Chart done on five minute candles. The market volatility index (VIX) spiked nearly 60% in recent trading as fears of an economic collapse continued to take their toll on stocks. In the last two weeks we’ve seen several bank failures and liquidity crunches across the globe, putting more pressure on the inflation ridden economy. Last Friday’s Consumer Sentiment Report showed a decline for the first time in fourth months, signaling that consumers are losing confidence and are likely to decrease spending. There are pros and cons to a decline in consumer spending. Less spending means less demand, which will help tame inflation at a quicker rate. But less spending also means a decrease in revenue for many companies, which will then impact stock valuation. This week the attention shifts to The Fed’s response given the developments from the banking industry. The Fed’s sharp interest rate hikes are bringing inflation down, but they are starting to bring financial giants like SVB down at the same time. Their decision is expected Wednesday whether they will raise interest rates by 25 BPS, 50 BPS, or if they’ll leave them unchanged to avoid more bank casualties.
To our surprise, SPY and many other large cap tech companies ended last week in a bullish overnight trend. The consolidation range last week had a low of 380.49 and a high of 396.70, so that will be the overall range to watch coming into this week. In between that range we have multiple supports and resistance points to watch, first is 392.25, above that SPY can push to test the high of 396.70. Below the 388.50, below that point we can see SPY decline to test last week’s lows of 380.50-383.50.