Stock Market Week Ahead: January 9, 2023 - SPY 380-400 range; JPow in the wild; CPI Thursday; confusing market - keep it light.
Economic Calendar: https://stonks.chat/feed/catalysts (all times EST below)
- Monday: Nothing.
- Tuesday: JPow speaks in the wild @ 0900 (!!)
- Wednesday: Nothing.
- Thursday: FOMC Harker @ 0730; CPI @ 0830 (!!!)
- Friday: FOMC Harker @ 0730 (again?); UMich Inflation Expectations @ 1000
Thoughts - General:
- Last week: I was on another roll last week up until Friday. I exited beautifully on Friday morning, then I made an error right before the ISM report I forgot about — I went short when I knew to go long after the NFP data (due to wage inflation slowing). That blew a hole in my account that remains currently a large unrealized loss. Being short doesn’t look good going into this week, either.
- There’s a word that’s making its way around the media - goldilocks. It showed up a lot this weekend. I can’t ignore it, even though I still don’t think it’s going to happen. Goldilocks is economic growth, unemployment staying low, and inflation coming down. It seems unlikely to be pulled off to me, but they did get some data that supports it on Friday.
- Right now the market is in between Fed Trade (betting on rate hikes / cuts) and Economy Trade (Recession or Not). It’s hard to tell from day to day how the market is going to react to data. A few months ago, it was crystal clear what was good news or bad news. Now….it can go either way.
- With reductions in liquidity (QT) this means it will continue to be more explosive moves in either direction - like we saw on Friday. That was a low volume move to the upside on slowing in wage inflation, yet still-strong labor market, and lowest unemployment in 50+ years.
- I continue to maintain that Fed isn’t cutting until end of this year (Q4) at earliest OR when something major breaks.
- Because of that, we SHOULD - eventually - have a spike in unemployment
- Currently, the bond market is expecting some Fed cuts much earlier than that
- Also on Friday we got a hint from Bostic that 25bps hike was more likely than 50bps. That’s closer to a pause, for sure, so the market liked that.
- on Tuesday, we have JPow in the wild - he can be a real roll of the dice in either direction - so expect that. If I’m guessing, he’s going to acknowledge the NFP and warn more is needed and he still doesn’t like tight labor market. So, nothing new.
- on Thursday, we’ve got CPI. Based on NFP Friday, this CPI will move the market. Everybody is expecting a easing reading below 6% and I expect nothing less. 5.7% is the forecast, 6% was the previous reading. Above or below the forecast and you know what happens. In the real-time/on the ground, it feels really sticky, but not increasing. This impacts corporate earnings, but not CPI reading.
- Earnings kick off on Friday with the banks leading the show. Here we go……I expect some wild moves this round from all sectors, especially tech. Layoffs will be the flavor of the month with the impact to earnings being the tailwind.
- Over in the UK, things continue to look much worse than the US. Are they leading indicator or just their own scenario?
- So where does that leave us?
- I think we’ve got a bullish week on our hands. JPow is a wild card, but everything else is screaming bullish (for this week): CPI, Fed speakers, NFP from Friday, all this goldilocks talk
- If CPI comes in at expectations or below, I think it’s possible we see 400 this week. I think it’d sell off pretty quickly from there, though, as we then head into the earnings confessional.
- My chart [will post below] says: stay out of the way until 398-400 and then short it.
Thoughts - Technicals (Latest):
- SPY levels: 380, 385, 390, 396, 400
- 200 MA: 398.62
- Chart - Weekly: Neutral/Bearish - The lines are too tangled and RSI in dead middle, but this looks like a consolidation before a drop.
- Chart - Daily: Bullish - looks quite bullish for this week.
- Chart - 4h: Bullish - same.
Trading Plan (This Week):
- Current position: I’m holding an /NQ (Nasdaq100) short position for March 2023 that is mostly a screwup from Friday.
- I’m looking to exit this with as little loss as possible before CPI - hopefully at 385 SPY or lower.
- I’ll stand out of the way until 398-400 SPY and then go short /NQ again
- I may scalp calls along the way, but never holding overnight.
SPDR S&P 500 - SPY
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