Weekly Wisdom: SPX Remains Stuck In Range

Greetings fellow traders and welcome to your May 11th 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.

Taking a look back on this week, May 8 - 12:

• $SPX futures remain stuck between 4100 support and 4200 resistance, despite getting through the majority of earnings reports, the FOMC meeting, CPI, and PPI data this week. While we won’t remain stuck in this range forever, the length is getting impressive as we trade around the same price we traded at the beginning of April.
• CPI data came in Wednesday morning better than expected: 
• US CPI YoY: 4.9% (Est. 5.0%)
• US Core CPI YoY: 5.5% (Est. 5.5%)
• US CPI MoM: 0.4% (Est. 0.4%)
• US Core CPI MoM: 0.4% (Est. 0.4%).  
• PPI data Thursday morning was also better than expected: 
• US PPI YoY: 2.3% (Forecast 2.5%, Previous 2.7%)
• US Core PPI YoY: 3.2% (Forecast 3.3%, Previous 3.4%)
• US PPI MoM: 0.2% (Forecast 0.3%, Previous -0.5%)
• US Core PPI MoM: 0.2% (Forecast 0.2%, Previous -0.1%)
• As of this morning, Fed Futures have moved lower following the CPI release on Wednesday, nearly 100% pricing in a no hike/pause move for the upcoming June meeting. We are also still pricing in 3-4 rate cuts by the end of January. 
• Friday, May 12 we get the University of Michigan's consumer sentiment index and inflation expectations at 10:00 a.m. ET.

Here's what we are eyeing next week, May 15 - 19:

Level Highlights:

• $SPX futures remain stuck between the 4100-4200 range we have been trading in since the 4050 breakout took place at the end of March - about a month and a half of sideways, choppy trade. Interestingly enough, $RSP, the equal weight S&P ETF, has performed much worse than $SPY over the past month as mega cap tech has charged higher amid broader weakness. 
• Bulls need a close over 4200 on $SPX futures for confirmation higher toward 4300. Bears need a close below 4075 for a retest of 4050 into 4000. On $SPY, bulls need a close above 416 and bears need a close below 408 for possible follow through on either side.
• $VIX remains subdued after briefly getting over 20 this past week, back into the mid 17s area which has been basing out on the $VIX daily chart since the second half of April.
• Another interesting point for bears to observe along with the broad weakness observed in $RSP vs $SPY would be $VVIX continuing to stay elevated away from year lows, trading over 100 this week and remaining well off year lows. Bears want to see a close over 100 on $VVIX for a move over 108, which should be enough to wake $VIX up in a real way and give the market a breakdown. Bulls want to see $VVIX lose this week’s low and close back under 90.

Upcoming News:

• Monday, May 15 we get the Empire State manufacturing index at 8:30 a.m. ET.
• Tuesday, May 16 Canada reports their CPI data and we get April U.S. retail sales and core retail sales at 8:30 a.m. ET.
• Wednesday, May 17 the Commerce Department releases data for April housing starts and building permits at 8:30 a.m. ET.
• Thursday, May 18 we get weekly jobless claims and the Philly Fed manufacturing index at 8:30 a.m. ET. The National Association of Realtors then reports April existing home sales and the Conference Board releases the leading economic indicators at 10:00 a.m. ET. 
• Friday, May 19 Fed Chair Powell is set to speak at 11:00 a.m. ET.

Here's Your Chart of the Week:

With CPI out of the way, the debt ceiling appears to be the main focus of worry now with CDS on US skyrocketing in recent weeks; the spread here shows the greater trust in institutions versus the government:

Source: https://twitter.com/WallStJesus/status/1656650595615244289/photo/1

SPY Daily Update:

$SPY daily remains stuck in the range, with 410 and 408 being important support levels below and 413 and 415 being important resistance levels above.

SPY Weekly Update:

$SPY forming an inside week as we remain stuck - mid 414s is the week high and 409 is the week low to watch for next week.

Options trader Dan Darrow joins next week's free pro trader Q&A on LinkedIn. Register for free now!

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-Patrick Hawe

Disclosures

Patrick Hawe's current positions:

*As of 2:33pm ET May 11, 2023

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