SPY - SPDR S&P 500 22:10 PM - Feb 05 2023
by: Maverick

Stock Market - Week Ahead: Feb 6, 2023 - SPY 400-420 range; Fed speakers everywhere; macro thoughts.

Economic Calendar
  • Monday: Nothing.
  • Tuesday:  JPow in the wild @ 1240; Fed Barr @ 1400; Consumer Credit @ 1500
  • Wednesday:  Fed spakers: Cook @ 0930, Bostic & Barr @ 1000, Kashkari @ 1230 (one to watch), Waller @ 1345
  • Thursday:  Jobless claims @ 0830
  • Friday: UMICH Inflation Expectations @ 1000, Waller @ 1230, Harker @ 4pm

Earnings Calendar
  • Wednesday: DIS after hours only one of interest to me this week

Market Thoughts:
  • Last week:  SPY was 400-412 - my prediction was 390-410. Pretty close on the high end, totally missed on bottom end, FOMC Q&A was a total surprise to me.  Will discuss below.  Overall, I was up a little for the week, so no complaints here.
  • Economic Calendar:  Fed speakers bonanza - please look at calendar above.  NOTE: CPI is next Tuesday (14th).
  • Earnings: DIS on Wednesday are only that I think are significant.  Last week was even crazier than I expected.
  • Let’s talk about macro…..
  • FOMC going for 25bps was a surprise to nobody, so expected there.  What WAS a surprise was how Jolly JPow was.  He shrugged off everything, basically gave up the battle against strong jobs, and communicated to the market to let the good times roll.  For the bears, there was nothing new - same line about holding the line.  For the bulls, he gave them a damn buffet of reasons to go long - and you saw the market respond in kind.
  • The Bond market + stock market continues to say they don’t believe the Fed and they’ll pause + cut sooner rather than later.  I still don’t see this being the case.  I stick to my position that they are not cutting until something breaks (not even close right now) OR end of year/Q4.
  • I’d go the other way, actually.  I think we could see an uptick in CPI (as early as the March 14 report) and JPow to come in with a 50bps with new SEP.  FOMC next meeting + SEP will be March 22.  If not then, then it’ll be during the summer/June meeting.  Inflation is pushing higher at some point.
  • Financial conditions ( https://www.chicagofed.org/research/data/nfci/current-data )  continue to loosen, thus this rally we’re in.  
  • QQQ was 260 exactly a month ago.  It was 313 on Thursday. 🤯
  • Repeating: The yield curve is 100% inverted.  That has never failed to predict a recession (by any definition).
  • Repeating: As I said last week, I’m overall bearish but that won’t start working until 2Q and on.  I think bulls have it for Q1, which is fine - I can go long too, even if I’m grinding my teeth.
  • Repeating: Short-term, as I said, the bulls have it.  Bad news is OK, good news is rocket ships.  Nothing is fazing them.  All dips get bought.  It’s reminding me of mania of days gone by (that didn’t end well).  True trash is running again.  It’s always the end run before the big drop or rug pull.
  • That jobs report was so strong, even the economists that were predicting it felt ashamed.  They missed by a mile.  I do have a theory about this.  Despite layoffs in tech (high paying), people are easily able to get a new job still, plus they have sizable severance packages, so they have time.  Due to inflation being rough + COVID couch party being over, the lower end of the job spectrum is having to get back in there.  To me, this supports the rising number and the flat/decreasing wages.
  • I’ve said over and over, the real drop will come when unemployment starts ticking up.  For now, there’s no sign of that, so risk is to the downside.  It’s party time for the bulls and I expect pretty much any dip to get bought until either CPI reverses course OR unemployment ticks up a few notches.  No hope for the bears until then, because even earnings aren’t missing quite enough yet.
  • Now let’s talk charts….
  • Repeating: Wow.  Just wow.
  • SPY 394 is the 200MA and it’s well above it now - and it will start bending up soon.
  • Looking at the Daily chart, SPY is getting very toppy here, is likely to cool off
  • QQQ may have already started its pullback, RSI topped out, MACD still pointing straight up, but I think it pulls back from here.
  • Repeating: I’m seeing a lot of capitulation of bears into bulls - which means that we’re right at the line - technically at least.
  • Rumblings in China<>US over this ballon worth noting.

Technicals (Latest):
  • SPY levels:  400, 408, 410, 416, 420
  • 200 MA: 394

Trading Plan (This Week):
  • Current position: I’m holding nothing.  I scalped some NQ this evening.
  • I would happily go short QQQ at 308 and certainly 313
  • I’ll be watching the technical conditions to see when they get worked out before going long
  • I will stay out of the way on Wednesday - Fed speakers all day.

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