Weekly Wisdom: Powell Not Worried

Greetings fellow traders and welcome to your March 21st 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, March 18 - 22:

• Markets are once again strong after the FOMC meeting this week where Powell did not change much of his rhetoric, emphasizing that watching the data come in is still important, but seeming a bit upbeat as well and highlighting that most everything is still going well.
• $SPX futures made another new all time high post FOMC, trading up to as high as 5322 on Thursday, along with the $VIX breaking down its rising wedge we have been highlighting here - losing 13.50 support and trading as low as 12.40 on Thursday.
• Data for the week began on Monday with a beat for the NAHB Housing Market Index at 51 vs 48 expected.
• Tuesday’s data for building permits was a slight beat at 1.52 million vs 1.50 million expected, with housing starts also beating at 1.52 million vs 1.43 million expected. Canada’s median CPI y/y came in light at 3.1% vs 3.3% expected.
• Wednesday was FOMC day this week. Powell kept rates unchanged and gave an upbeat press conference, showing no real signs of worry on the past couple of hotter than expected inflation data points.
• Future rate cut expectations moved around a bit but are overall still looking at June for the first rate cut to come this year.
• Friday, March 22 does not bring any meaningful economic data to end the week.

Here's what we are eyeing next week, March 25 - 29:

Level Highlights:

• $SPX futures traded new all time highs this week, breaching over 5300 for the first time ever with $SPX cash breaking over 5200 for the first time.
• Along with the new high, the $VIX broke down the ascending wedge and higher low formation on the daily we have been discussing, falling below the 13.50 level, helping boost the risk-on rally.
• Before this FOMC meeting, $SPX futures were stuck in a range between 5180-5250 which has now broken out.
• This gives $SPX futures a measured move of 70 handles up to the 5320 area, which has technically already been completed with $SPX futures reaching a high of 5322 on Thursday.
• Bulls now want to see markets hold the FOMC gains, with 5250 the new momentum level for active bulls to watch; bulls should be cautious on a close back under 5250 within the next week or so if we see it.
• A close below the lower end of the range, 5180, would put the market uptrend in jeopardy.
• $VIX, as always, should still be watched for potential market weakness, with lower 12s as a big support level. Should this keep trending down, 11 remains a major support level that has yet to be tested in this bull run.

Upcoming News:

• Monday, March 25 starts the week off with new home sales at 10:00 a.m. ET.
• Tuesday, March 26 brings data for durable goods orders m/m and core durable goods orders m/m at 8:30 a.m. ET. This is followed by the Conference Board's consumer confidence index and the Richmond manufacturing index at 10:00 a.m. ET.
• Wednesday, March 27 does not bring any meaningful U.S. data to markets.
• Thursday, March 28 is the busy data day next week, beginning with weekly unemployment claims, final GDP q/q, and final GDP price index q/q at 8:30 a.m. ET. We’ll then see Chicago PMI at 9:45 a.m. ET, followed by pending home sales m/m, and the revised University of Michigan consumer sentiment and inflation expectations index at 10:00 a.m. ET.
• Friday, March 29 markets are closed in observance of Good Friday

Here's Your Chart of the Week:

Via Bloomberg, Morgan Stanley Research:? Despite rate cut expectations pulling back throughout the past couple of months with the hotter US inflation data, markets have not seemed to care or notice the change, at least for now

Source

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SPY Daily Update:

$SPY has broken over the top of the range with the help of Mr. Powell - bulls now want to see these gains hold as best as possible as we digest the move. A close back under $SPY 517 would potentially negate the positive FOMC impact and could trigger further selling.

SPY Weekly Update:

$SPY weekly chart continues the monster run that started back in November after two weeks of sideways rest - bulls continue to look good, with the trend still being a very good friend.

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:07pm ET March 21, 2024

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