Hey team. The growing level of uncertainty from the bearish headlines seems to have found its way to the forefront, weighing on sentiment and triggering sell-offs to close the week.
Let’s recap last week’s events and dive into today’s article, which highlights the importance of understanding market dynamics.
Impact Snapshot
Consumer Confidence - Tuesday
Unemployment Claims - Thursday
Q4 GDP - Thursday
PCE Inflation - Friday
Macro Viewpoint
The Standard & Poor’s 500 declined by 1.7% this past week, pressured by weakness in consumer discretionary and communication services stocks.
Despite showing resilience in recent weeks and brushing off a series of headlines, the S&P 500 faced renewed concerns about rising uncertainty and its potential to hinder economic activity.
Last week’s retail sales report fell short of expectations, yet markets initially found ways to rationalise the miss—similar to how they reacted to the latest inflation data.
However, sentiment shifted on Friday as services PMIs unexpectedly contracted for the first time in over two years, and consumer sentiment was revised lower. Meanwhile, inflation expectations remained elevated at 4.3%.
These developments contributed to a sharp decline in the S&P 500, briefly pushing it below the 6,100 level. Options expiration on Friday likely added to the downside momentum as major indices began breaching key strike prices.
Looking ahead, next week’s economic calendar includes February’s consumer confidence report, a revised reading of Q4 GDP, and the January personal consumption expenditures (PCE) report—Federal Reserve's primary inflation measure.
The best way to teach a concept of market dynamics, such as acceptance and rejection, is by visualising it in real, applicable markets. Everything sounds good in theory, but what about applying these concepts in real markets?
Today’s article includes a lengthy deep dive into Friday’s session and how understanding ranges and balance areas could equip you with the right framework so you can:
Spot range acceptance and rejections
Understand the market’s true destination
Let trades run longer to reach their true profit targets
Be prepared for major moves while most aren’t.