SPY - SPDR S&P 500 22:27 PM - Apr 16 2023
by: samosa

Weekly Market Preview - April 16th, 2023

Last Week Recap - 

Sorry for the lack of preview last week. I was traveling for the holiday and was playing catch up all week long. Last week was filled with important marco data from the CPI and PPI to Retail Sales and Bank Earnings. But it was one report that caught the market off guard a bit... that sneaky UoM consumer index report.  The CPI came in sticky, and PPI saw a nice drawdown. Retail Sales came in weak and the UoM report showed a shocking number for the 1 year inflation expectations. Expectations for the number were 3.5%, it came in at 4.6%. The market took a moment to digest it, and then began to sell off on Friday. Throughout the week, dip buyers showed up in full force on the bigger dips, and Friday was no different. We rallied at the end of the day and say us almost finish green for QQQ. 

So let's revisit the bullish and bearish arguments and see how each have changed. 

Bullish Thesis - 

  • 2 Week Outlook
    • PPI came in nice and cool and is considered a leading indicator. We got 25 BPS hike pretty much confirmed with the Jobs data and CPI data, and the market is handling it well. We have taken all the hits from the bears and are still consolidating above 405 and 410. Market is holding up well and not sure what more ammunition the bears have to drag the market down.  We do have major earnings coming up, so we have to be cautious getting too bullish. 
  • 1 Month Outlook 
    • The Fed is set to raise one more time in May and then they will pause. Once the pause is confirmed, we will see a blast higher just on the optimism that the Fed is out of the way. JPow has been clear that he does not want to start, stop, start, stop so once he pauses, he is done for a few meetings. Remember, bulls don't care about inflation, they care about the Fed's reaction to inflation. 
  • 3 Month Outlook
    • If the Fed pauses soon, 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 been range bound for 2 weeks and the momentum in this rally is starting to stall. There is bearish divergence on the daily chart for QQQ and a bearish PPO crossover, so the technicals are saying this rally is on its last legs and is ready to start trending down. The bulls priced in a pause in the May FOMC meeting, and now it looks like 25 BPS is heavily expected. With that rate hike, the bulls have to delay their delusional fantasy of a summer rate cut. 
  • 1 month outlook 
    • Dip buyers are keeping this market up, so to breakdown and create a trend long enough to last a few weeks, the bears need a major gap down. What could cause this? Well, any horrible earnings from big tech could do it. I am not seeing any macro data in the next 2 weeks that will cause it, so it will need to be from the earnings reports or from the geopolitical spectrum. Maybe the rise of the DXY 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 - 

I have been mainly playing tech so I am going to stick with that in my updates below. QQQ has been on a crazy run this year and it will be the reason for the next major move in the SPY, so I want to keep track of that closely.  I am looking for the DXY to rebound sharply with the House Majority Leader McCarthy set to unveil the Republicans demands for agreeing to raise the debt ceiling. This should put a little more faith in the DXY. If the DXY does rebound higher, I am expecting the QQQ to break under 313 support and start another range bound trade from 306 to 313. 
If the market gets strong earnings reports from NFLX and TSLA this week, I think we will see QQQ break the 323 level and ultimately hit 330 as earnings optimism will be in full force. 

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

  • Check the full calendar here:  stonks.chat/feed/catalysts
  • Monday - ECB LaGarde Speaking at 11:00am (DXY implications)
  • Tuesday - Building Permits and Housing Data at 8:30am
  • Wednesday - UK Inflation Report at 2:00am (DXY implications)
  • Wednesday - EU Inflation Report at 5:00am (DXY implications)
  • Thursday - Jobless Claims at 8:30am
  • Friday - US PMI Data at 9:45am

Earnings This Week:
FtsmURhX0A4kPx7.jpeg 252.42 KB

Current Positions and Plays -

  • I am net short on the market with positions in MNQ, QQQ June puts, NEM, GE, NVDA, BX. And I have longer dated calls for KR, CAG, and UUP. 
  • I will look at closing most of my puts this week if we do not show some type of weakness in the market. We have just been range bound for 2 weeks, and I entered roughly in the middle of the range. So I need to see some movement this week in my favor, or I will close out and reset. 

QQQ Technicals - 

  • QQQ Technicals - The 30 min, 1 hour, 4 hour and Daily are above neutral.
  • QQQ has been trading in a range for 2 weeks. So it is all about 2 levels to see if they hold as support/resistance. 313 is support and 323 is resistance. If either one of those breaks, we will see a nice 5-8 point move in the direction of the break. 

Levels I am Watching

  • $QQQ  - levels 313 (major), 316, 320, 323
  • This is not financial advice


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