Last week was earnings (and Big Tech was a wild ride). This week it’s the Fed.
We’re expecting a rate hike Wednesday. Perhaps more important, what is all the data and fed-Speak we’ll hear?
Jobs, manufacturing, and the Fed will all be reported this week. Strong numbers increase the likelihood the Fed continues to raise rates. But the language out of the Fed’s mouth is what the markets are likely to really parse.
The numbers are already showing weakness. Futures point to a negative open. And, at least from a trading range perspective, markets are over-bought and show a probability of pull-back early in the week.
The other concerning data point is the VIX. It continues to follow a pattern we’ve seen the past several months. When it gets particularly high, get particularly low. But as the trend reverses, markets have rallied.
The October rally started, at least on the charts, started on the 13th. The VIX peaked on October 12th. Today, it’s back down in the 25-ish range. If it drops below 22 (assuming the trend repeats), markets will likely begin to slide lower as the VIX rebuilds.
For the week, the markets look fragile. October is ending, and lots of economic data will be coming out. The VIX has dropped significantly. And we’re near resistance levels for the SPX. The big round numbers are 3950 and 4000 for the SPX. Dig a little deeper, and you’ll find the specific numbers at about 3944 and 4029/4044. On the support side, there’s not much. If the market starts to slide, it could quickly unravel a lot of what we’ve seen for October. There is weak support at 3800. If that fails, we could quickly see a pull back below 3700.
Unfortunately, the odds of a pull-back, at least from a swag technical pattern recognition perspective, look pretty high. This weak could get bumpy.
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