Weekly Wisdom: Interest Rates Push Higher

Greetings fellow traders and welcome to your August 17th 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 14 - 18:

• We had another tough week this week with interest rates continuing to rise higher, helping push both the VIX and VVIX higher as well as $SPX futures down to new recent lows.??
• Tuesday brought us some mixed data results with retail sales coming in at a beat of 0.7% vs 0.4% expected, core retail sales was also a beat at 1.0% vs 0.4% expected. However, the Empire State manufacturing index was a miss at -19.0 vs -0.9 expected and the NAHB housing market index was also a miss at 50 vs 56 expected.??
• Wednesday had a miss for building permits at 1.44 million vs 1.47 million expected while housing starts came in-line at 1.45 million. The FOMC meeting minutes brought some volatility to the markets with the theme overall staying hawkish and continuing to focus on fighting inflation - however some members are worried about tightening too much which brought a dovish tint to the overall minutes.??
• Thursday’s weekly unemployment claims came in-line at 239,000 vs 240,000 expected. The Philly Fed manufacturing index came in stronger than expected at 12.0 vs -9.8 expected.

Here's what we are eyeing next week, August 21 - 25:

Level Highlights:

• $SPX futures traded lower this week, down to the bigger area of support we highlighted last week of 4420-4390 with a low so far of about 4405 but still downtrending. The FOMC meeting minutes brought us some volatility on Wednesday but this ultimately resolved lower with more follow through the next day. The next zone of support should we stay heavy and lose 4400 comes a little lower in the 4370-4340 range which goes back to levels from early June. If 4400 can manage to hold and provide a better bounce, upside resistance can be found at 4450, 4470, and then 4500 with bulls needing a close back over 4505 to be in the clear.??
• $TLT helped keep markets heavy this week as interest rates continued to rise higher, sinking further down to as low as 93 on Thursday. As mentioned last week, the low of the year is at 92 and new lows will continue to hurt equities.??
• $VVIX and $VIX are both trading higher this week but neither have broken to the upside yet. Bears are still watching for a $VVIX breakout over the 105 level to expand $VIX further - this traded up to 105 this week but has not been able to push through for another leg higher. Bulls are looking for $VVIX to fail pushing higher and ultimately turn back under the 100 level.?

Upcoming News:

• Tuesday, August 22 we’ll see updates for existing home sales and the Richmond Fed's manufacturing index at 10:00 a.m. ET.??
• Wednesday, August 23 the flash manufacturing PMI and flash services PMI are released at 9:45 a.m. ET. We’ll also see new home sales at 10:00 a.m. ET.
• Thursday, August 24 is the first day of the Jackson Hole Symposium. We’ll also get data for weekly unemployment claims, durable goods orders m/m, and core durable goods orders m/m at 8:30 a.m. ET.??
• Friday, August 25 we’ll get the University of Michigan consumer sentiment and inflation expectations index at 10:00 a.m. ET.?

Here's Your Chart of the Week:

Via Optionmetrics, Citi Global Markets: 0DTE options trading has been having a huge impact on intraday market movements this calendar year - we just recently broke the previous record for Zero-day options trading as a % of total volume - we have seen many mid day reversals this year and 0DTE options have played a huge part in that.

?Source: https://twitter.com/WallStJesus/status/1691982052952858850/photo/1

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SPY Daily Update:

$SPY failed to hold 445 support this week and has continued to trade lower. We are now coming into the next support level here at 438, below this 435 is the next major level should they fail 438 without a better bounce by the end of this week.

SPY Weekly Update:

$SPY weekly chart now testing this big 438 level from the ignition bar higher 5 weeks ago. 435 is another big support level below but below 430 our weekly trend officially breaks and we may be headed for a retest of the big 420 level we broke out from back in the Spring.??

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:51pm ET August 17, 2023

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