Weekly Plan 7/17 '22
Folks-
A choppy week that whipsawed many ended on Friday, perhaps at levels which no one expected going into the week. At start of the week, the majority of folks were pretty bulled up based on that previous Friday close at 3910. This was met with disappointment as we quickly slid down back into lower 37XX and then once everyone became bearish towards mid of the week, we rallied sharply higher to close right around 3860. This Substack was perhaps one of the only few to have correctly forecasted that we will sell off lower before any sort of rally this week.
From my prior weekly plan, this was textbook where at start of the week I expected we may see 37XX before we see a 4000.
Towards mid of the week , even on the CPI day, I expected dips into 37XX may be bought and that any new bears in those lows may end up frustrated. This was capped off by my Friday plan that anticipated 3860 to be the resistance in the SPX on Friday. Note this area 3850/3860 held very well and at one point we lose almost one percent off these levels, however we could not trade lower than 3820 which was my target around 3770-3800.
Here is the link to my weekly plan if you have not read it yet.
A couple of charts below which may be important going into the next week.
Chart A SPY shows potential exhaustion as it approaches a key trend line.
Chart B TLT trapped in an extremely narrow range. Bullish TLT investors are saying we are confident the US yields have peaked and we will buy bonds here for next 10-30 years as we believe the US will now have low yield environment going forward.
Do you believe so too?
The whipsaw in the stocks this week was caused by the interest rate expectations around FOMC on the 27th of this month.
These expectations bounced off between a 75 BPS hike versus a 100 BPS hike. I personally think with the consumer inflation expectations going down, with the manufacturing numbers softening, a strong dollar and overall reduction in energy prices, we will see a 75 BPS RATE hike not a 100 BPS one when the FOMC meets next.
The technical and fundamental situation
Zoom out on the S&P500 (SPY chart) and you see we have not gone any where for over a month now.
This range was shared by me weeks ago in May where I said we will have a hard time taking offers below 3666 and any bids above 4000 while we await the 2Q earnings season.
I think this earnings season will most likely break this range and it could come this week with the NFLX and TSLA earnings.
In this weekly newsletter, I will be sharing my key levels on the S&P500 for this week, plus my thoughts on the TSLA and NFLX earnings. Subscribe now to receive unto 5 such plans delivered to you every week.