$SPX (S&P 500) vs $RSP (S&P 500 Equal Weight) – (Net High/Low 33

31 Eki 2022

SPX posted its second consecutive week of gain (+3.95%), reclaiming its 50-day moving average (declining) during the week. SPX is currently 5.6% away from recapturing its 200-day moving average.

There is a growing belief among market participants that the Fed will soften its approach after the November meeting. The policy move from the Bank of Canada this week further fueled this notion. The Bank of Canada raised its key policy rate by 50 basis points versus an expected 75 basis points. The European Central Bank, however, delivered a 75 basis point increase for its key policy rates, as expected.

Market participants digested a slew of economic data this week that both supported and undermined the notion that the Fed will soften its approach soon. Some of the data releases included:

September PCE Prices 0.3%
The key takeaway from the report is that with continued income growth and a slightly hotter than expected Core PCE price growth, the Fed has an argument to maintain its aggressive rate hike course.
Weekly Initial Claims 217K
The key takeaway from the report is that the initial claims data suggest the labor market continues to hold up well, which of course is something that will continue to draw the Fed’s attention.
Q3 GDP-Adv. 2.6%
The key takeaway from the report is that it ends a two-quarter streak of negative GDP prints. It also suggests the economy held up well in the third quarter as it started to acclimate to rising interest rates. Real final sales of domestic product, which excludes the change in private inventories, increased a solid 3.3%.
October Consumer Confidence 102.5
The key takeaway from the report is that consumers’ concerns about inflation picked up again in October on the back of rising gas and food prices.
Falling Treasury yields were also a big support factor for the stock market rally during the week.

The support to watch for this week is revised up to 3,720 level, a beach of SPX rising 10 & 20-day moving average.

Bull Case: Reclaim above 4,110, 200-day moving average level.

Bear Case: Breakdown of 3,720 level, beaching its rising 10 & 20-day moving average. Next support at 3,490 level.