SPDR S&P 500 ETF (SPY) News and Forecast: Risk-on, Rally on, Bitcoin bounce, earnings announce

SPY closes higher on Friday as investors cheer doveish Fed comments.
SPY set to rally again on Monday as futures point higher.
Bitcoin bounces 7% as risk returns ahead of earnings season.

Ivan Brian FXStreet

The major equities indices closed higher on Friday as markets rounded out the week in an ebullient fashion despite the surging inflation print mid-week. That has threatened to wobble any optimism as fed funds futures price in a 100-basis-point hike before Fed members Waller and Bullard dampened fears with some doveish remarks. That all served to help equity markets recover intraday on Wednesday, and the situation followed though into Friday with a strong positive end to the week.

SPY stock news

The situation on Monday looks ever more optimistic now with investors choosing instead to focus on earnings and forget their inflation fears. 75 basis points has been deemed acceptable, and now earnings season cranks up a gear with some big names reporting this week. The equity rally looks set to continue based on the latest sentiment and positioning data, which are close to extreme fear and extremely underweight equities. The Fed has recently actually expanded its balance sheet despite QT.

Fed Liquidity Data => short term support for Equities...
=> a tail wind VS expected headwind from weak earnings season... pic.twitter.com/UJqiM8UNOy
— Douglas Orr, CFA (@EquitOrr) July 18, 2022

As mentioned, positioning is extremely underweight equities.

New record low. pic.twitter.com/KpWQpEkyfp
— Macro Charts (@MacroCharts) June 25, 2022

Company buybacks are set to restart once the earnings blackout is cleared, and that will create healthy demand across the entire market space.

With Bearish Sentiment Off The Charts, $5.5 Billion In Daily Stock Buybacks Set To Flood Markets https://t.co/hMh30d3A0q
— zerohedge (@zerohedge) July 17, 2022

So that is why we favour the rally in risk assets, and Bitcoin has certainly taken the bait and is already 7% higher this morning. Equities in Europe are also higher, and currently US futures are looking at an opening about 1% higher across the main indices.

SPY stock forecast

The first target remains $395 with the gap to fill at $401. That then will bring the target and old high at $415 into focus. This next move will likely depend on how the earnings season progresses. Recent negativity has seen analyst forecasts trimmed somewhat, and that may mean those consensus targets are slightly easier to achieve.

Maybe the bar for earnings is not set that high………Ex Energy, hurdle rate for Q2 is at -5% YOY in both the US and in Europe
— The Market Ear (@themarketear) July 18, 2022

That could then allow this rally to stretch to $415, and a break of that level would see $435 as the next resistance.

SPY chart, daily

The author is long IUSA.

Author

Ivan Brian

FXStreet

Ivan Brian started his career with AIB Bank in corporate finance and then worked for seven years at Baxter. He started as a macro analyst before becoming Head of Research and then CFO.

AUD/USD edges higher as hot CPI inflation and hawkish RBA lift rate hike bets

The AUD/USD pair gathers strength to near 0.7035 during the Asian trading hours on Friday. The Australian Dollar edges higher against the US Dollar as hotter Australian CPI inflation data has bolstered expectations of Reserve Bank of Australia rate hikes.

USD/JPY meets support near 157.00

USD/JPY retreats for the third consecutive day on Friday, revisiting the 157.00 region before attempting some recovery as investors continue to assess the latest BoJ meeting, where the central bank left rates unchanged, as widely anticipated.

Gold sinks to fresh yearly lows despite risk-off mood as Fed rate hike bets weigh

Gold slips to fresh year-to-date lows on Friday. The metal struggles despite a risk-off mood across markets, as expectations of further Federal Reserve (Fed) interest rate hikes continue to dominate price action, leaving Gold on track to end the month in negative territory.

Ripple Price Forecast: XRP bulls defend $1.20 as sell-side pressure triggers liquidations

Ripple (XRP) trades around $1.25 on Friday, rising from a short-term support level established at $1.20. This minor upward correction follows a sharp sell-off, triggered amid reports of a hack attack on the Binance exchange that impacted approximately $6.3 billion. The attack drove the broader crypto market on edge, as Binance suspended both deposits and withdrawals to contain the situation.

BoJ recap: A pause for now... but Japan has entered a new inflation phase

The Bank of Japan left its short-term policy rate unchanged at 1.25% but delivered a distinctly hawkish message on the risk of an inflation overshoot. The decision passed by 8-1, with board member Takata dissenting in favour of an increase to 1.5%, while Governor Kazuo Ueda stressed that the Bank would continue adjusting policy as needed.

The 2% inflation target came from a throwaway remark. It now moves trillions

The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.