Chart Advisor: Examining Key Technical Levels

By Jay Woods, CMT

Your Weekly Roadmap with Jay Woods, CMT

1/ Economic Data – CPI, PPI

2/ FOMC Minutes

3/ Earnings Season Begins

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1/

Economic Data – CPI, PPI

Traders will be focused on the instant classic of a series between the Phillies and Mets. Add in the Yankees and Royals and the floor will be buzzing with chatter. However, seeing this is a newsletter about the markets, let’s focus there.

There are 29 days until the Presidential election. Yet, none of the market’s focus this week will be on that important date. I will continue to say the market doesn’t care about your politics, but it does care about economic data and those that drive it.

This week we will get the first CPI and PPI numbers since the 50-basis point rate cut, plus a deep look into what exactly went on behind closed doors at the most recent Fed meeting.

If that wasn’t enough, on Thursday Elon Musk will preside over the much anticipated Tesla event – the debut the Robotaxi and his vision of autonomous driving. Lastly, this Friday is the official kick-off to earnings season.

Technically speaking the S&P 500 tested and held a key technical level we discussed over the last few weeks. It sold off to 5650 which was the breakout level in September. That old resistance level acted as support and the index bounced higher.

Also confirming the move was the RSI which continues to make higher lows and has yet to reach overbought territory indicating the trend is still intact and there is room to move higher.

CPI data will be released at 8:30 this Thursday. It continues to trend lower towards the Fed’s desired 2% goal. This month expectations are for numbers to sink to its lowest levels since early 2021.

Recent CPI data has continued to meet economists expectations, but when numbers surprise, markets respond with added volatility. Numbers in-line may lower the odds of any rate cut at the next meeting. Numbers higher and expect market volatility to increase as many will question that cuts are having an inverse effect on inflation.

2/

FOMC Minutes

For years the minutes from the previous FOMC meeting have been a non-event. That has changed recently. The prior meeting minutes came after there was no cut but they showed that the decision was more heated than the unanimous vote to leave rates unchanged really was.

The minutes will give us a better peek of the debate behind the scenes when they finally decided to cut by 50 basis-points. This rate cut was by a surprising ½ point and had one dissenting vote on the record. That in itself is a rarity. In a Jerome Powell led Fed, a dissenting vote speaks volumes.

There was clearly a divide in the room and the minutes may give investors more clarity as to why they decided 50 over 25 and if there are bigger issues to be concerned about as they continue to fight inflation without upsetting the labor market.

Not only will we get the minutes of the last meeting but we will get many Fed speakers throughout the week. Let’s see if we get new comments about recent unemployment data and thoughts on pending economic news.

3/

Tesla Event

On October 10th, Elon Musk will host one of his most anticipated events ever when he debuts the robotaxi. The design and reveal of its autonomous driving features have been discussed and hyped for roughly a decade.

Will Elon Musk deliver or is this more hype? There have been so many questions about his full self-driving auto and investors want this event to deliver on more substance.

Last week shares tumbled -4% despite posting a year-over-year sales increase. The electric vehicle maker narrowly missed analyst delivery estimates causing the pullback.

Going into the news, shares of Tesla had rallied as much as 35% over the last eight weeks. Shares are now up less than 1% for the year, severely underperforming the S&P 500.

4/

Earnings Season Begins

We officially kick-off Q3 earnings season when the financials start reporting on Friday. We highlight JPM, but keep an eye on other banking giants in Citi, Wells Fargo and BNY Mellon.

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Originally posted 7th October 2024

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