I hope you enjoyed your 3 day weekend. It’s time to get back to work and start making money in the stock market again. We have a lot of economic data being released this week, and this time the markets are open for it. Earnings season also kicks off on Friday. There will be a lot of great day trading opportunities Wednesday through Friday, but swing traders should take caution due to this week’s high uncertainty.
Last Week Recap
Last week’s job numbers showed the labor market remains strong, but is starting to weaken. Unemployment dropped again, but so did the number of available workers. Both private payrolls and the official jobs numbers showed fewer than expected job openings, and the gap between the number of available workers and the number of job openings declined as companies cut back on hiring. More telling was that the job cuts were occurring in high paying industries, while low paying industries were expanding. Workers continue to increase hours and take on 2nd and 3rd jobs to make ends meet. Meanwhile, wages continue to rise nearly 6% year over year. That means inflation remains strong at the same time the labor market is starting to weaken. While the economy remains strong for now, the warning signs are mounting for a possible recession on the horizon. And this is causing fears of a repeat of the stagflation from the late 70s to early 80s to grow.
Last week’s lower than expected jobs numbers sent the fear and greed index (https://www.cnn.com/markets/fear-and-greed) rising into the greed stage as investors increased their bets on the Fed cutting rates this year. With the market sentiment turning greedy, there’s a good chance the historical April bull market could repeat again this year. But uncertainty remains as other indicators show a possible bounce back down this week.
The volatility index (VIX) closed at the bottom of the channel where it normally bounces. Will it hold steady this week near bullishness and frustrating bears, or will it bounce and rug-pull the market, destroying bulls? Nobody knows, so expect an equal number of predictions for bullishness and bearishness this week from market analysts.
With another bullish week behind us, the technicals have now turned 100% bullish on the daily charts, indicating more rise in the markets ahead this week. The one exception is the small-cap Russell 2000 which continues to struggle. But be warned that we are also approaching the 50% Fibonacci Retracement level on the S&P 500, which could act as a point of resistance. Combined with a bounce on the VIX, and we could be looking at a rebound to the downside this week. All technical analysis could be destroyed by the economic news coming out Wednesday through Friday as well as earnings on Friday though, so swing traders should trade cautiously this week.
The weekly charts are similar to the daily charts, but are more neutral than the daily charts, giving less strength to a longer term bull run continuing. The small-cap Russell 2000 remains the outlier, with that weekly chart remaining 100% bearish.
We have another jam packed week full of economic news this week. While last week was focused on the jobs numbers, this week will be focused on inflation. The Consumer Price Index (CPI) comes out on Wednesday, followed by the Producer Price Index (PPI) on Thursday. We wrap up Friday with US retail sales. All three of those reports are being released at 8:30am , or one hour before the markets open each day.
And in the midst of all of the inflation data coming out, we also have numerous Fed members speaking on Tuesday, Wednesday, and Friday, so be sure to check the Fed Speech schedule in the link below so that you don’t get surprised by a sudden market move mid-day.
Here’s the full list of all of the economic news coming out this week as well as the time each report is being released: https://www.marketwatch.com/economy-politics/calendar
Here’s what time each Fed member is speaking this week: https://www.federalreserve.gov/newsevents/calendar.htm
Earnings season officially kicks off this week on Friday with a slew of bank stocks reporting including JPMorgan Chase, Citi, Wells Fargo, PNC, and Blackrock. This will be an important earnings season for banks, especially regional banks, as we’ve mostly been in the dark about the impact the bank failures 3 weeks ago have had on the bottom lines of these companies. There are also a few other companies reporting this week that you should be aware of if you are invested in any of these stocks.
Other Things to Know
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Wishing you the best of success trading this week,