Weekly Wisdom: Interest Rates Push Higher

Greetings fellow traders and welcome to your October 19th 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,?October 16 - 20:

• Data for the week kicked off on Monday with a beat on the Empire State manufacturing index at -4.6 vs -6.4 expected.??
• Tuesday brought strong economic data once again with retail sales m/m coming in at 0.7% vs 0.3% expected and core retail sales at 0.6% vs 0.2% expected. Industrial production m/m was also a beat at 0.3% vs 0.0% expected. Capacity utilization rate was inline at 79.7% vs 76.6% expected. Business inventories m/m was a slight miss at 0.4% vs 0.3% expected, while the NAHB Housing Market Index was a miss at 40 vs 44 expected.??
• Wednesday started off with building permits coming inline at 1.47 million while housing starts was a slight miss at 1.36 million vs 1.39 million expected.??
• Thursday’s weekly unemployment claims were a beat at 198,000 vs 210,000 expected, which is not the direction the Fed wants to see regarding the labor market. The Philly Fed manufacturing index was a miss at -9.0 vs -6.7 expected. Existing home sales was a beat at 3.96 million vs 3.89 million expected, while the Conference Board's leading economic index m/m was a miss at -0.7% vs -0.4% expected. Powell delivered a mixed but familiar message Thursday afternoon, claiming inflation is still too high but the Fed is watching data carefully and will continue to be data dependent for their actions.??
• Friday, October 20 ends the week quietly with no new economic data scheduled.

Here's what we are eyeing next week, October 22 - 27:

Level Highlights:

• $SPX futures have been subject to a lot of volatility without a lot of progress in either direction throughout the past week, but ultimately bears have taken back control for now.??
• Last week we wrote that bulls should be looking for a higher low pivot around the 4350 area. $SPX futures traded down to 4340 on Friday and managed to find a bottom, bouncing to make a high of 4423 for the week which came this past Tuesday.??
• However, the $VIX has managed to hold since the rally it saw last Friday, holding Friday’s low this week and trading back up to the 20 level with last week’s high being 20.78 and this week’s high being 20.29. This sent $SPX futures back down below last Friday’s low for a lower low this week of 4315.??
• Bears are now looking to take back full control with a push below the 4300 level that should lead to some follow through selling.??
• If bulls can take back 4350, we are back into the range for this week between 4350 - 4425. Bulls will ultimately need a close back over 4400 for control again.?

Upcoming News:

• Tuesday, October 24 starts the week off earnings from $KO, $GE, $MMM, and $GM before the open. The flash manufacturing PMI and flash services PMI are released at 9:45 a.m. ET. We’ll then get the Richmond Fed manufacturing index at 10:00 a.m. ET. $GOOGL,?$MSFT, and $SNAP report earnings after the close.
• Wednesday, October 25 brings earnings from $BA before the open. Then new home sales at 10:00 a.m. ET. $META and $IBM report earnings after the close.
• Thursday, October 26 starts with earnings from?$UPS and $LUV ahead of the open. We'll also get weekly jobless claims, Q3 advance GDP q/q, Q3 advance GDP price index q/q, durable goods orders m/m, core durable goods orders m/m, goods trade balance, and preliminary wholesale inventories m/m all at 8:30 a.m. ET. This is followed by pending home sales m/m at 10:00 a.m. ET. $AMZN and?$F report earnings after the close.
• Friday, October 27 ends the week with earnings from $XOM and $CVX before the open. We then get the PCE price index m/m, core PCE price index m/m, personal income m/m, and personal spending m/m at 8:30 a.m. ET. We’ll also see revised University of Michigan consumer sentiment and inflation expectations at 10:00 a.m. ET.?

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Here's Your Chart of the Week:

Via Bloomberg, Barclays Research: Financial conditions have begun to tighten once again in the second half of this year, but consumers are not quite feeling the pressure yet with Financial Stress staying on the low; this has started to uptick in recent times as well.

Source: https://twitter.com/WallStJesus/status/1713328861709054035/photo/1

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SPY Daily Update:

$SPY tried to make a higher low on the daily chart last Friday and barely made a higher high over last week’s before failing lower to form a lower low this Thursday. 426 was a level bulls broke through two Fridays ago that may act as support going forward, with 422 and 420 as lower support levels should the $VIX be getting ready to break higher. 433, 435, and 438 are resistance levels bulls will have to push through above.

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SPY Weekly Update:

$SPY weekly chart remains in a downtrend since markets topped out this past summer. This week we are possibly forming our next lower high in this weekly downtrend which would indicate a move below 420 coming. Be aware of the $VIX potentially gearing up to break out higher along with these technicals.

Want to Trade With My Team? Click here!

-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 3:04pm ET October 19, 2023

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