S&P 500 (+1.8%) and Nasdaq (+2.0%) recorded solid gains for the week amid volatility faced in recent days.
The war in Ukraine will again continue to weigh on the markets with any breakthrough on ceasefire unlikely to happen any time soon. Investors also will closely follow US payrolls report and personal consumption expenditures data for any clues on how fast the Fed will tighten the monetary policy.
Here’s what you need to know to start your week.
1. Nonfarm payrolls
Friday’s nonfarm payrolls report for March could help markets get a sense of whether the Fed’s roadmap for rate hikes is too aggressive or not aggressive enough.
Indications of continued strength in the labor market would underline the case for a more aggressive pace of rate hikes as the Fed battles to curb soaring inflation.
The Fed hiked rates by a quarter percentage point on March 16 but since then Fed Chair Jerome Powell has indicated that the central bank is prepared to raise rates in half-point increments if it is warranted, despite fears that this could trigger an economic downturn.
2. Oil prices
Oil prices notched up their first weekly gain in three last week, with Brent up more than 11.5% and WTI gaining 8.8%.
Oil prices have spiked – rising 50% since the start of the year – amid sanctions on major supplier Russia in retaliation for its invasion of Ukraine.
Rising oil prices have been fueling inflation expectations, burying the hopes of global central bankers that the inflation stoked by pandemic-era stimulus packages would be transitory.
Key Economic Calendar (Weekly)
The U.S. jobs report for March is coming up on Friday and will be closely watched, being the last monthly employment report ahead of the Federal Reserve’s next meeting in May. Ahead of that, there will be an update on inflation in what is set to be a busy week on the economic calendar.
All times listed are EDT
Tuesday
10:00: US – JOLTs Job Openings: printed at 11.263M in January.
Wednesday
8:15: US – ADP Nonfarm Employment Change: predicted to drop to 438K from 475K.
Friday
8:30: US – Nonfarm Payrolls: forecast to slump to 475K from 678K.
8:30: US – Unemployment Rate: predicted to edge lower, to 3.7% from 3.8%.
10:00: US – ISM Manufacturing PMI: seen to remain steady at 58.6.
Top 3 Leading and Lagging Sectors (Weekly)
10 sectors ended the week in positive territory with energy (+7.8%), materials (+4.2%), and utilities (+2.9%) leading the way while healthcare (-0.59%) recorded a slight loss after outperforming earlier this month.
Energy remained supported by crude oil, which gained $10.80 or 10.5% to end the week at $113.83/bbl. The ongoing Russia-Ukraine conflict remained a supportive factor for oil and other commodities, explaining the outperformance in the materials sector where steelmakers and fertilizer producers led the way.
Market Breath (Weekly)
% of Stocks Above 50 DMA = 56.00% (+3.68%)
% of Stocks Above 200 DMA = 39.79% (+2.05%)
Market Technicals – (S&P 500, NASDAQ, Bitcoin, Bonds & Credit Spread, NAAIM)
$SPX (S&P 500) vs $RSP (S&P 500 Equal Weight) – (Net High/Low +144)
The S&P 500 ($SPX) continues its ascend with a +1.79% weekly gain, closing at 4,543 level, touching a six-week high.
$SPX battled with its 200-day moving average since last Friday, but it was able to end the week above that level, marking its first time since 13th January 2022 where $SPX traded above all major moving averages.
At the current juncture, $SPX will be revisiting a significant pivotal level at 4,585, an area where lower highs were established last month.
The immediate support to watch for $SPX this week is at 4,390 level, a level that would undercut all major moving averages and volume-weighted average price (VWAP) from all time high, also coinciding with a major horizontal support.
$QQQ (Nasdaq 100) vs $QQQE (Nasdaq 100 Equal Weight) – Trend Reversal In Play
Tech and growth names have been hard hit since the start of 2022 by a rapid rise in Treasury yields on the back of expectations that the Fed will hike interest rates aggressively to combat high inflation as higher rates can hurt their companies with high valuations based on the prospect of future profits.
