SPY - SPDR S&P 500 21:57 PM - Apr 02 2023
by: samosa

Weekly Market Preview - April 3rd, 2023

Last Week Recap - 

SPY had a range of 393 to 409 with a close at 409. No sugar coating this one, it was a bullish breakout through a few key levels. We had a small pullback at a key level to 393 and just took off to break 400 and almost hit 410 in 3 trading days. Why did it move up that violently? No major news until Friday and the PCE data came in slightly under expectations and it was blast off time. Bears are capitulating, bulls are euphoric. Not a great time for a guy holding puts on QQQ. 

So the question is, are we witnessing the start of a much larger, sustainable move to the upside? Let's revisit the bullish and bearish arguments.  

Bullish Thesis - 

  • 2 Week Outlook
    • With inflation coming down, the possibility of a Fed pause coming in a month, a continued strong consumer, and low unemployment currently, it is hard to argue that the conditions currently are favoring the bulls. With the Fed set to pause soon, the inflation fears are starting to settle down so what can bring down the market? Sticky inflation is present, but it is not slowing down the consumer too much. The volume on the most recent rally has been lighter, but that could also bode well for bulls if the money on the sidelines believes that the worst is behind us. 
  • 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. JPow continues to say that 2% is the mandate, and bulls still do not believe him. We are at 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. 

Bearish Thesis - 

  • 2 Week outlook 
    • The market has ran way too hard way too fast on some sketchy macro data. This is due for a pullback to retest some key levels (405, 400, 398). Now dip buyers may show up, but we are technically due for a cool off period. OPEC+ latest news on cutting output could push energy prices higher again, which puts cold water on the deflationary argument. 
  • 1 month outlook 
    • Going to be honest here. Bears needs something to break again and/or some bearish data to show up (high CPI) for the dip buyers to back off. Earnings are around the corner so that could usher in the recession fears again.
  • 3 months+ outlook 
    • Regardless of the Fed's decision in May, the data is showing that inflation is sticking. 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. 

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 have a holiday week ahead of us with major data releasing on Friday when the market is closed. I do think we see a drastic pullback very soon in the form of a gap down. With oil rising on the OPEC news, the play to the downside will be in QQQ as participants look to book profits and rotate back into energy. I have quite a bit of puts that took a hit on Thursday and Friday, so I will be looking at trimming some of the shorter time frame ones on any solid pullback. 

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

  • Check the full calendar here. No Fed Speakers this week. They are in a blackout period:  stonks.chat/feed/catalysts
  • Monday - Fed Bullard Speaking  at 8:30am
  • Monday - US Global PMI at 9:45am
  • Monday - ISM at 10am
  • Tuesday - JOLTS Data at 10am
  • Tuesday - Factory Orders at 10am
  • Wednesday - ADP Employment Report at 8:15am
  • Wednesday - Import Exports and Balance of Trade at 8:30am
  • Wednesday - Global Services PMI at 9:45
  • Wednesday - ISM manufacturing at 10am
  • Thursday - Jobless Claims at 8:30am
  • Friday - Nonfarm Payroll Data at 8:30am

Current Positions and Plays -

  • I closed out a few positions last week for some gains but still have a large chunk of puts in QQQ. My current positions are QQQ, MU, AMD, NEM, FEZ, BX puts. I am also holding CAG calls as a recession play. Most of the smaller positions are for 4 to 6 weeks out. The larger positions are for June.  

SPY Technicals - 

  • SPY Technicals - The 30 min, 1 hour are overbought. 4 hour is just about there and Daily is above neutral.
  • SPY closed 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 .236
    • 401 is the .382
    • 391 is the .618 
    • 396 is the .500
  • 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 2023-04-02 at 9.54.35 PM.png 634.39 KB

Levels I am Watching

  • $SPY  - levels 398 (major), 401, 407, 410
  • $QQQ  - levels 313 (major), 316, 320, 323
  • This is not financial advice



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!