Weekly Wisdom: Top Of The Range

Greetings fellow traders and welcome to your May 18th 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 15 - 19:

• We had a quieter week of data this week compared to last but still had some notable events. Overall, $SPX futures have stayed tight and range bound besides Thursday breaking up slightly on the week but still remaining in the bigger picture range.??
• The Empire State manufacturing index came in Monday with a big miss at -31.8 vs -3.7 expected.
• Retail sales were also a miss on Tuesday with m/m +0.4% vs +0.8% expected and core retails sales +0.4% vs +0.5% expected.??
• Housing starts were in line on Wednesday while building permits were weaker than expected.
• Weekly unemployment claims were a beat Thursday morning coming in at 242,000 vs 253,000 expected. The Philly Fed manufacturing index was also better than expected at -10.4 vs -19.5 estimated.
• $SPX spent the first half of the week tightening up in a smaller range within the bigger 4100-4200 range we remain in. Overall market breadth and participation has been relatively poor while heavy weight tech names like $NVDA, $GOOGL, and $AMZN carry the majority of the strength.??
• Fed Funds futures are still pricing a pause at the June meeting, but odds of another hike are starting to move up, showing around 25% chance of another hike as of Thursday premarket. Also interestingly enough, the cuts we are pricing in are dwindling as well, now only showing 2-3 cuts by year end. This may put a ceiling on the market if we further reduce the rate cuts we have been pricing in.
• Friday, May 19 Fed Chair Powell is set to speak at 11:00 a.m. ET.

Here's what we are eyeing next week, May 22 - 26:

Level Highlights:

• As stated above, one of the key factors we have been paying attention to is the rate cuts Fed Funds futures have been pricing in - and just as the market starts to try to break higher at the end of the week here, Fed Funds futures are pulling back on the cuts and now only pricing 2-3 by year end from 3-4. Markets have been holding in very well partially on the back of those cuts to come - pushing that “financial easing” back will not be good for the bull’s momentum this summer.??
• $SPX futures remain in the 4100-4200 range, testing but failing to get through 4200 this Thursday. A real break of the level should give us a measured move to 4300 which is another big resistance level - however bulls may have less fuel on the way up if we also push back on rate cuts.?4160 was important for bulls to get through this week - back below there will have momentum bulls disappointed.??
• $VIX remains subdued with 18 being a resistance level for over a week now - however this does remain off the year lows of mid 15s as $SPX retests 4200, a possible bearish divergence for $SPX.
• $VVIX also continues to show divergence, down to 90 this week but still well off the year lows of 75. 100 continues to serve as resistance here, but $SPX will get hit down hard if the $VVIX can ever clear 100 in a real way - that should get $VIX back to 20 or higher.

Upcoming News:

• Tuesday, May 23 flash services PMI and flash manufacturing PMI are released at 9:45 a.m. ET. We’ll also get updates for April new home sales and the Richmond Fed's manufacturing index at 10:00 a.m.
• Wednesday, May 24 the Fed releases the minutes of its May FOMC meeting at 2:00 p.m. ET, but no rate decision or press conference until the June meeting.
• Thursday, May 25 we’ll get updates for prelim GDP q/q, prelim GDP price index q/q, and weekly unemployment claims. We’ll also get data for April pending home sales m/m at 10:00 a.m.
• Friday, May 26 is a busy morning bringing the April PCE and core PCE price indexes m/m, durable and core durable goods orders m/m, personal income and personal spending m/m, as well as prelim wholesale inventories m/m all at 8:30 a.m. ET. We’ll also get the University of Michigan consumer sentiment and inflation expectations index at 10:00 a.m.??

Here's Your Chart of the Week:

Via J.P. Morgan: Equities have held up very well on the back of future coming rate cuts, while other markets remain worried - who will be right? This should be an interesting summer.

Source: https://twitter.com/WallStJesus/status/1658440369208475650/photo/1

?

SPY Daily Update:

$SPY daily chart is attempting to break out of the smaller range we made this week, but remains in the larger 4100-4200 $SPX Futures range. 417.50-418 is the breakout area for $SPY and bulls would prefer to hold 413 going forward.

SPY Weekly Update:

Although $SPY daily chart is working on a breakout, the bigger weekly picture remains sideways and choppy, closer to the top of the range at this point. With most of the market not participating in strength, many are questioning how far $SPX Futures can go over 4200 without broader market participation.

T3's Senior Trader Derrick Oldensmith joins next week's free pro trader Q&A. Register for free now!

Want to Trade With My Team? Click here!

-Patrick Hawe

?

?

Disclosures

Patrick Hawe's current positions:

*As of 1:55pm ET May 18, 2023

?

Patrick Hawe is an Associated Member of T3 Trading Group, LLC (“T3TG”), a SEC Registered Broker-Dealer & Member of FINRA/SIPC. All trades made are placed through T3TG.

T3 Live, LLC is a financial publisher that disseminates information about economic, business, and capital markets issues through various media. T3 Live is not a Broker-Dealer, an Investment Adviser, or any other type of business subject to regulation by the SEC, CFTC, state securities regulators or any “self-regulatory organization” (such as FINRA). Although T3 Live and T3TG are affiliated companies by virtue of common ownership, the companies are managed separately and engage in different businesses.

The programs that T3TG distributes (including articles, commentary, videos, blogs and social media postings) are for informational and educational purposes only. No one should consider the information disseminated by T3TG to be personalized investment advice, a recommendation to buy, sell or hold any investment, an offer (or a solicitation of an offer) to buy or sell any investment, or the provision of any other kind of investment advice. No one associated with T3TG is authorized to make any representation to the contrary.

T3TG provides information that viewers of its programs may consider in making their own investment decisions. However, any viewer will be responsible for considering such information carefully and evaluating how it might relate to that viewer’s own decision to buy, sell or hold any investment. Such decisions must be based on that viewer’s individual and independent evaluation of his or her financial circumstances, investment objectives, risk tolerance, liquidity needs, family commitments and other factors, not in reliance on any information obtained from T3TG.

Statements by any person (whether identified as associated with T3 Live, T3 Trading Group, or any other entity) represent the opinions of that person only and do not necessarily reflect the opinions of T3TG or any other person associated with T3TG.

It is possible that any individual providing information or expressing an opinion on any T3TG program may hold an investment position (or may be contemplating holding an investment position) that is inconsistent with the information provided or the opinion being expressed. This may reflect the financial or other circumstances of the individual or it may reflect some other consideration. Viewers of T3TG programs should take this into account when evaluating the information provided or the opinion being expressed.

Although T3TG strives to provide accurate and reliable information from sources that it believes to be reliable, T3TG makes no guarantees as to the accuracy, completeness, timeliness, or correctness of any such information. T3TG makes no guarantee or promise of any kind, express or implied, that anyone will profit from or avoid losses from using information disseminated through T3TG.

All investments are subject to risk of loss, which you should consider in making any investment decisions. Viewers of T3TG programs should consult with their financial advisors, attorneys, accountants or other qualified professionals prior to making any investment decision.

The risk of loss in trading equities, options, forex and/or futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage that is often obtainable in options trading may benefit you as well as conversely lead to large losses beyond your initial investment. Past results are not indicative of future results. No representation is being made that any account will or is likely to achieve profits similar to those shown.

T3 Trading Group, LLC is a Registered SEC Broker-Dealer and Member of FINRA/SIPC. All trading conducted by contributors associated with T3TG on the Virtual Trading Floor is done through T3TG. For more information on T3 Trading Group, LLC please visit www.T3Trading.com.