SPX Daily neutral with a bearish bias. Recommended ratio: 48% SPX, 52% Cash. *SHORT SQUEEZE WATCH. Sentiment has switched to bearish in light of the incoming economic data this week (FFR rate hike announcement, first Q2 GDP estimate, PCE inflation index) as well as a big week of 'recession-fear inducing' earnings: Walmart missed by 12% on earnings and saying earnings should fall by 11%-13% this year due to less consumer demand; Alphabet missed on both EPS and Revenue but beat on Ad Revenue (unlike SNAP, TWTR and MSFT) which has it rallying after-hours; Microsoft also missed on both EPS and Revenue, but more importantly it missed on Personal Computing and Intelligent Cloud (Azure) revenue estimates which has Microsoft currently down 3% after hours. One of the few variables that are keeping the NBER from declaring the economy to be in a recession is a strong consumer (referring to retail sales, real PCE, personal income and credit quality). Though retail sales increased in June, if real PCE comes in lower on 07/29 then retail sales are due to fall as people shift to savings-and-necessities mode to mitigate inflation and recession effects. Real PCE appears to have formed a peak in April at $13950b, the May reading (current) was $13895b and the June reading is scheduled for release on 07/29; judging by earnings and what people historically do in recessions (consume less), it's sensible to infer that real PCE will likely come in lower on 07/29. Real personal income excluding transfers continues to trend higher as of May with a new ATH of $14501b; considering that the 11 year bull market in stock markets and 11 year decline in unemployment was largely due to historically low interest rates and QE, it would be reasonable to expect a downward correction in personal income (and hiring) that now that all the 'excess' capital available to businesses is significantly less. Although Consumer Credit increased by 5.9% in May compared to 9.7% in April, credit outstanding continues to go up with inflation; this is showing signs of increasing financial burdens being experienced by the consumer. Walmart, Alphabet and Microsoft all missed on their earnings but Alphabet benefited from being the only one of SNAP, TWTR and MSFT to beat on Advertising Revenue estimates. Key dates this week: FOMC Statement 2pm (EST) 07/27, META earnings after-hours 07/27, First Q2 GDP estimate 830am (EST) 07/28, AMZN & AAPL earnings after-hours 07/28, PCE index inflation and Real PCE excluding transfers at 830am (EST) 07/29.* Price is currently testing a critical support juncture where the 50 MA + lower trendline of the descending channel from August 2021 + $3938 minor support all converge; due to the importance of this support level it's prudent to not be too bearish until support is officially lost. Volume remains Moderate (high) and is fairly balanced between buyers and sellers in the last few sessions, indicative of a critical juncture. Parabolic SAR flips bearish at $3796, this margin is mildly bearish at the moment. RSI is currently trending down at 52 with no signs of trough formation as it tests 52.68 support. Stochastic remains bearish and is currently testing 76 support with no signs of trough formation. MACD remains bullish and is currently forming a soft peak at 10.73 minor resistance, this is happening as the Signal line turns -11.45 to support. ADX continues to trend down and is currently at 15 with no signs of trough formation as Price continues its attempt to push higher, this is mildly bearish at the moment. If Price is able to bounce here at this trifecta of support (50 MA + lower trendline of descending channel from August 2021 + $3938 minor support) then it will likely retest $4175 resistance. However, if Price breaks down below here, it will likely retest the uptrend line from 06/16/22 at ~$3880 before potentially heading lower to retest $3707 minor support. Mental Stop Loss: (two consecutive closes above) $3938.
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.