Weekly Market Analysis: Recap and Forecast. The Week of April 8, 2024

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The 1^st week of April was more volatile than we expected. We witnessed the market sold off on Thursday ahead of employment data with the SPX dropped over 100 pts from its intraday high. On Friday, rate-cut hopes took a hit after a blowout March jobs report that saw 303,000 new jobs added to the economy and a fall in the unemployment rate to 3.8% from 3.9%. The probability of a June cut now stands at just a little above 50%.

But investors also noted that the key test for rate expectations is likely to come Wednesday, with the release of the March CPI. After 2 consecutive stubbornly high readings in January and February, we could see investors reconsider 2024 rate-cut prospects as a further stall in the downward trajectory for inflation alongside hot jobs data. We saw that sentiment showed up in the VIX we mentioned last week that measures market volatility as investors feel uncertain of what the Fed may do.

In addition, the risk of a broader conflict in the Middle East could play an even bigger threat to markets than the Fed opting to keep interest rates on hold for the rest of 2024. Speculation that Israel may be bracing for a military strike from Iran as a catalyst for a violent reversal in stocks. Equity investors tend not paying much attention to geopolitical risk, but when it happens, we may get a reaction and even an overreaction. Oil and its ETF’s have been climbing since late February with the $XLE at its new ATM could be something to consider.

This week, financial stocks start releasing some of their earnings on $JPM, $WFC, $BLK, $C. As a reminder that earnings are always center stage when it comes to the stock market. A strong economy and resilient consumer speak to expectations for earnings growth, helping to fuel the stock market rally, market watchers reiterated after Friday’s strong jobs data. Therefore, we should be paying close attention to what the industry leaders will say about the state of the economy this coming earning season because it may be affected by energy price and inflation directly or indirectly from geopolitical tension in the Middle East. This could be the case because the muted reaction in bond yields last Thursday was a sign that fears about an Iranian escalation, not the shifting outlook for interest rates, were the main culprit for the selloff in stocks.

Last week, $SPY got rejected at $524 per our forecast and traded to $515 before bouncing back and closed at $518. And $QQQ failed to sustain $447 and traded down to $434 before bouncing back and closed just right at trendline support on the daily. This week, the market may be bouncing around on Monday and Tuesday prior to the release of CPI numbers and Fed’s March meeting minutes on Wednesday and PPI on Thursday. $SPY is in $515 to $520 range. Over $520 it may climb to retest $524-$525 one more time to have triple tops and break out to new high. If it fails to hold $515 and goes below $514, it may come back down to $510-$509 then $507-$505. $QQQ is currently in $436 to $442 range. Over $442 it may test $445-$447 again. Over $447, it may retest the high at $449-$450. $QQQ fails to hold $435, it then cracks the trendline it was in since beginning of this year and take it down to $430-$429 area.

With a busy schedule from Wednesday to Friday, we should expect another volatile week during that time and would be opportunity for short-terms day and overnight trades. We’ll focus on our FAANG’s stocks and the Indexes this week. Also, $WFC earnings on Friday and it’s been trading on tight range between $55.25 to $58. It may be ready for a break-out or a break-down. We’ll plan to have a trade on earning. Until then, have yourself a great week filled with opportunities and profitability. Namaste!!!