Market Update 5/2/2024
Latest recap:
The Pullback Of 2024 - April To May [GET READY!]
Fed Chair Powell’s Comical Press Conference
Apple Earnings Today & Jobs Data Tomorrow
Market Sentiment: Traders are shorting the rallies!
Trade Idea: Short The S&P500 With The “SPY” ETF (still valid!)
S&P 500 Levels - S: 5060 or 100MA; R: 5104 or 10MA
MY BULL/BEAR RATIO: BEARISH BIAS
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The Pullback Of 2024 - April To May [GET READY!]
Now that the May Federal Reserve meeting is behind us, we can turn our attention back to economic data and earnings.
Federal Reserve Chair Powell's message from yesterday's press conference was succinct: "We aim to maintain short-term rates at 5.5% to curb inflation, although we're uncertain about achieving this in 2024." This sentence encapsulates the essence of the entire conference.
Debt in the U.S. is spiraling due to massive deficit spending (stemming from low tax revenues, war financing, etc.) and regional banking bailouts. With current high interest rates, the cost of servicing new debt could potentially consume an entire household's annual budget if this trend continues.
The Fed initiated Quantitative Tightening (QT) to reduce inflation. However, the result has been a stagnant economy grappling with even higher inflation, due to elevated interest rates and overall restrictive financial conditions. Essentially, these policies are draining the economy's vitality without effectively combating inflation.
Compounding these challenges, Japan has introduced a new layer of concern: a YEN currency crisis that could potentially drive U.S. interest rates even higher in the short term. For more details, refer to my article from Monday, April 29, 2024.
This situation poses a significant risk of further downturns in the stock markets throughout May, possibly extending the pullback beyond the levels seen in April.
During the press conference, Powell also hinted that "emergency rate cuts" might be implemented if the labor market begins to show significant weaknesses. While this is unlikely to be reflected in tomorrow’s job report data, it could become a reality by June 2024.
For now, it might be wise to brace for potential turbulence in the coming 2-4 weeks.
Fed Chair Powell’s Comical Press Conference
Yesterday's Federal Reserve press conference might just be remembered as one of the most unusual in Chairman Powell's tenure.
Chairman Powell faced a tough task: he had to reassure the markets that the Fed is fully committed to controlling inflation, while simultaneously keeping the door open for potential rate cuts. The delicate balance of his message was crucial, as any misstep could have precipitated a sharp market decline.
This could explain why Powell appeared to struggle initially, marked by some coughing fits especially when fielding questions about inflation. At one point, he even ducked behind the podium, perhaps symbolically reflecting his actual sentiments about the challenges of managing inflation expectations.
The lighter moment of the press conference came during a question about "stagflation." Chairman Powell quipped, “I don’t see a stag nor a flation,” which, admittedly, was a humorous comment, albeit on a very serious topic. This response indicates that the Fed is acutely aware of the potential stagflation issue but prefers to steer clear of dwelling on it publicly.
This jest, however, underscores the tension surrounding the Fed's claim of being "data-dependent," while the 2024 data increasingly suggests a stagnant economy paired with rising inflation.
Adding an unusual visual element, the camera occasionally shifted focus to the cameramen at the back of the podium. Notably, around minute 40, one cameraman—a Black man on the left—appeared distinctly unamused by the proceedings, reflecting the overall somber mood of the audience.
Throughout the conference, Powell’s body language seemed to express a desire to conclude the session swiftly, signaling his discomfort with the bizarre twists of the event. This press conference may stand out as symbolic, marking a critical juncture where playful ambiguities can no longer mask the stark realities—like a looming stock market collapse in 2024.
Apple Earnings Today & Jobs Data Tomorrow
Today, more than 300 companies are scheduled to release their earnings reports, but the spotlight is undoubtedly on Apple, which reports after market close. This makes Apple the penultimate mega-cap tech company to deliver earnings before the sector enters a three-week hiatus, with NVIDIA set to report its earnings in three weeks.
The impact of these earnings will be more pronounced on Friday, coinciding with the release of key economic indicators like the non-farm payroll numbers and the unemployment rate. With such significant financial data hitting the market on the same day, expect Friday to be a day of volatile trading as investors react to these updates heading into the weekend.
Market Sentiment
Market in fear mode - traders short the rallies!
Trade Idea: Short The S&P500 With The “SPY” ETF
April 1st: The SPY pullback began, reaching the first significant threshold with a decrease of 5.9% to 495 after 15 trading sessions. This decline, measured from the previous all-time high, reflects heightened market volatility under current economic conditions.
April 19th: This date marked a temporary bottom at an index level of 495. Subsequently, the ETF rallied over the next six days, approaching a strong counterrally resistance between 510 and 512.
THURSDAY, MAY 2nd UPDATE:
It appears that the current market counterrally is losing momentum, indicating that a downturn could be on the horizon.
The S&P 500 chart now looks quite concerning, signaling that a drop may be imminent. The positive momentum previously driving the counterrally seems to have evaporated.
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Live S&P500 Futures - Pre-Market Analysis
The S&P 500 remains below the 10-day, 20-day, and 50-day moving averages—a typically bearish indicator. Additionally, the index has re-entered a downtrend channel, facing multiple resistance levels that it must surpass to even begin approaching bullish conditions.
On a positive note, the index has recently climbed above the 5060 resistance level, which now serves as support. This level must hold today to offer even a slight chance of preventing a potential waterfall sell-off.
Overall, the chart setup continues to appear very bearish, and the upcoming jobs report tomorrow could serve as a critical trigger point as we head into the weekend.
—> Ill be offline tomorrow but will be back on (black?) Monday! Stay tuned! <—
Levels to watch S: 5060 or 100MA; R: 5104 or 10MA
Pro Bullish:
New ALL-TIME-HIGHs!Bullish momentumAbove the daily
10MA, 20MA, 100MA, 200MAAbove the weekly
10MA, 20MA, 50MA, 100MA, 200MAAbove the monthly 10MA, 20MA, 50MA, 100MA, 200MA
10/20MA daily goldencross10/50MA daily goldencross20/50MA daily goldencross
20/100MA daily goldencross
50/100MA weekly goldencross
Strong Fourth Quarter of 2023
Strong First Quarter of 2024
Strong January Month of 2024
Strong February Month of 2024
Strong March Month of 2024
Price Target: 5,100-5,200 ACHIEVED (Wall Street Consensus for 2024!)
NEW Price Target: 5,500 (Oppenheimer Wall Street Bank March Update)
NEW Price Target: 5,700 (Fundstrat's Tom Lee April Update)
Blow-Off Top: 5,500-6,136
Pro Bearish:
Market is rolling over
Bearish downtrend channel
Long-term trendline break confirmed!
Weak April month
Wall Street’s 5100 price target for the year 2024 already achieved!
Wall Street’s 5200 price target for the year 2024 already achieved!
Market Sentiment was at EUPHORIA level
Below the weekly 10MA
Below the daily 10MA, 20MA, 50MA
10/20MA daily deathcross
10/50MA daily deathcross
20/50MA daily deathcross
Weakening bullish momentum / Bearish momentum
Potential bearish head and shoulders pattern
Geopolitical Risk: Middle East Crisis / Ukraine Crisis
Currency Risk: Japan’s Yen Currency, US-Dollar crisis looming/happening
PULLBACK PT: 4,808-4,980
MY BULL/BEAR RATIO: BEARISH BIAS
Thanks for reading my newsletter!
Have a happy trading day and weekend!
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