Weekly Wisdom: Hot Data Pushing Back Rate Cuts?

Greetings fellow traders and welcome to your March 14th 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, March 11 - 15:

• Markets have continued to hold up well, but may be stalling out a bit this week after multiple economic data points came in unfavorable compared to estimates.??
• Data for the week began on Tuesday again with our latest CPI inflation readings. CPI y/y came in at 3.2% vs 3.1% expected; CPI m/m was 0.4% vs 0.4% expected; core CPI y/y was 3.8% vs 3.7% expected; core CPI m/m was 0.4% vs 0.3% expected - nearly all slightly hotter than estimates provided. Later in the afternoon, the federal budget balance was roughly inline at -$296.3 billion vs -$298.5 billion.??
• Wednesday’s 30-year bond auction did not bring any notable volatility to equities markets.?
• Thursday brought us some further hotter than expected data with PPI y/y printing 1.6% vs 1.2% expected; PPI m/m was 0.6% vs 0.3% expected; core PPI y/y was 2.0% vs 1.9% expected; core PPI m/m was 0.3% vs 0.2% expected. We also got light data for retail sales m/m coming in at 0.6% vs 0.8% expected, with core retail sales m/m at 0.3% vs 0.5% expected. Weekly unemployment claims were 209,000 vs 218,000 expected. Business inventories m/m came in at 0.0% vs 0.2% expected.??
• Friday, March 15 ends the week with the Empire State manufacturing index, as well as import prices m/m, at 8:30 a.m. ET. This is followed by industrial production m/m and capacity utilization rate at 9:15 a.m. ET. We’ll then see preliminary University of Michigan consumer sentiment and inflation expectations at 10:00 a.m. ET.

Here's what we are eyeing next week, March 18 - 22:

Level Highlights:

• $SPX futures made another new all time high last Friday at 5257 but have not been able to surpass that this week.
• Although we have not pulled back too much yet, markets seemed to have stalled out this week on the multiple hotter than expected data points.
• Markets are still expecting the first rate cut to come in June, but the odds for that are down slightly after the Thursday hot PPI print.
• The momentum level for bulls has moved up to now 5150, with a close below there putting the uptrend for $SPX in jeopardy should we see it in the coming weeks.
• 5050 remains an important level but is now more “major” support on a bigger market pull back should it come, with 4950 as the next major support level below that.
• $VIX did manage to trade over the 15 breakout level but only for a short time - rising above the level but closing back below on Friday, followed by a gap up over 15 on Monday but back under 15 by Tuesday.
• $VIX is now back in the ascending wedge formation given here a couple of weeks ago, with 15 still an important upside level to watch and roughly 13.50 as a potential breakdown level which could further squeeze $SPX higher.

Upcoming News:

• Monday, March 18 starts the week off with the NAHB Housing Market Index at 10:00 a.m. ET.??
• Tuesday, March 19 brings us data updates for building permits and housing starts at 8:30 a.m. ET. Canada will also release their CPI data.
• Wednesday, March 20 is the big day next week with the FOMC statement and interest rate decision released at 2:00 p.m. ET. This is followed by the FOMC press conference at 2:30 p.m. ET. Markets are still expecting no change on this meeting with June being the likely first rate cut. Many will be listening to Powell to see if he walks that back at all after a couple of hotter than expected prints on CPI and PPI.??
• Thursday, March 21 gives us numbers for weekly unemployment claims, as well as the Philly Fed manufacturing index and the current account at 8:30 a.m. ET. We’ll then see flash manufacturing PMI and flash services PMI at 9:45 a.m. ET. This is followed by existing home sales and the Conference Board's leading index m/m at 10:00 a.m. ET.??
• Friday, March 22 does not bring any meaningful economic data to end the week.??

Here's Your Chart of the Week:

Via Goldman Sachs Global Investment Research, OptionMetrics:? Options volume surpassed that of shares during this month after a period of 2 years, largely driven by semiconductor related volumes

Source

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SPY Daily Update:

$SPY made one more new all time high last Friday but has now stalled out and is finding some resistance at the 517 level. 510, 505, and 503 remain support levels below with a close below 505 potentially killing the daily uptrend

SPY Weekly Update:

$SPY weekly ended up giving a doji candle last week and is now forming an inside week. With the FOMC meeting coming next week, it is unlikely we see another inside week - this week’s range is roughly 508.50 - 517.00

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:35pm ET March 14, 2024

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