3 Key Signs for the Week Ahead

3 Key Signs for the Week Ahead

Unfortunately, we’re back to our old 2022 “wait and see” pattern, where the S&P 500 (SPY) kind of turns sideways until the next big CPI report or Fed meeting. But there are three things I’m watching over the next few weeks. Read on to find out what they are.

(Please enjoy this updated version of my weekly commentary originally posted on February 10e2023 in the POWR Bulletin Stocks Under $10).

Market Commentary

Each of these could make a significant difference in the direction the market takes next.

Strong Technical Support/Resistance Levels

Since September, the S&P 500 (TO SPY) attempted to move back above the 4,100 level. This price has been an important support/resistance level for the index since February 2022 (and even further, depending on who you talk to).

After failed breakouts in September, November and December, we finally had a meaningful break above this level in February…

…only for things to go back below after this week’s sell-off.

Each time we fail to break through and STAY ABOVE this level, the psychological resistance becomes even stronger and subsequent breakups/failures become even more significant.

That doesn’t mean we’re going to see a quick sell off (maybe some light selling) next week, but it does mean that this level will likely remain our top until the March FOMC meeting, unless we do. let’s have a big surprise.

January CPI report

…which we could potentially get as soon as next week.

This will be the most important report to watch, and it will be released early Tuesday morning. (Move on, Valentine’s Day.)

Hopefully investors will LOVE the results and our bull market will have more fundamental support instead of the semi-exuberance that seems to have propelled the market in the first month of the year.

Analysts are currently expecting a slight drop in inflation. The Fed has also started to recognize encouraging trends in the latest data releases. (I mentioned some of this in my January 13 analysis of the December CPI report.)

But the data may not be as reassuring as we hope. Some energy prices, such as crude oil, are no longer falling, and wage growth and the labor market have remained strong.

The big wild card will be “safe haven”, which has the largest single weighting in the CPI report, which has mixed analysts as to whether it will be higher or lower.

Either way, the details will show us if Powell’s concerns are warranted and if we will have many more rate hikes at upcoming FOMC meetings. Which brings us to…

FedWatch CME Tool

It’s a really awesome tool that I’m sure some of you are already familiar with. It’s the FedWatch CME Tooland it shows you exactly what is “in” to the market in terms of future rate hikes.

And with the market hanging on every word from the Fed, it’s one of the most important risk assessment tools we have.

…in other words, we have a real-time snapshot of how many rate hikes traders are actually expecting over the next year, based on the price action we are seeing on futures federal funds.

So right now we can see that 100% of traders think we’re going to get some sort of rate hike at the March 22 Fed meeting. The vast majority of traders think we will see another 25bps upside, while around 10% think we could see a 50bps upside.

But what’s really interesting is that it also shows what traders were thinking a day ago, a week ago and a month ago. Note that on January 10, no less than 15% of traders thought there was a chance that we would have NO rate hike in March.

But after Powell’s Feb. 1 press conference (where he stressed there was still work to be done) and January’s surprisingly strong labor report, that number had fallen to just 2.6%.

Once people had a bit more time to digest this news, the number dropped to 0%.

Not surprisingly, the market rally has moderated. We still operate on the idea that there is a ceiling preventing any form of continued bullishness as long as we continue to see interest rates rise.

These figures correspond perfectly to what we see on the market…

January: “Hey, we might even be done with all this rate hike by March!” Let’s party!”

change to

February 3: “Hmmm, we’re probably going to have some sort of rate hike in March, but DEFINITELY not a big one. Maybe I should stop buying so much.

change to

Last week: “Well, we’re definitely going to have a 25 basis point hike in March…and maybe even a 50 basis point hike. Maybe I should take some of those January gains off the table…”

It might be a little Monday morning quarterback, but you can’t deny that the main driver of the market has been (and still is) monetary policy and the height and duration of the rate hike in the fed.

We’ve been talking for months about the disconnect between what Powell is saying and how the market is acting and this tool helps you monitor that in real time.


I know that comment sounds pretty bearish, but it’s actually more about being on the safe side. I think there’s still a chance that we’re in the thick of it and have more ups than downs in our future, but it’s not sure yet.

So we’ll play it safe for now… and prepare for next week!

What to do next?

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All my wishes!

Meredith Margrave
Chief Growth Strategist, StockNews
Editor, POWR Stocks Under $10 Newsletter

SPY shares closed at $408.04 on Friday, up $0.95 (+0.23%). Year-to-date, SPY has gained 6.70%, versus a % rise in the benchmark S&P 500 over the same period.

About the Author: Meredith Margrave

Meredith Margrave has been a renowned financial expert and market commentator for two decades. She is currently editor-in-chief of POWR Growth And POWR Stocks Under $10 newsletters. Learn more about Meredith’s journey, as well as links to her most recent articles.


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