SPY - SPDR S&P 500 21:12 PM - Feb 26 2023
by: samosa

Weekly Market Preview - February 27th, 2023

Last Week Recap - 

SPY had a weekly range of 404 to 393, closing just above 396. This was a week where the bears finally flexed some muscle and pushed the SPY under some key levels. The macro data came in hotter than expected on the inflation front with the PCE release on Friday. Also GDP came in under expectations on the Q4 revision. So that puts CPI, PPI, PCE all coming in hotter in January while GDP got revised lower. That was clean sweep for macro data for the bears in February.

So does the recent macro data open the door for the next leg lower in this bear market? Let's breakdown that question below by visiting the bullish and bearish arguments in a 2 week, 1 month and 3 month outlook. 

Bearish Thesis - 

  • 2 Week outlook 
    • The inflation data we got the past few weeks tells the market that the current rally was completely off base. So there should be a correction back to at least SPY 390 in the near term. This would put us right back in the chop zone that we were in prior to the FOMC February meeting. 
  • 1 month outlook 
    • This is all about the FOMC meeting in March. If we get a economic projection of the Fed funds rate over 550 BPS, then that will signal to the market that they were again way too premature on predicting a rate pause or cut to be within the next 2 meetings. This should cause a move back to SPY 380 as long as JPow maintains his 2% inflation mandate stance in the presser. 
  • 3 months+ outlook 
    • Regardless of the Fed's decision in March, the data is showing that inflation is not only sticking, but is also rising again. So inflation is showing that it is control, so no matter how the market wants to spin the narrative, if inflation is not dealt with, it will crush the consumer. There is no magic bullet that will get it under control outside of a recession. So bears are playing for the inevitable recession. 

Bullish Thesis - 

  • 2 Week Outlook
    • Yes, inflation data came in hotter than expected, however QQQ did not break under its 200 day SMA and the charts are looking slightly oversold on the shorter timeframes. With no major economic data this week, a bounce is likely to happen at the current support. 
  • 1 Month Outlook 
    • Inflation is in control so no landing is here! This will be the bullish narrative to allow them to dismiss the hot inflation data. Even if JPow says that 2% is the mandate in the March FOMC meeting, bulls will not believe him. He is closer to pausing rates and then he will just live with the results for a year with the rates at 5 to 5.25%. This will create a sweet spot where the Fed signals when it is pausing regardless of the current inflation reports, while the consumer is strong and unemployment is low. 
  • 3 Month Outlook
    • The no landing sticks, then we know that only a natural recession will bring the markets down. The Fed will not manufacture the recession and it will be up to whether inflation can stay back long enough for the consumer to stay strong. The theory here is that inflation is and was ultimately a supply side issue and those issues would be resolved by then. If this is the case, and inflation starts to slightly tick down while the Fed has paused, the market will explode higher as they will anticipate that a major recession will not happen. It will only crash or come down once the consumer has slowed down by the sticky inflation, thus causing an economic recession. 

I do not agree with one side of this narrative, but it is important to present all sides of the argument. Over the next few weeks, I will keep building and updating these narratives. 

My Prediction - 

We do see a bounce at support for SPY to ultimately get us back over 400. I am looking for that bounce this week. The bulls have the stronger 2 week outlook imo, while the bears have the stronger 1 month outlook. So I am playing the potential bounce for the next 2 weeks and looking at playing it very cautious with tight stops. 

Economic Data this Week (all times are EST)? - 

  • Check the full calendar here. We have a lot of Fed Speakers this week:  stonks.chat/feed/catalysts
  • Monday - EU Economic Statement at 5am (DXY implications)
  • Monday - Durable Goods Orders at 8:30am
  • Monday - Dallas Fed Man Index at 10:30a
  • Tuesday - Retail and Wholesale Inventories at 8:30am
  • Tuesday - Chicago PMI at 9:45am
  • Tuesday - Consumer Confidence at 10am
  • Wednesday - SP PMI at 9:45am
  • Wednesday - ISM Man PMI at 10:00am
  • Thursday - EU's Inflation Report at 5:00am (DXY implications)
  • Friday - SP and Non-Man PMI at 9:45 and 10am

Current Positions and Plays -

  • I am holding 1 NQ long. Looking at scalping this all the way up if we start to rally. I will close it out ahead of the data releases each day. I am much better at reacting to data, then predicting data. 

SPY Technicals - 

  • SPY Technicals - The 30 min and 1 hour are neutral. 4 hour is close to oversold on RSI but the MACD is curling down. Daily chart is at neutral on the RSI but MACD is curling down.  
  • SPY has closed under its 50 MA average but is still above the bear market trendline and the 200MA on the Daily chart.
  • SPY Fibs for Dec 2022 low to 2023 high (current rally) - We are right in the golden zone for a bounce at the 50 line and 61.8 line. Purple fibs on the chart. Those levels are highlighted in gold. 
  • SPY Fibs for ATH to June 2022 low - 389 is the .236 line. 407 is the .382 line. Light green fibs on the chart. 
  • SPY Fibs for COVID low to ATH - 380 is the .382 line. 416 is the .236 line. Gold fibs on the chart. 

Screen Shot 2023-02-26 at 9.30.17 PM.png 722.8 KB

Percentages from the Highs

  • SPY is approximately -18% (479 HIGH)
  • QQQ is approximately -28% (408 HIGH)
  • DJX is approximately -11% (369 HIGH)
  • IWM is approximately -24% (244 HIGH)

Levels I am Watching

  • $SPY  - levels 390 (major), 393, 396, 400, 405, 407 (major)
  • $QQQ  - levels 290 (major), 293, 296, 298.50, 300
  • NOTE: I have turned back into a daytrader. I love playing ES and NQ futures. 
  • This is not financial advice
Mentions: SPY QQQ


Login to join the discussion!
No comments have been made for SPDR S&P 500. Be the first!

SPDR S&P 500 - SPY

Total Followers: 3
Link Copied to Clipboard!