Weekly Wisdom: Dip Buying Keeping Inflation Sticky?

Greetings fellow traders and welcome to your February 16th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

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

Taking a look back on this week, February 13 - 17:

• This week has been engulfed in economic data with CPI on Tuesday, retail sales on Wednesday, and PPI on Thursday. All of those came in with “misses” vs what the Fed would like to see. CPI was slightly hot, retail sales was a solid beat to the upside, and PPI was hot as well.
• The economy overall appears to be holding up well and staying strong, with people buying dips in everything from stocks to houses. That's good for the economy, but keeps inflation sticky.?
• $SPX is trading in the lower 4100s, the same levels we were trading at last week despite the overall chop/volatility that has ensued with earnings and economic reports. Bulls have done a great job holding things together so far.
• $VVIX was able to reverse the 88 breakout, trading back down to as low as 83 on Wednesday as bulls continue to hold markets. This is still well off the year lows down near 72.
• $VIX had a move over 20 following the $VVIX breakout last week up to 22, but has since come back down with $VVIX this week to a low of 18 on Wednesday, also still off year lows near 17.

And here's what we are eyeing next week, February 20 - 24:

• Bulls continue to stay strong as the overall uptrend stays in tact. $SPX 4000 remains the higher low bulls absolutely must hold, but bulls are hopeful the Friday February 10 low of 4060 is going to be the higher low to raise stops to. This is not confirmed until we get a higher high over the February 2nd high of 4195.
• Bulls have saved $SPX a few times this week to keep things in tact, with lows for the past 3 days just shy of 4090. A move below 4090 may trigger some further selling for those looking to keep profits tight or get short.
• $VVIX reached a high of 92 today on the PPI morning sell off. Bears should look for a move above that level to confirm a bigger $SPX down move. For now, bulls still remain in control for over a month as levels continue to hold and weakness is bought.?
• Markets are closed on Monday, February 20th in observance of President’s Day.?
• On Tuesday, February 21st at 8:30 a.m. EST Canada will release their January CPI report as well as retail sales. At 9:45 a.m. EST, the S&P Global flash services PMI and flash manufacturing PMI will be out. At 10:00 a.m. EST, the National Association of Realtors reports existing home sales for January.
• On Wednesday, February 22nd we get the FOMC meeting minutes update at 2:00 p.m. EST - this is not a rate decision and there is no Powell press conference to follow.??
• On Thursday, February 23rd we get the first revision of Q4 GDP as well as weekly unemployment claims at 8:30 a.m. EST.?
• On Friday, February 24th we get the core PCE price Index m/m, personal income, and personal savings m/m updates at 8:30 a.m. EST. We’ll also get January new home sales and the University of Michigan's consumer sentiment and inflation expectations at 10:00 a.m EST.??

Here's Your Chart of the Week:

Via Bloomberg: As interest rates have moved back higher, bears continue to argue the S&P should move lower in the coming months as we are still “too expensive”

Source: https://www.bloomberg.com/news/articles/2023-02-10/clock-ticking-louder-on-a-stock-rally-the-pros-never-believed-in#xj4y7vzkg

SPY Daily / Weekly Update:

$SPY is fairly flat for about a week now, trading at levels we were at over a week ago. We have a clear daily range established now with 415 as an upside breakout and 408 as a downside breakdown.

As a result of the daily range, $SPY is now forming a second inside week with a high of 415.05 and a low of 408.24.

Don't miss the next edition of Conversations With A Pro Trader on February 28 with Scott Redler, register here now !

Want to Trade With My Team? Click here!

-Patrick Hawe

Disclosures

Patrick Hawe's current positions:

*As of 1:45pm ET February 16, 2023

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