Interest Rates Push Higher

Greetings fellow traders and welcome to your April 11th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

Now let's get to what we're currently seeing in these volatile markets and what we have our focus on going forward.

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Taking a look back on this week, April 8 - 12:

• Markets have been shaken lower this week after yet another hotter than expected CPI print hit the wires on Wednesday morning, marking the third hot surprise for CPI in a row.??
• Data for the week began on Tuesday with an inline number for the NFIB Small Business Index coming in at 88.5 vs 88.8 expected.??
• Wednesday brought the latest inflation update with CPI numbers. CPI y/y was slightly hot at 3.5% vs 3.4% expected. CPI m/m was 0.4% vs 0.3% expected. Core CPI y/y was 3.8% vs 3.7% expected, while core CPI m/m was 0.4% vs 0.3% expected.? We also saw an inline number for final wholesale inventories m/m at 0.5%. The FOMC meeting minutes in the afternoon did not bring anything new.?
• The hotter than expected CPI data sent interest rates higher and has pushed back rate cut expectations once again, with the majority looking at either July or September now for the first possible Fed rate cut.?
• Thursday brought a beat for weekly unemployment rates at 211,000 vs 216,000 expected, as well as PPI data. PPY y/y came in light at 2.1% vs 2.2% expected. PPI m/m was 0.2% vs 0.3% expected. Core PPI y/y was slightly hot at 2.4% vs 2.3% expected, while core PPI m/m was inline at 0.2% vs 0.2% expected.??
• Friday, April 12 ends the week with import prices m/m at 8:30 a.m. ET, followed by University of Michigan consumer sentiment and inflation expectations at 10:00 a.m. ET.

Here's what we are eyeing next week, April 15 - 19:

Level Highlights:

• $SPX futures took a bit of a hit lower this week following last Thursday’s sell on geopolitical concerns as well as hawkish Fed speak.??
• The main culprit for the selling this week came from Wednesday’s hotter than expected CPI report, which has once again pushed back future rate cut expectations.
• As of Thursday morning, Fed futures were pricing in just 18% chance for a rate cut in June, down from 55% just the day before. Chances for the cut to come in July were also down to 45% from 73% the day before.??
• Important to note that there are still two more CPI prints left before the Fed’s June meeting.??
• $SPX futures have found some support at 5175 in the second half of the week with the daily 50MA a bit below at 5147.??
• Bears have taken control for now and the bulls need a close back over 5275 to take the market out of “guilty” mode, which would have bulls taking back control.????
• $VIX finally broke higher over the 15 level with the market’s downtick this week, trading up to 17. Bulls will need this to get back under 15 and eventually bleed lower toward the 14 level.??
• Should this week’s lows break and more selling persist, the next major support for $SPX futures comes in the 510-5050 zone.?

Upcoming News:

• Monday, April 15 starts the week off with retail sales m/m, core retail sales m/m, and the Empire State Manufacturing Index at 8:30 a.m. ET. We’ll then see business inventories m/m and the NAHB Housing Market Index update at 10:00 a.m. ET.??
• Tuesday, April 16 brings Canada’s latest CPI update at 8:30 a.m. ET. We’ll also see U.S. data for building permits and housing starts at the same time. We’ll then see the update for industrial production m/m and the capacity utilization rate at 9:15 a.m. ET.??
• Wednesday, April 17 we’ll see the update for the Fed’s Beige Book released at 2:00 p.m. ET.??
• Thursday, April 18 kicks off with the weekly unemployment claims update, as well as the Philly Fed Manufacturing Index at 8:30 a.m. ET.? This is followed by existing home sales and the CB Leading Index m/m at 10:00 a.m. ET.??
• Friday, April 19 does not bring any meaningful data to end the week.

Here's Your Chart of the Week:

Via Bloomberg, Goldman Sachs Global Investment Research: Something to pay attention to which is still fairly new to the market - the rising AUM in covered call ETFs continues to increase under the surface.

Source

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SPY Daily Update:

$SPY was hit lower this week on another hot CPI report, but is now bouncing off of the 512 support level. Bulls will ultimately want a close back over 521 to fully take back control.

SPY Weekly Update:

$SPY slightly broke last week’s low on Thursday of this week but was able to reclaim it the same day - unless markets trade lower this week, $SPY is working on building a weekly bull flag which should continue higher in the coming weeks.

Want to Trade With My Team? Click here!

-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:20pm ET April 11, 2024

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