Weekly Stock Market Update & SPY Technical Analysis
The S&P 500 reached a new milestone last week, touching 5500 for the first time in history, but buying power fizzled out by Friday after Nvidia and Apple suffered strong pull backs to end the week. The two stocks have been carrying the market higher in recent months, helping indexes across the board push to new highs, so the drawdown could cause further uncertainty heading into this week, especially ahead of a week filled with key economic data. Monday will kick off the week with multiple Fed members speaking, including Chicago Fed President Austan Goolsbee, who has made several comments regarding interest rates that have driven markets down. Tuesday will bring more Fed speakers and the Consumer Confidence Report, which surprisingly jumped last month, but is expected to slightly decline on this reading. Last but not least on Thursday and Friday, the 2nd revision GDP report will update markets on quarterly growth, and the PCE index will provide new inflation data. The PCE report will be the most watched event this week because it is The Feds’ preferred inflation gauge, which will ultimately impact the path to an interest rate cut. Recent data from the Consumer Price Index reflected a month over month decline in inflation, which could foreshadow what to expect on this week’s PCE. Analysts are projecting a decline from 2.7% to 2.6%, closer to The Feds’ 2% target.
So it goes without saying that markets will be on edge as new data hits the wire, but it doesn’t necessarily mean we’ll see a sell off. The theme of this year has been to “buy the dip,” and although small, the dip on Nvidia may see a rush of buyers. However if the stock pulls back further, it may send a shockwave to the rest of the technology sector, especially stocks involved in artificial intelligence. We did note bullish flow on oil/energy stocks to end last week, which often happens when money rotates out of tech, and with technology stocks already so stretched, Wall Street may begin moving capital from one side of the market to the other.
SPY Technical Analysis:
Chart done on hourly timeframe. SPY broke below its overnight uptrend last week for the first time since the end of May. The break it faced in May was quickly bought back up, but judging by recent volume and option flow, we could be in for a bigger drawdown in the coming weeks. Our downside target on this pull back is 528.00-531.00, but keep in mind that it may not be a smooth way down. Buyers are still lurking for opportunities so dips may be bought up as the index chops lower.