Weekly Wisdom: Hotter CPI Pulls Back Rate Cut Bets

Greetings fellow traders and welcome to your January 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, January 8 - 12:

• Markets bounced back well this week after the new year selling, but are stalling out on Thursday with CPI coming in hotter than expected.??
• $SPX futures continued their selling into the end of last week, making a low of 4702 before finally bouncing off the 4700 support area to close the week at 4732, well off the highs that started the year up at 4828.??
• Since then, $SPX futures opened the week up at 4735 and traded all the way back up to 4838, overtaking last week’s high of 4828 and just missing the highs made at the end of December of 4841.??
• Data for the week started off on Monday with consumer credit m/m at $23.8 billion vs $8.9 billion expected.??
• Tuesday began with a beat for the NFIB small business index at 91.9 vs 90.7 expected. The US trade balance came in better than expected at -$63.2 billion vs -$64.9 billion expected.??
• Wednesday brought us final wholesale inventories m/m which was in-line at -0.2%.
• Thursday was the big data day this week which brought updates for inflation with CPI. headline CPI y/y was hot at 3.4% vs 3.2% expected, with CPI m/m also slightly hot at 0.3% vs 0.2% expected. Core CPI y/y was slightly hot at 3.9% vs 3.8% expected, while core CPI m/m was inline at 0.3%.? Weekly unemployment claims came in at 202,000 vs 210,000 expected. The federal budget balance came in at -$129 billion vs -$66.2 billion expected.??
• Friday, January 12 ends the week with December PPI and core PPI data released at 8:30 a.m. ET.

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

Level Highlights:

• $SPX futures traded higher this week, breaking last week’s high before stalling out and trading down to a 4773 low off the hotter than expected CPI numbers.??
• Bulls remain in control on the bigger picture with 4700-4650 remaining an important support zone; more important now that it has been tested and held for now.??
• A close below 4650 would potentially end the market’s uptrend that began in late October / early November.??
• While the bears don’t have much going for them for now, January OPEX (options expiration) takes place next Friday and may help “loosen” the market up a bit.?
• To go with that, $VVIX has traded down hard this week and is back into major support levels in the mid 70s, trading with a 75 handle on Thursday. Bulls should take note of this and be careful of pressing too much more as mid 70s on the $VVIX has been major support for over a year now.

Upcoming News:

• Monday, January 15 markets are closed in observance of Dr. Martin Luther King, Jr. Day.
• Tuesday, January 16 starts the week off with the Empire State manufacturing index at 8:30 a.m. ET.??
• Wednesday, January 17 brings us updates for retail sales, core retail sales, and import prices m/m at 8:30 a.m. ET. Next we’ll see industrial production m/m and capacity utilization rate at 9:15 a.m. ET, followed by business inventories m/m, and the NAHB housing market index at 10:00 a.m. ET. Lastly for Wednesday is the Fed's Beige Book update at 2:00 p.m. ET.??
• Thursday, January 18 brings us weekly unemployment claims, as well as building permits and home starts, and the Philly Fed manufacturing index at 8:30 a.m. ET.?
• Friday, January 19 ends the short week with existing home sales as well as the University of Michigan's consumer sentiment and inflation expectations index at 10:00 a.m. ET.

Here's Your Chart of the Week:

Via CNN Business: Update on Fear & Greed meter - falling back into the upper Greed range from Extreme Greed at the end of December? -? as you can see, market strength and breadth have started to roll over a bit into the new year

Source: https://www.cnn.com/markets/fear-and-greed

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SPY Daily Update:

$SPY daily chart with a bit of a pull back off today’s hotter CPI numbers. Markets are trying to hold 474 support with 471 and 468 as further support below - bulls would be very disappointed with a close below 468.

SPY Weekly Update:

$SPY with a nice bounce back this week after last week’s beginning of the year selling. $SPY has stalled out at 477 / all time high resistance but bulls remain in control overall on this weekly chart for now.?

Want to Trade With My Team? Click here!

-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:31pm ET January 11, 2024

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