Insurance

SPDR S&P 500 ETF Trust (SPY) Forecast: Waiting for the breakout ahead of Nonfarm Payrolls

Thursday was a day of losses for the SPY and the other major indices. Equities are currently waiting for some sort of signal from the employment report that will be released on Friday.

Is it possible that bad news could be good news as talk of a Fed shift increases?

The major stock market indices ended Thursday with losses, most likely because speculators took some money off the table in anticipation of Friday’s employment report. The employment report, which is consistently one of the most important data to be released each month, now has an even greater weight. Recently, there has been a rise in the amount of discussion on a possible policy shift by the Federal Reserve, which comes as certain areas’ monetary structures are dangerously close to collapsing. Already, we have witnessed the Bank of England take action to save the gilt market, and the United Nations, of all organisations, has requested that the Federal Reserve moderate the speed at which it is increasing interest rates.

SPY news

The majority of Federal Reserve officials who went on the airwaves last week continued to express hawkish sentiment, which was one of the most remarkable aspects of this past week. The employment statistics from this week and the consumer price index from the following week will determine how firm that conviction is. Investors have been flocking back to risky assets this week as the markets anticipate that both will show signs of improvement in the coming days. That has resulted in some outstanding gains across markets; therefore, the question is: can they continue? Regarding the day that lies ahead, it is anticipated that payrolls will show a growth of 250,000.

In my opinion, the most desirable outcome is a number that is probably closer to 200,000, since this will put the discussion on the Fed’s pivot into overdrive. At the moment, the assumption is that a Fed pivot will be beneficial for equity markets since it will result in lower interest rates. The grounds for a Fed pivot are likely to mean a deep recession, but for the time being, equity markets are willing to ignore this possibility.

According to the study that I have recently read, the month of September has a significant history of missing to the downside. Given this, it is possible that current rally will continue. It seems like a pain transaction, and markets function best when they can inflict as much suffering as possible on as many players as possible. The CTA and trend-following positioning is now low, and if we start to squeeze, we will need to make adjustments.

There is a good chance that, in the days leading up to earnings season, an impression will prevail that all of the unfavourable news has been reported and removed from consideration before earnings season even begins. There have been other companies, including FedEx (FDX), Nike (NKE), and most recently Advanced Micro Devices (AMD), that have released awful reports. Samsung’s overnight performance was also poor. The attitude and positioning of equities investors are still very negative, which always pushes the risk-reward scenario in the direction of a countertrend squeeze rally. That does not mean that the outlook for the longer term appears to be difficult; but, the risk-reward profile, in my opinion, continues to favour the upside.

The prediction for SPY

There was an attractive rebound from the 200-week moving average, and the Relative Strength Index (RSI) indicated that the market had been oversold. At this time, $373 is still the pivot. If we make further progress upward, our next objective is $389. If the pivot point of $373 is broken, a new annual bottom will be established below the 200-week moving average, which is currently at $359.

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