Important To Watch The S&P 500 Index’s Support Zone

there’s no way The Fed Can Get Dovish: Tom Essaye Quoted in MarketWatch on MSN

Fed day is here. Here are important technical levels to watch for stocks, bonds, and VIX

It is important to watch the S&P500 index’s support zone from 4,050 to 4,170, where the index spent most of April and May, according to Tom Essaye, founder and president of Sevens Report Research. 
On the other hand, “if policy makers deliver a dovish message and signal the hiking cycle is indeed ‘over’ then a relief rally could see stocks rise rapidly back towards the October highs,” according to Essaye.
The first important technical resistance level to watch is 4,225, while beyond that, investors should keep an eye on the level of 4,330, where the index saw a mid-October reversal. For the 2023 stock market rally to resume, the S&P 500 has to beat its October high of 4,377, Essaye wrote. 
“There is growing evidence that the VIX may be forming a near-term top as the ‘fear gauge’ did not close at new October highs last week despite the S&P 500 falling to new multi -month lows,” Essaye wrote.

Also, click here to view the full article published by MSN on November 2nd, 2023. However, to see the Sevens Report’s full comments on the current market environment sign up here.

Index’s Support Zone

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What’s the VIX Saying About This Market?

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What’s in Today’s Report:

  • What’s the VIX Saying About This Market?

Futures are solidly higher as Thursday’s bounce extended overnight following additional reminders that global disinflation is still on going.

The EU Flash HICP (their CPI) rose 4.3% vs. (E) 4.6% and Core HICP increased 4.5% vs. (E) 4.8%, sending an important reminder that disinflation is still on going.

There was no material progress in avoiding a government shutdown overnight (which at this point is likely).

Today focus will be on the Core PCE Price Index (E: 0.2% m/m, 3.9% y/y) and put simply, if that number meets or is below expectations, then this bounce back rally should continue.  If the Core PCE Price Index is higher than expectations, don’t be shocked if stocks give back these early gains.  Finally, there is one Fed speaker today, Williams at 12:45 p.m. ET, but he shouldn’t move markets.

What's the VIX Saying

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FOMC Preview: How Long Will Rates Stay High?

FOMC Preview: Strengthen your market knowledge with a free trial of The Sevens Report.

What’s in Today’s Report:

  • FOMC Preview – How Long Will Rates Stay High?
  • VIX Chart – Is Volatility About to Surge

S&P futures are modestly higher this morning after a favorable dip in EU inflation statistics and upward revisions to global growth forecasts while oil continues to climb towards $100/barrel.

The Eurozone’s Narrow Core HICP (their CPI equivalent) met estimates at 5.3% in August, down from 5.5% in July. The OECD raised their global growth forecast from 2.7% to 3.0%, primarily thanks to strength in the U.S. and Japan while growth estimates for Europe and China were reduced. However, the net increase in the global growth outlook was received as a mild positive this morning.

Looking into the U.S. session, there is just one economic report: Housing Starts and Permits (E: 1.435M, 1.440M). As long as there are no big surprises in the release, markets should fall into a holding pattern as the September FOMC meeting begins in Washington.

However, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET, and if the outcome moves rates materially, stocks could react amid last-minute positioning ahead of tomorrow’s Fed decision.

Fed Preview

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Tom Essaye Quoted in Blockworks on April 20th, 2023

Bitcoin, Ether Hover Below Key Levels While Volatility Dips

“The VIX is trading at the lowest levels since the S&P 500 hit its standing all-time high in the early days of 2022,” Tom Essaye, founder of Sevens Report Research, said. “It will be hard to believe the market is poised to casually cruise towards new record highs from here,” he added. “I.e., the bottom of the bear market is not in.” Click here to read the full article.

Special Technical Report Coming Monday

What’s in Today’s Report:

  • Special Technical Report Coming Monday
  • Why Did the VIX Just Hit 52 Week Lows?
  • EIA Analysis and Oil Market Update
  • Two Notable Observations from a Quiet Trading Day

Futures are moderately weaker following a disappointing night of earnings.

TSLA, NOK, FFIV and TSMC all missed earnings and provided cautious commentary or guidance, and that’s increasing concerns about an economic slowdown.

Today there are numerous potential catalysts including important economic reports, lots of Fed speak and more earnings reports.

Starting with the data, the key report today is Philly Fed (E: -19.4) and markets will want to see if it confirms the rebound we saw in Empire (if it does, expect some stock weakness as Fed expectations become slightly more hawkish).  We also get Jobless Claims (E: 242K) and any move closer to 300k will be welcomed as it signals a slightly more normal labor market.

Turning to the Fed, there are multiple speakers today including Waller (12:00 p.m. ET), Mester (12:20 p.m. ET), Logan (3:00 p.m. ET) and Bostic (5:00 p.m. ET) and it will be notable to see if they all push back on the rate cut expectations in the markets.

Finally, on earnings, results lately have been underwhelming so these reports are becoming more important.  Earnings we’re watching today include: T ($0.58), TSM ($1.21), AXP ($2.63), UNP ($2.57), PPG ($1.55), CSX ($0.43), STX ($0.18).

