Weekly Stock Market Update & SPY Technical Analysis
Investors are anxious to come back to markets this week as they await the latest trade-deal developments between the United States and China. Last week, markets celebrated a newly inked deal between the U.S. and the UK, with the Trump administration praising it as the first of many “great” deals to come. The biggest changes in the deal were around cars, steel, and aluminum. The U.S reduced its tariff on British car imports from 27.5% to 10% for up to 100,00 vehicles annually. The U.S. tariffs on UK steel and aluminum, previously raised to 25%, have been eliminated for certain sectors, providing relief to manufacturers. The deal also established a tariff-free quota of 13,000 metric tonnes for U.S. beef exports to the UK, which is set to help U.S. farmers. Despite these sectoral reductions, a 10% import tariff remains on the majority of UK goods exported to the US.
While the deal between the U.S. and the UK is a great start, it is not what investors are really focused on. Markets are awaiting a deal between the U.S., Canada, Mexico, and China. Canada and Mexico are the United States’ biggest trading partners, making them a significant piece of the equation, but there has not been any official meetings to point to a resolution yet. The U.S. and China met over the weekend, but The Trump’s administration has only released some positive feedback so far, the full details aren’t revealed yet.
Apart from trade deals, which will remain the biggest focus, the market is also awaiting the latest inflation data this week. The consumer price index (CPI) will be released on Tuesday May 13th before market open and is expected to decline to 2.3% from the previous reading of 2.4%. This would bring inflation closer to the 2% target that The Fed has, possibly signaling a rate cut is on the horizon. Although inflation is now at a more favorable target, The Fed did not cut rates in their meeting last week, citing that higher tariffs may reignite inflation. We’ll hear more from Fed members this week, with the most notable being Jerome Powell’s speech on May 15th.
Last but not least, U.S. retail sales figures will be released on Thursday along with multiple other economic reports (which we’ll cover in our morning updates throughout the week for the premium members). These reports will be key to watch to gauge economic health and find opportunities to trade in the weeks and months to come.
SPY Technical Analysis:
SPY spent the majority of the past two weeks consolidating near the highs of its recent “comeback” rally. Buyers haven’t been confident enough to push it past 571.00, but they are still holding onto their positions for a possible breakout. It may take a positive catalyst of some sort to give them the boost they need to push the index higher; however with so much uncertainty, if there’s a negative development about the economy or trade, those same buyers may bailout on their positions and move the index back below 556.00. Either way, there are opportunities to take to the upside and downside, we’ll be watching through the week to take high probability set-ups. Wanna join us for daily updates and set-ups? Click here.