Weekly Wisdom: Markets Take Needed Breathe

Greetings fellow traders and welcome to your June 22nd 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 19 - 23:

• We had a short week this week as markets were closed on Monday for Juneteenth; overall this was a quieter week as the markets finally got some much needed cooling off.??
• Housing starts came in higher than expected at 1.63 million vs 1.40 million expected on Tuesday, as well as building permits at 1.49 million vs 1.42 million expected.??
• Powell testified this week and re-emphasized the Fed’s main goal of fighting inflation. He hinted at another possible 2 rate hikes this year and tried to cast away any signs of any rate cuts coming this year as core inflation remains too sticky and seems to have plateaued for now.
• Existing home sales was a beat on Thursday at 4.30 million vs 4.25 million expected. The Conference Board's leading economic index was also a beat at -0.7% vs -0.8% expected. Weekly jobless claims were 264,000 vs 261,000 expected.?
• $SPX futures have spent the week cooling off after going parabolic and stretching to the upside late last week - now down to 4400 from last week’s high of 4493. The momentum level of 4380 we highlighted last week still holds for the bulls for now, as the $VIX has been unable to wake up even with the cool off.
• $VIX and $VVIX have both stayed relatively tame throughout this market pullback, with the $VIX still stuck in the 13s and heading lower toward a 12 handle for the first time in years.
• Friday, June 23 we’ll get data for flash manufacturing PMI and flash services PMI at 9:45 a.m. ET.

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Here's what we are eyeing next week, June 26 - 30:

Level Highlights:

• So far this $SPX pull back is about as bullish as it could get, with the momentum higher low of 4380 holding this week. The main higher low bulls need to hold for this bigger uptrend to stay in tact is 4260 - as mentioned last week there is still room for the market to fall lower but have our uptrend hold. The more markets chop sideways, the better the bulls set up for another leg higher.??
• On the contrary, $VIX continues lower and is seeing new year lows this week, trading down to the low 13s. $VIX has not seen a 12 handle since pre-covid. Bulls should be careful and need to keep watching as the $VIX leaks lower without any real rallies - this can keep pressing lower, but eventually the $VIX will have a 1-3 day rally which could catch lazy bulls offsides fairly quickly.
• $VVIX is more or less flat after last week, trading higher in the initial market pull back but now back down as the market chops sideways in the second half of this week. Overall this still remains well off year lows and has been uptrending with the market for the entire month of June. Bulls would want to see a break below 89.50 to break this uptrend, while bears are looking for a move back over 100+ to wake the $VIX up in a real way.

Upcoming News:

• Tuesday, June 27 data for durable goods orders m/m and core durable goods orders m/m are released at 8:30 a.m. ET. Canada also releases their CPI update. Then at 10:00 a.m., we’ll get the Conference Board's consumer confidence index, new home sales, and the Richmond Fed manufacturing index.??
• Wednesday, June 28 Fed Chair Powell is set to speak at 9:30 a.m. ET. We’re also set to get bank stress test results at 4:30 p.m. after the market close.
• Thursday, June 29 at 8:30 a.m. ET we’ll get data updates for final GDP q/q, final GDP price index q/q, and weekly jobless claims. We’ll also see pending home sales m/m at 10:00 a.m.
• Friday, June 30 at 8:30 a.m. ET the core PCE price index m/m is released, as well as personal income, and personal spending m/m. Then we’ll get Chicago PMI at 9:45 a.m., followed by the University of Michigan consumer sentiment index and inflation expectations at 10:00 a.m.??

Here's Your Chart of the Week:

Via EPFR, Haver, Deutsche Bank Asset Allocation: Chart says it all; technology has been a huge leader in this market rally, vastly outpacing all other sectors; energy, materials, and financials have been lagging while healthcare, telecom, and utilities have stalled out.

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Source: https://twitter.com/WallStJesus/status/1670795642925375498/photo/1

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SPY Daily Update:

$SPY daily chart finally seeing a pull back after multiple weeks of trading either up or sideways. The uptrend is still very much in tact and bulls should be looking for 430 to hold on further downside - a move below 426 risks breaking this large uptrend.

SPY Weekly Update:

$SPY weekly chart is seeing an inside week this week as the market works to cool off the parabolic move. Bulls have been paid well and may want to be careful buying too much too early on a dip.

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:42pm ET June 22, 2023

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