Weekly Stock Market Update & SPY Technical Analysis
Markets booked their longest winning streak in over 20 years as major indexes recovered from their April lows, but the rally will face a big test this week as investors brace for the Federal Reserve’s FOMC meeting. Before diving into the details, let’s briefly discuss what took place last week.
Last week introduced a plethora of new economic updates and earnings data. On the economic front, the first quarterly GDP reading of this year reflected that the U.S. economy contracted by -0.3% due to an uptick in imports. Companies rushed to import products from other countries ahead of Trump’s tariffs, which subtracted from the United States’ growth (exports add to GDP and imports subtract from it). Markets initially reacted poorly to the reading, but were quickly bought up in the days that followed thanks to promising inflation data and earnings from large cap technology stocks. The PCE Index, which is The Fed’s preferred inflation gauge, reflected a reading of 2.3%, right around The Fed’s 2% target. This increases the likelihood of an interest rate in the near future, but whether or not it will happen on this week’s meeting is unlikely. The reason being is the mixed economic data, specifically from the U.S. labor market. The U.S. unemployment rate remained at 4.2% per last week’s reading, and upon its release, odds of a rate cut dropped for this week. The Fed recognizes that if they lower interest rates in an environment where consumer spending power is still strong, then inflation may reverse course and tick back up, especially when tariffs take their toll.
So coming into this week, The Fed is walking a tightrope, and investors will be watching their tone for signals of optimism or pessimism. Fed Chair Powell is often non-bias and only focuses on the data, investors are hoping to at least get a timeline to when a rate cut will take place if it doesn’t happen this week. FOMC meeting days can often cause large upside or downside movement, potentially reversing markets in the near-term, so be on the lookout for these sharp changes.
SPY Technical Analysis:
SPY’s rally over the past two weeks is definitely one to “respect,” but we must note that bear market rallies are often known to be extremely strong and fooling. We’re not saying this is a dead-cat bounce (a term used to label bear market rallies), but traders shouldn’t get too comfortable just yet. A sharp pull-back is likely to happen with the help of a catalyst that reignites fears, this could come from a random Trump tweet or an actual piece of economic data. We are noting two unfilled gaps on SPY, one to 527.45 and the second to 514.90. SPY is not necessary going to fill these gaps this week, but it is at risk of doing so if selling pressure increases. If the market continues to push, buyers are looking for a breakout above 571.00 to see the next target of 585.00-586.00. We’ll be trading accordingly in the group. Wanna see daily updates and stock / option set-ups? Join our premium community here.