Weekly Market Update & SPY Technical Analysis
The market recovery continued last week as stocks pushed higher in response to positive progress on trade talks with Europe and China. Markets also celebrated another relieving labor market report, which reflected a 4.2% reading of the U.S. unemployment rate. A strong labor market is essential to avoid further slipping into a slowdown in economic growth, especially during a time where recession fears are still brewing. One thing traders should note however, is that although the unemployment rate remained healthy at 4.2%, the U.S. economy only added 37,000 private payroll jobs in May, far below the 110,000 forecast. A continued trend of slow hiring could eventually boost unemployment, which will in-turn impact economic growth. We will continue watching labor market trends closely to and adjust our approach accordingly.
Looking ahead to this week, market attention will turn to inflation data, with the Consumer Price Index (CPI) and Producer Price Index (PPI) offering key insights into pricing trends at both the consumer and producer levels. Inflation has remained tamed despite tariffs, but many fear that tariffs have yet to take their full effect. Only the real data will tell the truth, which we’ll be watching closely this week. The most recent inflation report, the PCE, was promising as it showed inflation improving closer to The Fed’s 2% target. The faster inflation reaches 2%, the faster The Fed is likely to lower interest rates, which have been eating at American’s abilities to borrow and spend for years. Last but not least, the market is also anticipating the lates consumer sentiment report later this week. Consumer sentiment is sitting near record lows in-light of the economic uncertainty and tariff fears, but forecasts suggest that it has modestly improved early on in June.
On the political front, China loosened restrictions on rare-earth mineral exports over the weekend, marking a huge move forward in the trade discussions. Many industries rely on these rare-earth minerals for manufacturing purposes, and the previous restrictions were causing a serious threat to production.
SPY Technical Analysis:
Buyers fought tooth and nail to close SPY above 600.00 last week, but they just couldn’t cross the finish line, leaving the index at 599.00 on Friday. Many hope that positive developments between China and the U.S. over the weekend will help push markets higher this week, especially those stocks that are deeply impacted by the uncertainty. Traders should note that some sectors that have recovered into the rally over the past few weeks are starting to look overbought, so it may be time for a healthy capital rotation to take place. We noted some strength in certain sectors last week, which we’ll look to capitalize on in June. We’ve constructed our watchlist this week to suit this rotation, focusing on the stocks and industries that are expected to start pushing off their lows. We’ll also be taking profits on those names that we rode through the market rally and are getting ready for a pullback. Want to see real-time market updates and daily new set-ups? Learn about our Hyper Stocks Pro membership.