Tom’s Weekly Newsletter June 22, 2023

Originally published via our newsletter previously. Subscribe for early access!

Fed Day Decision June 14 Seemed Like a Sell the News Day

The Federal Reserve Open Market Committee’s decision on interest rates was one of ‘no decision’. They did not hike.

Fed Chair Jerome Powell said that they, the central bank, will consider the ‘cumulative’ impact of rate increases in future meetings.

According to the CME Fed Watch Tool, investors appear to be anticipating a 61.5% chance of the Federal Reserve hiking rates by at least a quarter of a point at its July 25-26 meeting.

Chairman Powell said the Fed hasn’t yet made a decision on what they’ll do at the July meeting.

The markets sold off on the day. The Dow intraday was down 400-points but peeled off those lows and ended up down 257-point or a decline of 0.7%.

Market in Focus

Equities: SPY

The markets followed up a day of selling with a day of buying where the day of trade saw the SPY trading much higher on the day at the time this article was written.

If one anticipates a sell of or a pull back for whatever reason the image above shows three potential targets that may end up being support.

If one wants to consider trading bearish option trades in anticipation of a pull back then the support areas being discussed may be what those option traders use as a price target for profit goals on that type of trading.

If one wants to instead, wait for the pullback to happen to then get long here are the three possible price points that ‘could’ become a support.

Three Price Levels that could become Support

1. Old Resistance becomes New Support
   • Where SPY traded up to and then consolidated just under 430 (say maybe 429) and then traded higher from, a short-term pullback may bring SPY bac to that price. If the conviction of buyers is higher and momentum continue that may end up being a new price support area.
2. There is a price gap higher from say 422 to 425. Should a pullback/sell off occur and the SPY break 429 then monitor the gap to see if SPY finds support at the price it gapped to, it gapped from or somewhere in that price gap difference.
3. Another price level that could be an Old Resistance becomes New Support is 416/417.
   • This is a price level that was a prior resistance price SPY took a bit of effort to break and stay above from February of this year to mid-June here where it is now breaking out.

To reiterate, these price levels can be used as either price targets to use if one is considering a bearish trade (option or stock/ETF)

OR

They can be used as support price levels one waits for SPY to hit before they consider initiating bullish trades (options or stock/ETF).

There is another technical price level that can be observed and that is with the use of the Fibonacci Retracement Tool in my software.

Go to Stocks > Charts > Toms Auto Fibs

What one can do with Tom’s Auto Fibs in the software is choose to either use

the Fib’s on either a list of stocks or a single ticker.
The above image shows the tools being set to the ticker SPY.

The Days for Peaks and the Plot Days default to 150 and that is what we predominantly use unless there is a shorter or longer period of days we wish to use the Fib analysis on.

Once the settings are what one wants to click the Search tab.

Here is the chart of SPY with the primary Fib retracement price levels.