Rippy Global Weekly Outlook - March 27 to March 31
March 27-March 31, 2023 by Adit Dayal for RIPPYGLOBAL.
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. Last week was choppy, although a great week to trade because of the range we got every day with the 200DMA acting as a crucial line of support for bulls, and the 50DMA acting as resistance for bears. I am confident the market will make a large move this week and I will explain why in this newsletter.
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As usual, first let’s take a look at the state of the US economy. Chairman of the Federal Reserve Powell told us, "The U.S. banking system is sound and resilient” and he believes the banking issues are a contained issue although fears are now spreading to Deutsche Bank and First Republic. I do believe these issues are still maintained.
In the bond market, we can see how traders are expecting rate cuts this year, which is interesting because Powell did say to not expect any of those in 2023, but the bond market does not believe him.
The market expected Powell’s 25bps rate hike, but the collapse of Signature Bank and Silicon Valley had the market wondering if Powell would pause hikes in order to help out these regional banks. Warren Buffett is reportedly in talks with the White House since Berkshire Hathaway stores so much cash. He previously helped out Goldman Sachs in 2008 and Bank of America in 2011.
The truth is that we are likely headed into a recession and the added stress on the banking sector will slow down the economy. The good news is, that a slowing economy will reduce inflation without the Fed having to use the Federal Funds Rate to do so. For us as traders, it’s important to remember that the market is always forward looking and a bad economy may not always equal a bad market.
Open interest in $VIX (commonly referred to as the fear index) call options has reached a 5 year high as well as you can see below:
In other news, GameStop posted an unexpected profit last quarter and is catching momentum while Hindenburg Research just posted a new short report on Block ($SQ).
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The main catalyst this week is going to be on PCE number from the Fed which is their preferred inflation gauge.
#1) There are no interesting earnings to me this week other than Lululemon because of how it will display retail confidence. Last week, Nike had rising costs and slowing revenue growth which sparked some fear in investors.
#2) Big week for biotechs. $PHAR has an FDA date of March 29th, and $EBS is looking to have the first OTC naloxone nasal spray in the US on the same day.
#3) The Senate Banking Committee is hosting a meeting on bank failures on Tuesday at 10AM.
#4) The Personal Consumption Expenditure (PCE) number which is the Fed’s preferred inflation gauge is on Friday at 8:30 AM.
#5) There is an upcoming OPEC+ meeting which will have a large effect on $USO and Crude oil.
Here is the full economic calendar:
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S&P 500
The S&P 500 ($SPX index) maintained the 200DMA after rejecting the 50DMA. These are crucial to hold on either side as we consolidate into this triangle pattern here.
The most important levels on the dark pool tape are $393.41 and $395.75 on SPY.
My key breaks are $3971 for bulls and $3924 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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Options Flow Reading
Here are the biggest options orders by size on Friday:
There were some unusually large trades on Friday, ignoring the 0dte ones. $BB calls were popular before their earnings which is next week and VIX call options as well.
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INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
TSLA
Tesla is continuing to be the strength in EV stocks and the chart is reminding me of NVDA before it had a huge run. Lots of people are going to try and short this name and it’s going to squeeze them out. Look for a hold over 200 for this move.
Here is the NVDA chart for reference:
I would not be opposed to TSLA filling that gap below back at $150 to trap some more shorts, but I’m mainly watching a hold of $200 for a swing trade.
AAPL
Last week I pointed out AAPL as the best tech stock and it has broken out of this bullish head and shoulders and is consolidating. It has room to $165.
I would watch for topping in this region though as traders are buying into some AAPL puts which are just a few months out with over 5000 contracts at a time.
NVDA
NVDA has been very strong recently and I think it’s finally time to short it as it’s at the top of this channel. It cannot sustain this $272 level and I think it will fall back down to $230. It’s currently trading 154x earnings while other tech stocks are all correcting!
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Insider Activity
PLBY is a great penny stock with almost $18M in insider trades. I could see this running this week.
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)
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