Last week, the SPY closed the week towards the lower area of the range. It did manage to hold the 100 SMA, but it failed to retest the prior highs. The DIA finished with the lowest close of the weekly range. In fact, it was the second lowest low of the week on Friday. The QQQs finished slightly better, but still down on the week. The IWM was the ugliest ETF on the week, where it could not hold the 100sma and closed at the lowest low and lowest close of the week. It is hovering slightly above the 50 sma. The SMH had a nice rebound on Thursday, with a nice pop on Friday that fell to give a potential reversal signal. The TNX was mixed on the week, falling below the 100 SMA, but recovered nicely on Friday. The DXY did not fair as well with closing in the middle of the weekly range and below the 200 sma.
This week we will be having a complex trading week with combination of CPI, FOMC, and Quad Witching in the same week, in one of the final weeks of 2022.
This will likely be one of the most awaited weeks of the year to trade, and an understanding of core principles is key.
This week will mostly depend on the Fed’s interest rate decision and commentary on Wednesday. They be taking into account the PPI from Friday which came in a little hotter and the “to be released” CPI on this coming Tuesday. The FedWatch Tool from the CME group(https://www.cmegroup.com/) shows us that the market thinks that the Fed will only hike 50 basis point with a probability of 77%. So if we see any major change away from expectations in the CPI, we could see some fireworks. The last couple of CPIs saw major movements including a major reversal on our last reading in November. The Fed, if CPI comes in as expected, will most likely stick with 50 BP and maintain their schedule of quantitative tightening. The Cleveland Fed is predicting that the topline CPI and the core to drop slightly this month. his week will be all about the CPI sentiment reading from the Fed’s hikes. There are plenty of what’s if scenarios, but the general bullish consensus could push us into a bull market for the rest of the year(Wall Street markups!) while new lows could create a tax selling loop that could create some ugliness. Tuesday morning CPI(8:30 EST) and Wednesday afternoon(2-2:30 EST) will be the big announcements for the week!
As seen below on $SPX daily chart, market sell off badly last 3 times as soon as touching that downtrend resistance line.
Market is been consolidating after touching that 200 mva few days ago. This consolidation is occurring right under the core downtrend channel resistance is now 4090ish.
As per 4 hr chart for $SPY below, a bear pattern is forming. There is also a bear flag pattern forming on the daily after Friday move lower.
If $SPY can’t hold the $392.56 support, it can move lower towards the $390.05, $387.46. $384.13.
$SPY for needs > $ 395.88 to move higher.
This week there is CPI & Fomc, So big things can happen! Get Ready!!
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