Weekly Wisdom: Markets Get Euphoric

Greetings fellow traders and welcome to your June 15th 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, June 12 - 16:

• Markets did not blink much at the data and the Fed this week as $SPX continues to push to new highs for the year and the $VIX stayed subdued.?
• Inflation data was released on Tuesday with CPI Y/Y coming in at 4.0% vs 4.1% expected, CPI M/M at 0.1% vs 0.2% expected; core CPI Y/Y came in at 5.3% vs 5.3% expected and core CPI M/M was 0.4% vs 0.4% expected.??
• The CPI data was favorable for bulls as this was another cooler than expected report, which helps the Fed take their foot off the gas in terms of cooling the economy in order to fight inflation.
• We had more data Wednesday morning with PPI M/M coming in at -0.3% vs -0.1% expected, and core PPI M/M was 0.2% vs 0.2% expected.??
• The Fed then decided to pause interest rate hikes after 10 in a row, leaving rates unadjusted at 5%-5.25%. Some of the main themes from Powell’s speech included once again backing off on the idea of multiple rate cuts coming anytime soon. Fighting inflation is still his number 1 goal, and they will not be afraid to raise rates further in either July or September if the data calls for it.?
• $SPX futures had a further push this week through 4300 and holding and consolidating very well last week, reaching a high of 4457 this week.
• $VIX continues to stay heavy, unable to find the ability to rally much more than 1 point in the past couple of weeks. $VIX had a slight jump from upper 13s to low 15s to start this week, but has since drifted right back down.
• $VVIX on the other hand continues to stay fairly elevated, putting in a low of 88 this week which is well off last week’s lows of mid 83s.

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Here's what we are eyeing next week, June 19 - 23:

Level Highlights:

• $SPX futures daily chart has started to go parabolic here, stretching many measures of extension and exhaustion. Bulls are very happy, and now need to work on not getting too greedy or complacent . Even bull markets still have 2-3% pullbacks at times, small corrections are very healthy. Since the market has stretched to the upside so much, there is a lot of room lower to fall but still keep the uptrend in tact. Momentum bulls would prefer to see 4380 hold on a pullback.
• Bulls should also be very aware of the $VIX and $VVIX divergence building out in the parabolic market. $VIX is working on a higher low this week of 13.79 vs last week’s low of 13.50, despite $SPX making a significant higher high. Bears should look for a break over 15 in the $VIX for a bigger market pullback.??
• $VVIX is also working on a higher low this week, continuing to uptrend during the month of June. Bears are looking for $VVIX to get back and stay over 100 in order for the $VIX to give a rally that lasts more than half a day.

Upcoming News:

• Monday, June 19 markets are closed for Juneteenth.
• Tuesday, June 20 data for building permits and housing starts is released at 8:30 a.m. ET.?
• Wednesday, June 21 Fed Chair Powell is set to testify beginning at 10:00 a.m. ET.
• Thursday, June 22 we get our weekly unemployment claims at 8:30 a.m. ET.?At 10:00 a.m., Powell will continue to testify and we’ll also get data for existing home sales and the Conference Board's leading economic index m/m. Bank stress test results are set to come out after the close at 4:30 p.m.??
• Friday, June 23 we’ll get data for flash manufacturing PMI and flash services PMI at 9:45 a.m. ET.?

Here's Your Chart of the Week:

Via CNN:?The bigger picture gauge we shared last week continues to push higher with the market, hitting new extreme greed highs not seen in over a year now. Longer term buyers may want to take caution and use patience up here for now.

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

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SPY Daily Update:

$SPY daily chart has begun to go parabolic upward as buyers continue to chase higher price. 445-450 is a major resistance zone to be aware of should $SPY keep pushing higher this week without a better pause.

SPY Weekly Update:

$SPY weekly chart is getting very stretched to the upside. The zone of 440-450 has a lot of resistance from last Spring, with 440, 445, and 450 all being major levels.

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:37pm ET June 15, 2023

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