ES/SPY Weekend Levels (July5-8)

The S&P continues to be caught in a downward slightly wedging channel. Price sits within the ema cloud below the Jun 28th high and June 17 pivot low. It worth noting that price has not yet tested the higher time frame 382 Fib. This is significant b/c usually when price comes within range of a significant level it eventually touches it. Hard to predict direction at this point until a key pivot is taken out in either direction. Below are few quick notes for the week.

• Current bias BEARISH ==> Neutral
• PCE came out last Wednesday and was lower month over month hinting at peak inflation
• Yields have pulled back with 10 year yield below 3%
• Positive inflation news is met with new fears immerging about recession
• MU reported earnings and had a big miss pointing to slowing economy.
• Fed caught between need to raise rates, so they have more ammunition to fight a recession and creating a recession
• At extreme lows on all sentiment readings. Most market participants are sitting in cash or net short.
• Choppy price action last week going into the end of the month and the July 4th long weekend.
• Starting new month may bring inflows.
• Deeply oversold but many participants still expecting another leg down.
• Market vulnerable to another event shock as governments & Fed out of tools/money to react.
• Possible outlier events = invasion of Taiwan & complete oil cut off by Russia to Europe.
• 2020 peak may still be a magnet for price.
• More data on tap including FOMC minutes and Non Farm Payrolls

WEEKLY EVENTS

Monday US Market Closed
Tuesday US Factory Order & Durable goods
Wednesday US ISM Manufacturing, JOLTS & FOMC minutes
Thursday US International Trade, US Jobless Claims & EIA Crude
Friday Non Farm Payrolls & US Average Earnings

NOTABLE EARNINGS

Monday Market Closed
Tuesday
Wednesday
Thursday HELE, LEVI, PSMT, WDFC
Friday

BULLISH NOTES

Oversold conditions
Extreme bearish sentiment = Contrarian indicator
Strong bear market rally always possible
XLY/XLP ratio showing slight divergence
Growth/Value ration showing slight divergence.
Bond yields have pulled back

BEARISH NOTES
High outlier event risk ie Taiwan invasion
Negative reaction to Fed minutes possible
Weak Manufacturing data possible
Increase in oil prices
Increased social unrest due to inflation
Bond yield pulling back suggest possible recession.