Weekly Wisdom: Fed Ready To Pause?

Greetings fellow traders and welcome to your June 1st 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.

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Taking a look back on this week, May 29 - June 2:

• Markets were closed on Monday for Memorial Day.
• Tuesday, May 30 we had a beat on Conference Board consumer confidence coming in at 102.3 vs 99.1 expected.??
• Wednesday, May 31 Chicago PMI came in at a miss of 40.4 vs 47.1 expected. JOLTS job openings were a solid beat at 10.1 million vs 9.41 million expected.??
• Thursday, June 1 ADP private employment change was a strong beat at 278,000 vs 173,000 expected. Weekly unemployment claims were in line at 232,000 vs 236,000 expected. ISM manufacturing PMI was a slight miss at 46.9 vs 47.0 expected, while ISM manufacturing prices was a miss at 44.2 vs 52.4 expected.??
• Despite the shorter week, $SPX has managed to make an impressive recovery from last week’s volatility. We wrote last week to look at 4175 on the upside as a reaction high which $SPX broke up through last Friday, trading back over the big 4200 level this week.
• $VIX has since sold back down hard from over 20 last week down to sub 16 again as $SPX futures hold their trend and march higher.
• Fed funds futures have been very volatile as well, pricing around a 75% chance of another rate hike at the June meeting earlier this week but reversing hard to now pricing in a pause at the June meeting - however we are now showing only 1 rate cut by the end of the year, and odds for a July rate hike are increasing as well.?
• Friday, June 2 the Labor Department releases the official May jobs report at 8:30 a.m. ET.

Here's what we are eyeing next week, June 5 - 9:

Level Highlights:

• Now that $SPX futures have broken back up over 4175 and 4200, bulls should look for 4200 to try to hold as support going forward as we keep failing to hold over 4200 yet fail to break lower as a result. Should we ever break back under 4175, bulls run the risk of being underwater on new money and may see further downside. Should trends stay in tact, bulls should be targeting 4300 on the upside still for the 4100-4200 range breakout.?
• $VIX is back under 16 this week and nearly making new year lows. Should this continue downward, $VIX 14 is a big level that goes back to pre-bear market levels, an area where it may be difficult for $SPX to push too much higher.?
• $VVIX has moved lower as well, back under the important 100 level into 85. This remains important to watch as this is still off the year lows of 75 made in early March. An attempt at new year lows here should help $SPX push higher, but no new year lows with $SPX moving higher remains a possible divergence.?

Upcoming News:

• Next week is an overall slower week of data, but all leading up to the following week’s CPI report on Tuesday and the FOMC meeting and rate decision June 13-14.
• Monday, June 5 we get final services PMI at 9:45 a.m. ET. Then at 10:00 a.m. we get ISM services PMI and factory orders m/m.??
• Wednesday, June 7 we get the consumer credit m/m update at 3:00 p.m. ET.??
• Thursday, June 8 weekly unemployment claims are released at 8:30 a.m. ET. This is followed by final wholesale inventories m/m at 10:00 a.m.??

Here's Your Chart of the Week:

Via Barclays Research, Bloomberg: As the VIX melts back toward year lows, risk control funds have been steadily adding exposure - a more neutral area here takes away an edge for the bulls - there is room for higher, but also room for de-risking?

Source: https://twitter.com/WallStJesus/status/1664037910352392200/photo/1

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SPY Daily Update:

$SPY is once again looking to breakout with $SPX futures trading back over 4200. A close over 420 on this $SPY chart will give bulls a healthy look and should provide room for higher.

SPY Weekly Update:

$SPY weekly now seeing two tails on our most recent candles as dip buyers continue to work hard. Bulls are looking for this week to help really confirm a 4200 breakout for a move to 4300.

T3 Live's David Prince joins next week's free pro trader Q&A. Register for free now!

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 3:04pm ET June 01, 2023

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