The Tone of the Market to be Set with Upcoming Economic Reports this Week?

Tom Gentile

Posted in
Big Picture

By: Tom Gentile
May 10th, 2023

3 mins read

We have pointed out in prior articles support and resistance levels on the S&P500.

We don’t see it as likely the markets will remain trading in this sideways range for too much longer, what with the CPI and PPI along with Initial Jobless Claims.  Not only are the three reports I just mentioned a concern, but the markets are also dealing with whatever decision congress makes regarding the debt ceiling.

Treasury Secretary Janet Yellen has gone on record as saying if there is a decision to NOT raise the debt ceiling it could be an economic catastrophe.

This staring competition between the President and the Democrats versus Republicans is putting the country and the US Treasury at risk of a potential debt default – meaning the treasury wont be able to pay its bills such as Social Security recipients and veterans and people counting on money from the government as an example.

There are Democratic and Republican economists that agree a brief default would be tough on the financial / equities markets along with sending interest rates even higher.  The key to avoiding a default of our nation’s debt seems to be Congress taking action to raise the debt ceiling or at least suspend the debt limit.  And soon.

Figure 1: 120-Candle Chart on SPY with Support and Resistance Highlighted
Figure 1: 120-Candle Chart on SPY with Support and Resistance Highlighted

Figure 1 shows the SPY and a support, and a resistance area highlighted by a horizontal, solid, green line.

The two circles/ovals area emphasizing extreme lows of the date range shown that could be area of support or where SPY could trade down to if things get dire.

CPI, PPI, and Initial Jobless Claims

The economic reports for this week start tomorrow with the release of the Consumer Price Index (CPI).

CPI is an economic indicator of the average change over time in the prices paid by us, urban consumers for consumer goods and services. Core CPI is the indicator and reading which excludes the volatile food and energy sectors.

PPI is the reading on a group of indexes that measure the average change over time in selling prices received by domestic producers of goods and services. In other words, it measures price change from the perspective of the seller.

Initial Jobless Claims is a key economic statistic reported weekly by the U.S. Department of Labor.

It counts people filing to receive unemployment insurance benefits. The ‘initial’ claims number is for those filing for the first time. ‘Continuing’ claims are of those from people previously or already collecting unemployment benefits.

All three of these are indicators of the health of the economy and what the Fed will be paying attention to.  These numbers and statistics will tell us if inflation is still too hot or easing.

Depending on if it is deemed inflation is still too hot or cooling off will determine investors/traders conviction for either buying or selling securities.

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