$QQQ recorded solid gain of +2.36%, trading above its 50-day moving average for the first time since 4th January 2022. The rally in both $QQQ and $QQQE is playing out the highlighted trend reversal Double Bottom formation from last week.
At the current juncture, $QQQ will be visiting its VWAP from all time high, a level that has already been reclaimed by $QQQE.
The support level to watch for $QQQ this week is at $340. Similar to $SPX, this is a level that undercuts all major moving averages which coincide with previous support level.
$BTCUSD (Bitcoin / USD) – Price Action Exhaustion Observed, Bearish Head and Shoulder Pattern Remains Valid
Bitcoin ($BTCUSD) ended the week surging +8.18%, posting its first consecutive weeks of gain since late January.
$BTCUSD has reflected rally exhaustion price action pattern from its past 6 sessions of gain. There is lowering in trading ranges, intraday price action struggling to close at its high, and price action getting rejection from $45,000 pivot level.
The next level of support to watch for $BTCUSD is at $40,000. A psychological price level, and previously a Head and Shoulder pattern breakdown level.
$PCCE (Put/Call Ratio Equity) & $VIX (Volatility S&P 500) – $PCCE Uptrend Since January
The spike level to watch for $PCCE is at 1.00. The the current reading of 0.690 (+2.16%) reflects risk-on sentiment of the market, However, $PCCE remains on short term uptrend since the start of 2022.
$VIX have further eased off from its peak to 20.80 (-12.82%), also affirming the risk-on sentiment of the $PCCE reading with its decline.
$IEI/$HYG (Credit Spread) – $TNX (10YR Treasury Yield) – Yield Nearing 3 Year High
Market participants are keeping a close watch on credit spreads as one of the better economic signals. Junk bond issuers are perceived to be bigger credit risks, so if economic growth slows or contracts, there will be increased angst that these issuers won’t be able to make good on their interest payments. Hence, a widening high-yield spread is regarded as a leading indicator of difficult economic times which, in turn, often invites a more challenging period for the stock market since difficult economic times translate into weaker earnings prospects.
Credit Spread further decline to 1.49% over the week (-0.01).
$TNX have now topped to its 3 years high, rising to 2.491% (+0.344) as the market grappled with high inflation and a Federal Reserve that could easily spark a downturn as it aggressively tightens policy.
NAAIM Exposure Index 52.69 (+6.01)
The NAAIM Exposure Index represents the average exposure to US Equity markets reported by members of the National Association of Active Investment Managers. It provides insight into the actual adjustments active risk managers have made to client accounts over the past two weeks.
This week’s NAAIM Exposure Index number is: 52.69 further bouncing off from the extreme of 30.3 recorded in the first week of March.
Top Trading Ideas for the Week
$ZI very clustered chart at first look but plenty of significant technical build up in this name
-double bottom basing chart with RS since feb
-2 weeks price coiling between both VWAPs IPO and ATH
-price action rejection at 200MA on 3 period since janall points to $61 breakout pic.twitter.com/oG6bsimclg
— Jeff Sun (@jeffsuntrading) March 27, 2022
$BEPC (Utilities – Renewable)
HTF setup, now within a pennant range. hv already violated the momentum of its year long downtrend channel, and trading above VWAP from ATH reflecting significant accumulation in its past 2 mths rally
pivot on weekly is at $45. pennant BO at $43.50 pic.twitter.com/ueh8GzND0K
— Jeff Sun (@jeffsuntrading) March 24, 2022
$ZETA one of the few technology names that has an intact uptrend since the start of 2022.
above all KMAs while undergoing 4 weeks of consolidation within a bullish pennant pattern.
further price tightening will see all KMAs coiling into the pennant for an imminent breakout pic.twitter.com/EvZzEZfosn
— Jeff Sun (@jeffsuntrading) March 17, 2022
Do follow me on twitter for more daily trading ideas.
