SPY Technical. CPI / PPI, Palestine & Israel Tensions, and Bank Earnings


Chart done on hourly timeframe. Financial institutions are set to report earnings this week, which means it’s the start of earnings season. Industry leaders such as: JPMorgan Chase, Citigroup, Well Fargo…etc. will update markets on their Q3 performance. Their earnings last quarter surprised investors with better than expected numbers, but analysts are on edge this quarter as weak stock and bond market performance can have an impact on their bottomline. Banks already experienced volatility in the first half of 2023, so investors want to see them at least come in line with expectations to avoid further uncertainty. 

Other earnings in focus this week are expected from PepsiCo, Delta Airlines, and United Health. All three of these names hold heavy weight in different sectors and industries, so their earnings can give us an insight of what to expect from their peers in the coming weeks as more earnings unfold. Wall Street upped corporate earnings expectations last week, but there is still pessimism in the guidance issued by many companies in the S&P. As these companies report, we’re paying close attention to what their forward guidance looks like as they head into the fourth quarter, typically the strongest quarter of the year. 

More inflation data is also set to report this week as the CPI and PPI reports give an update on prices from the consumers’ and producers’ standpoint in September. CPI inflation reading declined from a high of 9.1% in June 2022 to a low of 3% in June 2023, but for the last three months it has climbed back to 3.7%, away from The Fed’s target rate of 2%. Lingering inflation can cause The Fed to hold interest rates at their current high rates for a longer period, which causes stock market instability. Many companies rely on borrowing money to grow their workforce and for their research and development, so a high interest rate environment makes it more difficult and more expensive to borrow money, which hinders growth. 

Technical analysis:

SPY buyers were able to regain the overnight uptrend and close SPY above 430.00 on Friday, but the weekend developments from Palestine and Israel may have some impact to start the week. If markets do pull back, SPY will need to defend the 425.00-426.00 support for it to remain strong and of course, a close above 430.00 is preferred. The next resistance SPY is facing is 434.00, above that level we can see a gap fill to 438.00. If buyers fail to defend the 425.00 support, then the next downside support is 418.80-420.00, which will get ugly if broken.