FOMC This Week and Wall Street's Predictions (September 18th-22nd)
September 18-September 22, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. The market fell last week by 0.10% after CPI and PPI data both came in hotter than expectations. We have more from the Fed this week that should impact markets.
Let’s take a look at what this week has in store!
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Many believe the FOMC meeting this week will give the market a more clear look on what we can expect, although expectations are mostly priced in with a 99% chance of no rate hike as they believe rates will remain steady now and through the end of the year. University of Michigan's reading on consumer sentiment fell as well last week. The Fed will meet on September 19th and 20th, and on Wednesday, Fed Chair Powell will host his FOMC press conference at 2:30.
Wall Street has been *so wrong* about their analysis for the S&P 500 this year, and we are finally seeing some analysts shift their views. In fact, along with the many other analysts that changed their price targets into the second half of the year, Mike Wilson from Morgan Stanley said he was too bearish although still believes there will be another 10% drop before the end of the year. Data from Deutsche Bank shows that although investors may have been overexposed into the first half of this year, positioning is now more neutral. Below is their chart on asset allocation:
The Wall Street Journal had a great article that can lead into an actionable trade idea about airline stocks and how low ticket fares are squeezing them. Domestic flights are losing face with expensive ticket costs, and many passengers are opting to travel to Europe instead- forcing domestic airlines to drop costs when they can’t really afford to. Last week, Spirit Airlines said it had to offer “steep discounts”. The cost of fuel has increased, labor contracts mean labor costs have increased, and the borrowing money from the pandemic is faltering.
In fact, oil futures hit a new high for this year and $100bbl/oil is looking more and more likely. Gasoline prices are surging as well, impacting travel and construction companies the hardest. Saudi Arabia extending his cuts will likely affect price through the end of the year.
Redfin reported this week that homebuyers are scrapping their deals at the highest rate in 10 months. Freddie Mac just reported the average mortgage loan is now 7.18% and one can imagine how difficult that can make buying a house for the regular person. Chen Zhao who heads Redfin’s economic research does not expect home prices to stay this high for he foreseeable future. Zillow also listed an uptick in listings as well. A few weeks ago I reported seeing the Case-Schiller home price index and that may hit a double top here too.
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#1) Earnings week is super boring this week. Maybe FedEx can give an insight onto deliveries but that’s it.
#2) On Monday, Oracle is hosting their CloudWorld event and UBER CEO is expected to speak there as well.
#3) On Tuesday, both PINS and CRWD have an investors day event or will have their CEO speak. Expect talk about AI from CRWD.
#4) On Wednesday, INTC and MSFT have product days, and the FOMC policy statement will release at 2:00 and Fed Chair Powell will speak at 2:30.
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S&P 500
The S&P 500 ($SPX index) has continued this huge consolidation pattern and dropped with significant volume on Friday s well. Hard to be a bear until we break this trend line but when we do it can be massive as I mentioned earlier that positioning is more natural and Wall Street expect a drop into the end of the year.
My key breaks are $4546 for bulls and $4437 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
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INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
TSLA
Tesla is about to break out of this inverse head and shoulders into the gap above, but it also has a gap below and I think that it can fill there first if the market is weak.
AAPL
Apple has printed a bearish head and shoulders patter, but $170 is strong support here. Wherever this name goes it will guide the market into the next move since it’s the largest holding in the S&P. Make sure to watch this name and how the demand is going on their new devices and what their suppliers are saying about production.
AMZN
AMZN failed this breakout here and could be headed back to $132.50 after trapping buyers on the breakout and then failing the retest.
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Insider Activity
In terms of insider trades, CHPT is seeing some interesting buys after that selloff there.
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)