Weekly Wisdom: Buyer Exhaustion

Greetings fellow traders and welcome to your August 10th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

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

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Taking a look back on this week, August 7 - 11:

• This past week stayed with elevated volatility as we seem to be running into some buyer exhaustion with markets selling off today despite a good looking CPI report. Core CPI is still running above the Fed's 2% target.?
• Monday we had consumer credit come in higher than expected at $17.8 billion vs $13.8 billion expected.
• Tuesday had final wholesale inventories come in light at -0.5% vs -0.3% expected.??
• Thursday we received our anticipated updates on inflation via CPI numbers. CPI m/m came in at 0.2% vs 0.2% expected and core CPI m/m came in at 0.2% vs 0.2% expected as well. CPI y/y came in at 3.2% vs 3.3% expected, while core CPI y/y came in at 4.7% vs 4.8 % expected.
• We saw $SPX trade up initially in the morning following the numbers, but have since seen markets roll over completely, from highs of 4543 to back under 4500, possibly signaling buyer exhaustion.??
• Friday, August 11 brings more important data with PPI and core PPI released at 8:30 a.m. ET. The University of Michigan's consumer sentiment and inflation expectations index will be released at 10:00 a.m. ET.

Here's what we are eyeing next week, August 14 - 18:

Level Highlights:

• As mentioned above, $SPX futures made highs after CPI data on Thursday morning of 4543, but rolled all the way over a short while later to make new lows on the day down at 4473. This is possibly a signal of buyer exhaustion which may signal a bigger picture top for now as we could not hold breakouts this morning on good news. Our bigger picture support levels to look out for below 4500 remain the same as last week, starting with 4450 and then 4420-4400 is a more solid support zone.??
• $TLT managed to stage a bounce earlier this week but is working its way back lower on Thursday as interest rates move back higher. Last week’s low for $TLT is about 94.50 and the low for the year is just under 92 - we are trading down to 96 this week, off the week’s highs of about 97.50. A fast move down below last week’s low may give a shock to the markets and send equities lower.
• $VIX and $VVIX are both trading higher with the market roll over today but are still off recent highs. $VVIX is up big today on Thursday from a low of 90 to a high of 105, with recent highs of mid 106s not too far away. Bears are eyeing a 105 breakout to come soon to take us to 110+, which will also deliver a shock to markets and should send equities lower. Bulls are looking for a fail back under 100 so the $VIX can start to bleed lower again and bring some stabilization to markets.?

Upcoming News:

• Tuesday, August 15 starts the week’s data off with retail sales and core retail sales, as well as the Empire State manufacturing index released at 8:30 a.m. ET. We’ll also get updates for business inventories and the NAHB housing market index at 10:00 a.m. ET.??
• Wednesday, August 16 we’ll get data for building permits and housing starts at 8:30 a.m. ET. We’ll also get the industrial production m/m update at 9:15 a.m. ET. Later in the afternoon, we’ll see the FOMC meeting minutes released at 2:00 p.m. ET, but there is no rate decision or press conference for this month.??
• Thursday, August 17 we’ll get weekly unemployment claims at 8:30 a.m. ET, along with the Philly Fed manufacturing index.?Later in the morning we’ll see updates on Conference Board's leading economic indicators index m/m at 10:00 a.m. ET.??

Here's Your Chart of the Week:

Via Nomura Vol: “MCELLIGOTT: “And again, on repeat... this VIX squeeze remains a potential issue because of Systematic Vol Control positioning, as highlighted here for weeks?—?VC now 95.8 percentile Equities exposure on 3Y lookback… As such, Vol Control is a lumpy seller if the daily SPX range were to widen-out”

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Source: https://twitter.com/WallStJesus/status/1688714610558279681/photo/1

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SPY Daily Update:

$SPY daily chart has had trouble rallying back higher since last week’s turn, failing once again today on an attempt to push back over 450.?Today we tested and so far are holding support at 445 highlighted here last week - below this we have 443 and then the 440-438 zone as next support levels.

SPY Weekly Update:

$SPY weekly chart seeing some further downside after last week’s ugly candle was put in - 438 remains vital for bulls to hold in order to keep this weekly trend looking clean still. For now, in the bigger picture, this is just a healthy pullback after a very big multi-month run.

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Disclosures

Patrick Hawe's current positions:

*As of 3:04pm ET August 10, 2023

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