Week 29: Fed’s Rate-Hike Announcement on Tap

Weekly Preview & Recap

Hello members! We hope your weekend is going well. We’re looking to help get your game-planning on track by taking a few minutes to look at the week ahead.

That’s a quick glance at the econ reports, earnings schedule and the weekly charts in an effort to “zoom out” and get a better idea of where things stands on the larger timeframes.

Quick Recap

The stock market ripped off a quick three-day rally to start last week. The S&P hit new 52-week highs on Wednesday, but spent Thursday and Friday under some pressure.

This year’s stars — the Nasdaq and S&P — took a backseat for this year’s duds, as the Dow and Russell raced higher. Luckily for premium members, we were watching for a quarter-up rotation in the Dow, which sparked a quick 660-point rally to the week’s high.

There wasn’t much in the way of economic reports last week, with retail sales being the big one. That figure came in light, which is not all that surprising I guess as the inflation figures were also light earlier this month. It seems spending is, finally, coming under a bit of pressure. Let’s just hope the Fed doesn’t overdo it.

The Week Ahead

Banks kicked off earnings on Friday, July 14 and more earnings rolled in last week. The reactions were…subpar.

Banks rebounded a bit last week, which was encouraging. But the reaction we saw from tech — particularly TSLA, NFLX and TSM — was a bit of a concern, given the Nasdaq YTD leadership.

Also some bearish reactions from Discover (DFS) and Amex (AXP) may have investors a bit suspect about the consumer (especially when paired with the retail sales whiff).

That said, this week’s earnings reaction will be much more telling. We have a fair mix of everything, from big tech (MSFT, GOOGL and META), to consumer brands, automakers and energy firms. We’ll also round out the credit card companies with Visa and Mastercard.

Additionally, the Fed is expected to raise interest rates by another 25 basis points on Wednesday. While that is well-known, Powell’s presser certainly moves markets.

Earnings

Economic Reports

The S&P 500

Up in 8 of the last 10 weeks, the bulls have been in control. However, the Fed rate-hike announcement this week combined with earnings is sure to make things interesting.

I am interested in two things by Friday’s close: Last week’s high at ~4578.50 and the Q2 high near 4450.

If the SPX can rally and take out last week’s high, it does so with a number of key events in its face, while also solidifying itself above the 78.6% and that prior support/resistance area from late-2021/early-2022.

On the downside, a break of last week’s low at ~4505 opens the door down to the ~4450 breakout area and Q2 high. That’s only about 55 points below last week’s low, so it wouldn’t take much to get there. An overshoot could put the 10-week ema in play, which would be its first test since May.

S&P Futures (ES)

The futures look similar, although the ES has yet to test the 78.6% up at 4646.75. If we go weekly-up over ~4609, it could get us to that ~4650 area.

Last week, Danny dropped some solid wisdom about upside targets like that, noting how the ES tends to top 10-20 points above “The Big Figure.” Well we pushed to 4609, then pulled back 50 handles.

From here, let’s see if the ES can gain any traction over 4600. Otherwise, a move below 4528 could put the big 4485-4500 area back in play.

What We’re Watching: Nasdaq 100

The Nasdaq underwent a special rebalance and we’ll see it go into effect on Monday. I’m not sure if that creates any additional weakness to the three-day dip we’ve seen so far, but if it does, there’s an area of interest to take note of.

That’s as the low-$370s looms with the rising 21-day moving average and uptrend support (blue line) in this area. Additionally, this area was resistance twice before the breakout, so a retest would be a solid R/R look for bulls.

What We’re Watching: Regional Banks

Not many seemed to notice, but the KRE ETF gave us a monthly-up and quarter-up rotation last week as many banks have been reporting earnings. Are the regional banking issues behind us?

I am watching two things: The $50 level and the $45 level — and hoping for the latter.

The former marks the 10-month moving average and the 50% retracement of the regional banking crisis decline. The latter ($45), marks the June and Q2 high, as well as the 10-day moving average.

A dip to this area could give bulls a potential buy-the-dip setup, with last week’s high near $47.50, then $50 being the upside objectives. Either way, KRE is worth keeping an eye on.

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!