Why Stocks Won’t Drop Part II: The Economy

What’s in Today’s Report:

  • Why Won’t Stocks Drop Part II: The Economy
  • VIX Falls to 52-Week Lows – Chart

Hawkish money flows are dominating markets this morning with stock futures falling, yields rising and oil and gold both testing support after hot inflation data overnight.

Economically, U.K. CPI was 10.1% vs. (E) 9.8% y/y in March while the Eurozone Narrow Core HICP reading rose 0.1% to 5.7% meeting estimates. The two inflation prints are causing a hawkish shift in central bank policy expectations this morning, which is in turn rekindling hard landing fears.

Looking into today’s session, there are no notable economic reports today however there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET that could impact both bond and equity markets.

As far as the Fed goes there are two speakers today, but both are after the close: Goolsbee (5:30 p.m. ET) and Williams (7:00 p.m. ET).

That will leave investor focus on earnings early with more big banks and notable consumer financial companies reporting ahead of the bell including: MS ($1.67), CFG ($2.15), SYF ($1.49), ALLY ($0.88), USB ($1.13), and TRV ($3.64), while TSLA ($0.85) and IBM ($1.27) will release results after the close.

Bottom line, the 2-Yr Treasury yield is testing a more than one-month high this morning and stocks are coming for sale broadly which underscores deteriorating sentient among investors with the S&P 500 trading well above 4,100 this week. And if earnings news is not encouraging today, and yields continue to move higher over the course of the session, the selling pressure on equities is likely to continue and liable to accelerate.

FOMC Meeting Preview

What’s in Today’s Report:

  • FOMC Preview
  • VIX Chart – Is Volatility About to Surge Again?

U.S. stock futures are tracking European markets lower this morning amid a hawkish reaction to strong economic data and disappointing earnings from UBS and Samsung.

Economic data in Europe showed a reversal back higher in French inflation and better than-feared growth in the EU which is resulting in more hawkish money flows ahead of the several key central bank decisions this week and that is ultimately weighing on risk assets this morning.

Looking into today’s session, there are a few economic reports to watch in the U.S. (in order of importance): Q4 Employment Cost Index (E: 1.1%), Consumer Confidence (E: 109.0), Chicago PMI (E: 45.1), and the Case-Shiller Home Price Index (E: -0.5%).

With the FOMC Meeting getting underway, the macro focus will be on rate markets and expectations for the terminal rate as tomorrow’s 25 basis point hike is priced in with nearly 100% confidence. If market-based terminal rate expectations rise today, expect further pressure on risk assets and lower equity prices broadly.

Meanwhile, earnings season continues in full force today with notable releases coming from: UPS ($3.58), GM ($1.65), XOM ($3.32), MCD ($2.45), CAT ($3.95), and AMD ($0.67).

Is the VIX Broken?

What’s in Today’s Report:

  • Is the VIX Broken?

Futures are modestly higher following in-line inflation readings from China and more gridlock in Washington as markets look ahead to today’s inflation readings.

Chinese CPI met expectations rising 1.6% and that benign reading will keep stimulus coming in that economy.

Politically, Arizona Senator Sinema left the Democrat party and registered as an independent, although the move is unlikely to change her voting patterns.

Today focus will be on inflation data, specifically PPI (E: 0.2% m/m, 7.2% y/y) and the University of Michigan Five Year Inflation Expectations (E: 3.0%).  If those reports come in under expectations and further hint at dis-inflation, it will extend the early rally.

Sevens Report Co-Editor Tyler Richey Quoted in S&P Global on December 7th, 2022

Stock market’s ‘fear gauge’ plunges as investors shift hedging strategies

Still, the VIX has not behaved in its typical fashion for much of this year, said Tyler Richey, a co-editor at Sevens Report Research. Click here to read the full article.

Market Multiple Levels: S&P 500 Chart

What’s in Today’s Report:

  • Market Multiple Levels – S&P 500 Chart
  • VIX Breaks Longstanding Downtrend in Cautious Signal

Futures are modestly lower as persistent concerns about hawkish Fed policy and fading global growth overshadow positive Covid policy news out of China and encouraging EU economic data.

Economically, German Industrial Production was better than feared at -0.1% vs. (E) -0.6% while  Q3 Eurozone GDP topped estimates at 2.3% vs. (E) 2.1% Y/Y suggesting the EU economy may be stabilizing.

China’s NHC issued new guidelines on Covid restrictions overnight that eased certain testing and quarantine requirements and will hold a press conference tomorrow which points to the potential for more progress in moving away from Covid-Zero.

Looking into today session, there is one economic report before the bell: Productivity & Costs (E: 0.4%, 3.3%) and then Consumer Credit (E: 27.3B) will be released in the afternoon. The latter report is not one we typically follow closely but there has been increasing concern about the health of household balance sheets, so a sharp move higher in outstanding credit could raise concerns about defaults in the coming quarters.

Finally, there are no Fed speakers today but stocks have been taking queues from rate markets and the dollar so if either meaningfully move higher, that will add pressure to the broader equity market today.