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From "FED's pivot" hopes to a "strong labor market" excuseYesterday brought another interesting trading session, with the market being very complacent before Jerome Powell’s speech. However, as soon as he walked on the stage at the Economic Club of Washington, the market rallied. In the early minutes of the speech, SPX jumped up approximately 1.20%. Although, once the FED’s chairman mentioned ongoing rate hikes in the future, SPX slumped by almost 1.8%, bringing it into negative territory. Then again, a few minutes later, the market found its excuse in a strong labor market and rallied toward the end of the day. As a result, SPX closed 1.29% up for the day. This market behavior continues to highlight a tense yet very optimistic mood among market participants, who are back to buying dips. Nonetheless, nothing changes in the big picture. The rally continues against worsening economic data (corporations being hit by a significant decline in net income in 2022, a slowdown in economic activity, declining consumer savings, slow growth of wages, etc.) and assurances of the FED to tighten economic conditions even more in 2023. Overall, the market sentiment seems to have shifted from investors looking for FED’s pivot to them focusing on strong labor market data. Just like on previous occasions, we do not argue against the continuation of the rally in the short term. However, we continue to notice more and more problems in the economy and a growing disconnect between market expectations and reality. That casts a dubious shadow over the market’s performance in the coming months and moves us closer to a big repricing event. With that said, we stick to our price target on the downside for SPX in 2023 at $3 400. Illustration 1.01 Illustration 1.01 shows the 1-minute chart of SPX. Technical analysis Daily time frame = Bullish Weekly time frame = Bullish Illustration 1.02 Illustration 1.02 displays the daily chart of SPX. If the price breaks above Resistance 1, it will bolster a bullish case in the short term; contrarily, if the price breaks below Support 1, it will hint at exhaustion in the rally. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
SP:SPXShort
by Tradersweekly
27
Investors attempt to call FED's bluffThe Federal Reserve raised interest rates by 25 basis points yesterday. Jerome Powell reiterated his commitment to hiking rates throughout the year, and, more importantly, he dismissed any prospects of rate cuts in 2023. Despite that, investors seem to ignore the FED’s rhetoric and try to fight it. In our opinion, the disconnect between reality and the market is growing to tremendous proportions that we have not seen in years. That is particularly worrisome as we continue to see a lot of corporate underperformance and outlook downgrades during the current earnings season. As we noted in our previous article, the conditions are moving closer to a big repricing event. Investors are irrationally complacent at the moment, trying to call FED’s bluff. However, we expect the mood to change once it becomes clear that the U.S. central bank is not bluffing (or once we start seeing a deterioration in the labor market). Therefore, we treat the current rally with the utmost caution. Illustration 1.01 Illustration 1.02 displays the daily chart of SPX. It also shows two SMAs and simple support/resistance levels. For the rally’s continuation, we would like to see SPX hold above Support 1 and SMAs. If the price breaks below Support 1, it will bolster the bearish odds; the same applies if it falls below SMAs. Technical analysis Daily time frame = Bullish Weekly time frame = Slightly bullish Illustration 1.02 Illustration 1.02 displays the weekly chart of SPX. The yellow arrow indicates a price retracement toward the 50-week SMA (and breakout above it). We will pay close attention if the price manages to hold above this level; if yes, it will further bolster the bullish odds. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
SP:SPXShort
by Tradersweekly
47
A thought for all bullish callsSPX is up 4.5% since the start of 2023 and 14.5% since its lows in October 2022. As a result, we are noticing an increase in calls for recovery and the beginning of a bull market. However, we are skeptical about these calls. With 2022 full-year results from U.S. banks, we now know their net profit decreased dramatically from the previous year; in the case of Morgan Stanley and Goldman Sachs, we saw this trend also in net revenue. Now, we expect companies in other sectors to follow suit and show corporate underperformance in 2022 (versus 2021). We expect that to confirm our thesis about the economy progressing deeper into recession; due to that, we have strong doubts about the sustainability of the current rally. Accordingly, our price target for 2023 stays at $3400. Change in net income for particular U.S. banks - 2022 vs. 2021. Bank of America = -14% YoY JP Morgan Chase = -22% YoY Morgan Stanley = -26% YoY Citigroup = -32% YoY Wells Fargo = -38% YoY Illustration 1.01 Illustration 1.01 displays the daily chart of SPX and sloping resistance. Currently, SPX trades slightly below the resistance. The breakout above the resistance will be bullish in the short term. We would look for a retest of the $4100 level in such a case. Technical analysis Daily time frame = Bullish Weekly time frame = Slightly bullish Illustration 1.02 Illustration 1.02 shows the daily chart of SPX and alternative resistance levels. A breakout above Resistance 1 will further bolster a bullish case for the index. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
SP:SPX
by Tradersweekly
19
SPX - Bearish like all other major U.S. indicesSimilarly, like in the case of QQQ, we also maintain a bearish notion on SPX. Our price target stays at 4 000 USD. Technical analysis - daily time frame RSI, MACD, and Stochastic are bearish. DM+ and DM- are bearish too. ADX paused a climb and dipped lower. The daily time frame structurally coincides with QQQ and is bearish. Technical analysis - weekly time frame RSI, MACD, Stochastic, DM+, and DM- are all bearish. ADX increases, which indicates that the bearish trend is gaining strength. Overall, the weekly time frame is bearish. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not serve as a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
SP:SPXShort
by Tradersweekly
4
SPX500 with potential Peek-Sell!Hey tradomaniacs, SPX500 has tested the current upper trendline and could continue its way down as recent attempt to break has got rejected with a fakeout. As always I`m very cautious here due to the current volatility and uncertainy of the market. Generally we can assume that rising rates are putting stocks under pressure which is why I`m currently staying on the bearish side. A breakout could of course cause another correction to the upside, but as long as this level holds we have a potential peek-sell here in case of another rally sell-off. What do you think?
OANDA:SPX500USDShort
by Trading2ez