The S&P 500 rallied +6.2% last week on the back of a four-day winning streak with the Fed delivering its first rate hike since 2018 along with an encouraging assessment of the U.S. economy. Additionally, a technical bounce for the market was also overdue, along with some short-covering activity in the mix as the bearish sentiment entering the week provided the basis for the big rally.
With a long-awaited rate hike from the Federal Reserve out of the way, Investors will be looking to see whether stocks are set for a sustained recovery or if more turbulence awaits. The war in Ukraine will remain in focus with any new development set to create volatility. Oil markets are calmer but concerns over supply shortages remain to the fore. Also, investors will be paying attention to the COVID situation as the virus is again spreading in Europe and Asia and causing lockdowns in Chinese cities.
Here’s what you need to know to start your week.
1. Ukraine war
Market watchers will continue to monitor the course of the war in Ukraine and headlines could continue to cause market turbulence in the upcoming week. Diplomacy efforts are ongoing even as Russian strikes on Ukrainian cities continue.
U.S. President Joe Biden is to join a NATO meeting on Wednesday and also a mid-week EU summit in Brussels, aiming to cement the new-found cohesiveness with European allies.
The West is risking rifts with China and India, which have not condemned Russia’s invasion of Ukraine.
On Friday, Biden warned his Chinese counterpart, Xi Jinping, of “consequences” if Beijing gave material support to Russia’s invasion of Ukraine.
2. Oil prices
Last week oil prices recorded a second consecutive weekly decline, with both Brent and U.S. crude ending the week down about 4%.
Oil prices have been on a roller coaster ride, hitting the highest levels in 14 years two weeks ago, boosted by the supply crunch from traders avoiding Russian barrels and dwindling oil stockpiles.
But prices were pressured by worries about demand after a surge in coronavirus cases in China, while faltering nuclear talks with Iran have been a wild card on the market.
The International Energy Agency has said oil markets could lose 3 million bpd of Russian oil from April. That loss would be far greater than an expected drop in demand resulting from higher fuel prices, the IEA said.
Key Economic Calendar (Weekly)
The economic calendar is light but there will be two appearances from Fed Chair Jerome Powell this week.
On Monday, Fed Chair Jerome Powell is to speak about the economic outlook at the annual conference of the National Association for Business Economics, less than a week after the Fed kicked off what is expected to be an aggressive monetary policy tightening cycle.
On Wednesday, Powell is to participate in a virtual panel discussion at a summit hosted by the Bank for International Settlements.
Other reports includes durable goods orders, initial jobless claims, both new and pending home sales, as well as services and manufacturing PMI data.
All times listed are EDT
Monday
10:00: US – Fed Chair Powell Speaks
Thursday
8:30: US – Core Durable Goods Orders: forecast to edge lower, to 0.6% from 0.7%
8:30: US – Initial Jobless Claims: likely to have fallen to 211K from 214K.
Friday
10:00: US – Pending Home Sales: predicted to jump to 1.5% from -5.7%.
Top 3 Leading and Lagging Sectors (Weekly)
10 of the 11 S&P 500 sectors closed higher with nine sectors rising between +0.9% (utilities) and +9.3% (consumer discretionary).
The energy sector (-1.82%) was the only sector that closed lower.
Market Breath (Weekly)
% of Stocks Above 200 DMA = 38.99% (+22.46%)
% of Stocks Above 50 DMA = 54.01% (+63.02%)
Market Technicals – (S&P 500, NASDAQ, Bitcoin, Bonds & Credit Spread, NAAIM)
$SPX (S&P 500) vs $RSP (S&P 500 Equal Weight) – (Net High/Low +65)
The S&P 500 ($SPX) erased all losses suffered over the month of March with a +6.16% technical rally, on the back of a four-day winning streak.
$SPX have now violated the Downtrend Line, trading beyond its 10, 20, 50-day moving average, along with its volume weighted average price from all time high within the week.
At the current juncture, $SPX remains below its 200-day moving average, with the $RSP already trading beyond all moving averages. It is also worth to note that $RSP already have an uptrend channel in play, reflecting further strength in the benchmark $SPX index in near term.
