank of Japan Governor Kazuo Ueda reiterated the central bank will likely continue to boost interest rates if the economy and prices perform as expected.
• Further contracting economic data on Tuesday added fuel to the selloff.
• Data for Tuesday began with final manufacturing PMI which was a miss at 47.9 vs 48.1 expected. We then saw ISM manufacturing PMI which also missed at 47.2 vs 47.5 expected. Construction spending was also a miss at -0.3% vs 0.1% expected. The one data beat for the day was ISM manufacturing prices which came in at 54.0 vs 52.1 expected. These contracting economic numbers added further sell pressure to Tuesday’s weak market.
• Wednesday delivered a miss for JOLTS job openings which came in at 7.67 million vs 8.09 million expected. US trade balance data came inline at -78.8 billion. Factory orders m/m was a beat at 5.0% vs 4.7% expected.
• Thursday started off with ADP non-farm employment change which missed at 99 thousand vs 144 thousand expected. Weekly unemployment claims were a slight miss at 227,000 vs 231,000 expected. Revised unit labor costs q/q were a miss at 0.4% vs 0.8%. Revised nonfarm productivity q/q was a slight beat at 2.5% vs 2.4% expected. Later in the morning, we saw final services PMI with a beat at 55.7 vs 55.0 expected. ISM services PMI was roughly inline at 51.5 vs 51.3 expected.
• Friday, September 6 ends the week with average hourly earnings m/m, the unemployment rate, and non-farm employment change all at 8:30 a.m. ET.

Here’s what we are eyeing next week, September 9 – 13:

Level Highlights:

• $SPX futures started the month of September off with a hard sell lower on the first trading day of the new month.  
• Tuesday’s sell lower was enough to break the 2 week range that $SPX futures had been stuck in between 5580 support and 5660 resistance.
• As mentioned last week, a break either higher or lower from the range should give an 80-handle measured move, which we saw this week on the breakdown with the low for the week so far being 5491.  
• All eyes are now on the Friday payrolls number, with the Fed much more focused on the jobs market and the overall strength of the economy as opposed to inflation.
• After this week’s data, markets are pricing in a 50bps rate cut from the Fed’s September rate decision; anything else may worry the markets that the Fed is behind the ball and may lose the strength the economy has been able to hold onto for so long.  
• Support to look for below for $SPX futures on further weakness, if 5500 support is lost, comes in the 5460-5440 zone, and then 5350 is a solid support level.  
• Bulls now need a close back above 5600 to fully take back control and make the bears nervous again. 

Upcoming News:

• Monday, September 9 starts the first full trading week of September with final wholesale inventories m/m at 10:00 a.m. ET. Later in the afternoon we’ll get the update for consumer credit m/m at 3:00 p.m. ET.  
• Tuesday, September 10 is a slower data day with just the NFIB Small Business Index update at 6:00 a.m. ET.  
• Wednesday, September 11 is the big data day next week, starting with the latest CPI inflation updates at 8:30 a.m. ET. The Fed is still watching closely to make sure inflation does not begin to tick back up at all, although they are now more focused on the economy not slowing down too much after having kept rates elevated. Many are worried Powell is now moving too slow to cut rates. Later in the afternoon, there is a 10-year Bond Auction just after 1:00 p.m. ET. 
• Thursday, September 12 brings further inflation data beginning with the latest PPI update at 8:30 a.m. ET. We’ll also see our weekly unemployment claims released at that time. Later in the afternoon, there is a 30-year bond auction just after 1:00 p.m. ET. Data for the day ends with the Federal budget balance update at 2:00 p.m. ET.
• Friday, September 13 brings the update import prices m/m at 8:30 a.m. ET. We’ll then see the latest for University of Michigan consumer sentiment and inflation expectations at 10:00 a.m. ET.  

Here’s Your Chart of the Week:

Via GS FICC and EQ:  Past election years typically show volatile and weak markets in the two months leading up to the election, particularly in mid September and mid October, before a bid comes back into place after the election is over.

Source

SPY Daily Update:

$SPY daily chart lost the 560 and 554 support levels, breaking down the 2 week range we had formed in the second half of August. Support below the 550 level comes at 546 and then 542.

SPY Weekly Update:

$SPY weekly chart failed to break last week’s high despite the continuation hammer that was formed, given the daily breakdown that we saw this past Tuesday. Overall on the big picture here, the weekly chart remains fairly intact until we get a weekly close below 545.

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-Patrick Hawe

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Patrick Hawe’s current positions:

*As of 2:31pm ET September 5, 2024

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