SPY - SPDR S&P 500 21:28 PM - Mar 05 2023
by: samosa

Weekly Market Preview - March 6th, 2023

Last Week Recap - 

SPY had a weekly range of 392 to 404, closing just above 404. It was a wild week with the market starting off with a bounce, and then by Thursday in premarket, SPY was testing the 200 Daily Moving Average near 393. Once it tested it, the buyers stepped and blasted us higher to 404. 

I predicted a bounce last week, but unfortunately I got caught being married to the bearish side midweek. Once we got a revision in the wage data on Thursday morning, I went overly bearish and it cost me. The power of the 200 Moving Day Average was way stronger than that data. Lesson learned, and we move forward. 

I believe I have spotted the missing link in my previews and I will talk more about that in my prediction section. 

Let's move on to the bullish and bearish thesis section to see what lies ahead. 

Bearish Thesis - 

  • 2 Week outlook 
    • We blasted higher last week, but we had more bearish data come out with a massive revision up on the wage rate data. However, that data was not enough to hold back the buyers from the 200 MA bounce. Technicals support a small pullback here back to 400 or even 398, but it appears that will be the extent of it barring a major economic data update. Maybe from the jobs data on Friday? 
  • 1 month outlook 
    • This is all about the FOMC meeting in March. If we get an 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. (Same as last week)
  • 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. (Same as last week)

Bullish Thesis - 

  • 2 Week Outlook
    • Yes, the fundamental data is bearish, but the market is holding up strongly. We are due for a small pullback from the technical standpoint, but that dip should be bought up pretty fast with the 200MA provided firm support. There is a landmine on Friday with the jobs data, but again the fundamental data has not seemed to be slowing the market down this year. The Fed is losing credibility by the day and that is short term bullish. 
  • 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. (same as last week)
  • 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. (same as last week)

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 - 

So let me first present my theory of what is currently happening with why the market is not reacting to fundamental data like last year. 

Volume is now hiding in the option chains. So there are now 3 phases to the market currently. Technicals, fundamentals and now mechanics. They are using the mechanics to counter the fundamental data.

I believe TSLA cracked the mechanics code 4 years ago.

TSLA has always trumped the fundamental case against it. But there was always these crazy call options weekly that tended to push the stock up. The buyer was labeled the Tesla whale.
It was clearly successful and as Tesla continued to workout their issues and continue the hype train, the stock just went crazy. I think this strategy is now being implored in a more broader scope to hold up stocks until fundamental data improves.
Mechanics are working in overdrive to achieve this. Which is why bad news is not creating the moves like last year. The 0DTE changes helped fuel this.

So with that out of the way, I am looking for a pullback before the JPow testimony on Tuesday, and then buyers should step in very fast as the event is a nothing burger. These hearings will make you hate the government officials even more. They all tend to use their time to say how the other party is causing the current issues in the economy and then ask JPow if he agrees. He then simply responds with a "I cannot comment on those matters." The main fear here will be his opening remarks, once those are done, the market should rebound from any dip that may have occurred. 

I will be scalping small wins or losses all week. We have major data on Friday with the nonfarm payrolls, so I will be playing it light this week. So to recap, looking for a pullback, and then a buy the dip moment to push us higher heading into Friday's report. 

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 - Factory Orders at 10:00am
  • Tuesday - JPow Hearing at 10:00am
  • Tuesday - TIPP Economic Optimism at 10:00am
  • Wednesday - EU LaGarde Speech at 5:00am (DXY Implications)
  • Wednesday - EU GDP and Employment Change at 5:00am
  • Wednesday - ADP Employment Change at 8:15am
  • Wednesday - Import and Export Data at 8:30am
  • Wednesday - JOLTS Report at 10:00am
  • Wednesday - JPow Hearing at 10:00am
  • Wednesday - ISM Man PMI at 10:00am
  • Thursday - Nothing major 
  • Friday - US Nonfarm Payrolls - 8:30am (the report of the week)

Current Positions and Plays -

  • I am holding a few QQQ puts for Friday. I will hold these into JPow's hearing on Tuesday to see some de-risk. I am looking at scalping with a small amount this week.

SPY Technicals - 

  • SPY Technicals - The 30 min and 1 hour are overbought. 4 hour and daily are neutral.
  • SPY 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) -  Purple fibs on the chart. 407 is the resistance ahead and 401 is support. 
  • 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. 

Levels I am Watching

  • $SPY  - levels 390 (major), 393, 396, 400, 405, 407 (major), 410
  • $QQQ  - levels 290 (major), 293, 296, 298.50, 300, 303, 306, 310
  • NOTE: I have turned back into a daytrader. I love playing ES and NQ futures. 
  • This is not financial advice



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