Weekly Market Analysis: Recap and Forecast. The Week of April 15, 2024

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Our last week forecast about the Iranian escalation and the release of CPI and PPI numbers brought a volatile market turned out to be exactly it! $SPY whipsawed between $510 to $520 twice and $QQQ did the same between $435 to $445 with it trying hard to hold its uptrend on the daily. We were prepared with planning ahead and able to capture some great trades on $TSLA, $SPY, $NVDA, $AAPL, $GOOG, $ADBE. One notable move was on the VIX. It went above 18, the level hasn’t seen since last October, before the market started to rally on prospects of Fed 2024 rate cuts.

March CPI showed the annual headline rate of inflation moved up to 3.5% from 3.2% previously. It also triggered the biggest one-day jumps in the 2- and 10-year Treasury yields in at least a year. Higher inflation diminishes investors’ hopes for multiple Fed interest rate cuts this year, while opening the door to 5% Treasury yields across the board and dividing the stock market into sectors of winners and losers. Winners are being identified as those companies with ample cash and little debt, sheltering them from the need to borrow or refinance at higher interest rates. However, investors are used to Yields at 5%. It may take yields to move north of 5% and close to 6% for the market to have a correction.

Thus, it left us with the risk of war in the Middle East and possible larger regional conflict that may threaten to unleash further inflationary pressures with oil prices likely to rise, followed by Treasury yields. According to some Wall-Street experts, “Right now, the market is thinking the Fed can still lower rates, but whether they will hike is the real question. If inflation continues to rise and forces the Fed to deliver another hike in 2024, the stock-market rally is likely to stall, and a deeper correction is likely to unfold as soon as such probability gains traction.”

Both $SPY & $QQQ finished last week in the red while trying to hang on their trendline supports on the daily of $510 on $SPY and $435 on $QQQ. This week, $SPY is in $510-$515 range. It needs to hold $510 to trade back to $515-$518. Under $509, should take it down to $505-$504 then $501-$500. $QQQ is in $435-$441 range. Over $441, it should trade to $444-$$446. Under $445 again, that should take it down to $430-$429 then fill the gap below at $426-$425.

This week, we’ll see some Housing Data coming out on Tuesday and Thursday with U.S Leading Economic Indicators, along with some Fed presidents speaking at different events. Importantly, earning season is kicking off with more financials like $GS, $SCHW, $BAC, $DFS and techs $TSM and $NFLX and $UNH. We may have trades on some of these earnings while focusing on our FAANG’s stocks along with $SPY & $QQQ.

We should expect a whipsaw week as investors are digesting the situation in the Middle East and possible inflation pressure from energy prices. In the meantime, let us be grateful for our peace and opportunities the market brings. Namaste!!!