Weekly Wisdom: Traders Brace For Jobs & Inflation Numbers

Greetings fellow traders and welcome to your March 9th 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, March 6 - 10:

• Interest rates continued higher this week with the 2-year Treasury yield breaching 5% to make a high of 5.085%. Yield curve inversions continue to increase, with shorter-term rates accelerating higher at a faster pace than longer-term rates.??
• $SPX futures continued their rally off 3925 last week to a high of 4082 Monday morning before pulling back later in the week off Powell’s hawkish tone throughout his Congressional testimony, trading back down to a low of 3971 Wednesday morning as the big 4000 level continues to get chopped.
• $DXY and $UUP continued to rally higher this week, making a higher low and higher high on the daily chart. A higher dollar has been giving an upside ceiling to any market rallies this past week.
• $VVIX has actually managed to trade lower this week with the market chop, making a new weekly low of 73.60 on Thursday before finally finding a bottom and turning higher. $VVIX is certainly more oversold than overbought going into these economic numbers and bulls should be wary of having too much long exposure on. For many of our past numbers, the VIX market has been elevated into the events but this time is a bit different.

Here's what we are eyeing next week, March 13 - 17:

Level Highlights:

• As mentioned, $VVIX made a final low for this week at 73.60 before turning back higher Thursday morning. $VVIX has more or less sold straight down from 96 to 74 over the past 2 weeks. An oversold VIX market is not a good setup for bulls going into a binary event, risk seems to the downside here.
• $SPX futures have now spent weeks chopping the 4000 level, making a rough range between 3900 - 4100, a 200 handle range. The next real break, which could establish a trend for the market again, gives us a 200 handle measured move either down to 3700 or up to 4300 depending on which way we end up breaking. Overall, the outlook is bearish for now and 3700 looks more likely than 4300, but as we know this market can change in a day - keep waiting on $DXY and interest rates for any changes.?

Upcoming News:

• Tuesday, March 14th is a big day with February CPI y/y, CPI m/m, and core CPI being released at 8:30 a.m. EST. The Fed has noted that they are closely watching core CPI.
• Wednesday, March 15th is another big day with February PPI, core PPI, retail sales, core retail sales, and Empire State manufacturing index all being released at 8:30 a.m. EST. We’ll also get the March NAHB housing market index and business inventories m/m at 10:00 a.m. EST.??
• Thursday, March 16th will bring us updates for Philly Fed manufacturing index, weekly unemployment claims, February housing starts and building permits, and import prices m/m all at 8:30 a.m. EST.
• Friday, March 17th we’ll get the preliminary University of Michigan consumer sentiment index and inflation expectations plus the Conference Board's leading economic indicators index at 10:00 a.m. EST.

Here's Your Chart of the Week:

Via Bloomberg: “There’s a reasonable chance that the Fed will have to bring the Fed Funds rate to 6% & then keep it there for an extended period to slow the economy & get inflation down to near 2%:” BlackRock's Rieder …. New yield-curve inversion as short-term yields soar:

Source: Bloomberg

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SPY Daily Update:

$SPY has seen a ton of chop over the past couple weeks but now trades at the same prices we traded at on 2/21, over 2 weeks with no real progress in either direction. Will jobs or CPI be enough to break us in a direction and establish a trend?

SPY Weekly Update:

$SPY weekly chart here a bit of a mess after the all the chop - I would argue we are pretty neutral here going into these upcoming numbers in terms of both technicals and overall positioning. Be ready for a break or false break either way.

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-Patrick Hawe

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Disclosures

Patrick Hawe's current positions:

*As of 2:40pm ET March 9, 2023

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