- SPY closes Friday in the green and positively for the first week in four.
- QQQ also rallies as risk assets and high beta outperform.
- Bitcoin bounces above $20k and continues higher over the weekend.
Risk assets closed out the week in ebullient mood as a rising tide lifted all boats on Friday. Over 90% of stocks closed higher on Friday across the Nasdaq and NYSE, and we note some interesting observations about what happens next in such scenarios.
Up-volume days of greater than 90% are significant and historically point to much better days ahead. The S&P 500, Nasdaq-100, and NYSE Comp all were 90%+ Friday, while under the 200-ma. See the summary table below for what historically happened after. $SPX $SPY $QQQ $NDX $NYA pic.twitter.com/lwcC4hltww— Jonathan Harrier, CMT (@jonathanharrier) September 10, 2022
That looks promising, and indeed the bullishness could continue with Tuesday's CPI report imminent. We may get a little position squaring ahead of the report on Monday but overall expect headline inflation to indeed have peaked. Oil is lower, shipping rates are lower, housing prices are falling, and used car prices are falling. Comparisons are high, so the bar is low for the CPI number to have peaked. This will play into the narrative of a soft landing. The Fed will pivot, which should lead to an extension of the current rally.
Everything is on hold until Tuesday then. Our only slight concern is that the market fully expects inflation to have peaked. If it has not we will get a pretty sharp knee-jerk sell-off. The market has already priced in a 75 bps hike in September and is comfortable with that. The market has already priced in peak CPI, and now we are on the downward slope. Anything that changes this narrative will see equities lower. In terms of trading into the CPI number, if you want to, that is a high-risk game. But I believe the risk-reward is to the downside. Expectations are for the number to have peaked. If it has and we get confirmation, then this rally should extend as the week goes on. But if CPI is high, then we will get a sharp sell off. In my view, the risk-reward is skewed to the downside even though I think the CPI will be fine and the market will carry on rallying.
Wow, what a move on Friday! With 90% of stocks closing in the green and a strong move above the 50-day moving average, it was an exciting day. If the tweet from ZeroHedge is accurate, then expect some CTA and FOMO traders to jump on this trend.
The bad news: CTA one week net change in positioning is one of the largest net selling in US equities over the last 5 years.— zerohedge (@zerohedge) September 9, 2022
The good news: if stocks can keep it above 4,000, they start buying aggressively next week. pic.twitter.com/3VKBXtUFnp
$401 is now the pivot. Above and we stay bullish with a target of $417 and the 200-day moving average at $426. CPI is the key – we need it to fall. We also have triple witching options expiry on Friday, so things could get chopppy.
SPY daily chart
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