Earnings, Inflation on Tap as Stocks Look for Balance

Let's start the week on a good note.

Technical Edge — 

• NYSE Breadth: 91% Downside Volume (!!)

• Advance/Decline: 86% Decline

• VIX: ~$32.80

Game Plan: S&P, Bonds

A stronger-than-expected jobs report had lower wage pressure, but a stubbornly high unemployment rate. To the Fed, that means they have more runway for their hawkish stance and the market behaved like that is the case on Friday. 

Long-time readers know I’m never in much of a hurry to do something on Monday’s open. I like to see how the market is going to set up — especially with earnings on tap this Friday and the CPI report due up on Thursday.

In any regard, we’re coming into the day with more bond weakness and dollar strength — a recipe that has, for the most part, kept us relatively cautious. 

Even if that’s “boring” by most standards, it’s kept us pretty safe & I am grateful for that. 

Let’s have a great week. 

S&P 500 — ES 

The ES did not have a good close last Friday, but nor did it have a good close on the prior Friday either and it promptly rallied 250 points. 

I’m not saying that’s on tap, but the S&P is at a notable area. 

I was trying to find the positives last Friday in our recent video, but a lot of it will hinge on how the ES handles the June lows near 3639. If it can hold this area and stay above Friday’s low of 3632.50, perhaps it can drift higher toward 3700 and the declining 10-day ema. 

Below 3640 and I think we need to be a bit more cautious. Below the overnight low (and failure to reclaim it) at 3618 keeps last week’s low in play at 3571. 

SPY