The immediate support to watch for $SPX this week is at 4,150 level, a 10 months low support that was reclaimed intraday a month ago.
$QQQ (Nasdaq 100) vs $QQQE (Nasdaq 100 Equal Weight) – Trend Reversal Formation In Making
Tech and growth names have been hard hit since the start of 2022 by a rapid rise in Treasury yields on the back of expectations that the Fed will hike interest rates aggressively to combat high inflation as higher rates can hurt their companies with high valuations based on the prospect of future profits.
$QQQ was boosted with a +8.35% surge, closing beneath its 50-day moving average at $351.49 level. The rally in both $QQQ and $QQQE have violated the initial play of downtrend channel, morphing out a Double Bottom – bullish trend reversal formation for $QQQ.
The support level to watch for $QQQ this week remains at $319.
$BTCUSD (Bitcoin / USD) – Tighter Weekly Range, Remains Morphing out a Bearish Head and Shoulder Pattern
Bitcoin ($BTCUSD) ended the week with a further gain of +9.31% with its a 3rd consecutive week of tighter trading range. At the current juncture, $BTCUSD remains whipsawing within the convergence of moving averages (10, 20 and 50 day), along with its anchored VWAP from 27th December high.
$BTCUSD continues to be morphing out a right side shoulder of a mid-term bearish Head and Shoulder Pattern.
The next level of support to watch for $BTCUSD remains at a re-test of $37,000.
$PCCE (Put/Call Ratio Equity) & $VIX (Volatility S&P 500) – $PCCE Uptrend Since January
The spike level to watch for $PCCE is at 1.00. The the current reading of 0.676 (-21.65%) reflects risk on sentiment of the market, which is in tandem with market breath as % of Stocks Above 50 DMA increased rapidly over the week by +63.02%. However, $PCCE remains on short term uptrend since the start of 2022.
$VIX have further eased off from its peak to 23.86 (-22.38%), also affirming the risk on sentiment of the $PCCE reading with its decline.
$IEI/$HYG (Credit Spread) – $TNX (10YR Treasury Yield) – Eyes on Spread
Market participants are keeping a close watch on credit spreads as one of the better economic signals. Junk bond issuers are perceived to be bigger credit risks, so if economic growth slows or contracts, there will be increased angst that these issuers won’t be able to make good on their interest payments. Hence, a widening high-yield spread is regarded as a leading indicator of difficult economic times which, in turn, often invites a more challenging period for the stock market since difficult economic times translate into weaker earnings prospects.
Credit Spread decline to 1.50% over the week (-0.04).
$TNX have further risen to 2.147% (+0.144) as the central bank raised the target range for the fed funds rate by 25 basis points to 0.25-0.50%, as expected, and signaled six more rate hikes this year.
NAAIM Exposure Index 46.58 (+4.00)
The NAAIM Exposure Index represents the average exposure to US Equity markets reported by members of the National Association of Active Investment Managers. It provides insight into the actual adjustments active risk managers have made to client accounts over the past two weeks.
This week’s NAAIM Exposure Index number is: 47.58 up from 42.58.
Top Trading Ideas for the Week
$ZETA one of the few technology names that has an intact uptrend since the start of 2022.
above all KMAs while undergoing 4 weeks of consolidation within a bullish pennant pattern.
further price tightening will see all KMAs coiling into the pennant for an imminent breakout pic.twitter.com/EvZzEZfosn
— Jeff Sun (@jeffsuntrading) March 17, 2022
$AR nice clean break from pivot. energy sector $XLE pullback to below 20MA, but $AR remains sitting on its rising 20MA to declining volume.
holding its 20MA to tightening price action will entice me to pyramid this name on a mean reversion setup pic.twitter.com/E2W2TjZmm0
— Jeff Sun (@jeffsuntrading) March 17, 2022
$PTEN sitting on rising 20MA, coupled with VWAP from Q4 ER. tightening price action with declining volume, forming a nice wedge pattern.
looking to pyramid further on this at $15.25 level, and shifting my entire stops to a round number $14.
let it trend, until it bends pic.twitter.com/SjGYzLI3pZ
— Jeff Sun (@jeffsuntrading) March 17, 2022
Do follow me on twitter for more daily trading ideas.