Weekly Market Update & SPY Technical Analysis

Weekly Market Update & SPY Technical Analysis

Markets posted a record close last week after both the S&P500 and The Dow pushed to another new all time high for the year, once again proving buying resilience despite lingering inflation and economic uncertainty. Last week’s inflation data reflected mixed results between the consumer and producer side per the CPI and PPI reports, with consumer side inflation declining from 3.5% to 3.4%, but producer side rising for the fourth month in a row. The rise in prices on the producers’ side shouldn’t be eclipsed by the moderate improvement on consumer prices because often times rising costs on the wholesale/manufacturing level lead to a rise in prices for consumers, which will ultimately move the CPI data back up and away from The Fed’s 2% inflation target rate. The current 3.4% reading is a significant improvement from the 9.1% inflation we saw in the last 24 months, but The Fed are still adamant about sustaining high interest rates until the fight against inflation in “won”.  

This week’s attention shifts from inflation data to earnings from one of the most prominent companies on the market. The golden child of the artificial intelligence boom, Nvidia, will be reporting its quarterly earnings on Wednesday, which will be a major test for technology stocks as a whole. Artificial intelligence has been the theme of this year’s stock market rally, with nearly every notable company integrating some kind of AI into its business, but markets need to see actual numbers growth in order to justify the rally. Nvidia’s report will either satisfy those numbers to boost markets higher, or it may crater tech stocks if it doesn’t meet expectations. 

Last but not least, the final reading of May’s U.S. consumer sentiment index will be released on Friday with a consensus of 67.4. This is drastically lower than last month’s 77.2 reading, reflecting a decline in how consumers feel about the economy in the near term. Low consumer sentiment can lead to less spending, which will ultimately help inflation, but it may also impact company profits. 

SPY Technical Analysis:

Chart done on hourly timeframe. SPY closed near its all time highs last week, but uncertainty around Nvidia’s earnings may drive some traders to take profits ahead of the report so a pullback may be seen in the first half of the week. The nearest strong downside support on SPY is 523.00. Buyers need to defend that level to avoid losing their healthiest range. If Nvidia boosts markets then we expect SPY to retest 532.52 for another all time high push, but if it misses then we’ll likely see a move towards 510.00-511.00 on SPY.