Weekly Stock Market Update & SPY Technical Analysis
In usual fashion, the market is starting out September in a choppy environment, typical for this month historically. Oddly enough, however, the Volatility Index (VIX) is trading roughly 30% below its average September levels. What this means for us? Although price action has remained shaky, investors aren’t showing the kind of fear or panic that has historically accompanied September volatility.
Why Low Volatility is Surprising
Lower than average volatility in September is already a one-off, the more unusual part is that investors aren’t panicking to an extremely uncertain environment. Here’s what the market is currently facing:
- Oil is back above $90 per barrel, returning to levels we haven’t seen consistently since the energy shock surrounding the Russia/Ukraine conflict.
- Long term bond yields remain extremely elevated, giving investors an alternative to owning stocks while simultaneously increasing borrowing costs throughout the economy.
Together, higher oil and bond yields are working against the Federal Reserve, potentially keeping inflation elevated and making it harder to justify aggressive rate cuts. Meanwhile, the U.S. and Iran remain locked in an escalating geopolitical conflict, creating additional uncertainty around global energy supplies and the Strait of Hormuz.
Although volatility isn’t elevated, complacency from investors isn’t necessarily a good thing either. When investors aren’t positioned for much downside risk, any unexpected “shock” can quickly trigger panic selling and a sharp spike in volatility. That makes this week’s economic data especially important. The Federal Reserve meets on September 15–16, and the reports released over the coming days could play a major role in determining its next move on interest rates. Here’s the economic calendar:
- Labor Day Holiday (Mon)
- PPI Inflation Report (Thursday)
- CPI / Core CPI Inflation Reports (Fri) 🚨
The consumer price index on Friday is the most important report. It’ll be released before market open and can ultimately decide where markets close out the week before the FOMC decision.
SPY Technical Analysis
SPY appears to be making lower highs so far in August after reaching a record high of 779.37. You can see on the chart above the yellow sloping line, showing the weakening price action heading into this week. Poor economic data is likely to force a retest of the 756.00-759.00 area. But better than expected numbers are likely to launch us higher considering what we said about the volatility index above. We’ll cover developments day by day in the Hyper Alerts group.