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Here is an excerpt from our trading plan.
It’s all about the Fed this coming week
On Thursday evening 7/4, we reported that market internals were sending out a collective buy message. Then came the job report early Friday morning. Market was not happy initially as it was too good! According to WSJ:
"All three major indexes fell from their records after new data showed U.S. employers hired at a robust pace in June. somewhat dashing investors’ expectations of an interest-rate cut at the Fed’s policy meeting later this month. A sustained slowdown in job growth could potentially nudge the central bank into taking steps that would have stoked further economic growth. ... Markets have moved to all but price out the probability of a double interest-rate cut from the Federal Reserve in July...If the U.S. labor market and the U.S. consumer remain in reasonable health, recession risks may start to look overpriced.”
However, with market internals primed to buy, the initial drop early Friday morning turned out to be a buy-the-dip moment. $SPX $NDX $RUT all closed the week looking relatively bullish.
This coming week will be quite interesting. Fed chairman Jerome Powell will be speaking on Tuesday through Thursday, most of which will be for Congress. And on Wednesday, FOMC minutes will be released. You can bet that market participants will be combing through Powell's words and FOMC minutes for the answer to the Fed’s next move.
Meanwhile, for us the key is not in trying to guess how market will react to the nuances from the Fed's statements. Rather, we will just focus on deciphering the collective message from market's internals. Right now the message is it's still Surge5. Let's take a closer look to see when Surge5 might end.
Volatility: Friday morning started out bearish for $SPX $NDX $RUT as $VIX $VXN rose up sharply at open. However, volatility proceeded to drop sharply down as the day progressed, indicating that participants are still primed to buy.
$VIX $VXN are both likely going to be testing their support zones in the coming week, which are:
The rest of this article covers:
$SPX $NDX $RUT support & resistance zones during Surge5
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