The Week Ahead

Friday’s rally provided much-needed relief to an equity market that looked to be teetering on the edge. At its lows of around 5840 on Thursday and Friday, the SPX was down nearly 5% from its recent highs, set just a week earlier. The SPX rallied nearly 2% from the morning lows, with half of the gains occurring in the final two hours of trading—and a significant 50-point surge happening in just the final minutes. The possibility of an oversold bounce aligned with what we noted on Thursday, when the market was testing a key area, while implied volatility was spiking. From Thursday:

• Key Levels to Watch:

  • A 5%-6% pullback from recent highs could mark a capitulation event, where an initial sharp drop is followed by a strong rebound.

  • The first 4% of this move has been fairly orderly, but if the decline continues, expect more disorderly price action.

  • Keep an eye on the 5850 level because it may be the options market last help until closer to 5700.

Friday’s reversal wasn’t driven by any obvious changes to the story causing the recent decline, but did benefit from an oversold bounce in a short gamma backdrop, forcing buyers to chase into the close. It is worth noting however, that the SPX finishing just above 5950 is notable. The significance depends on whether the market can open above and hold that level on Monday. If it can, that 5950 once again may serve as support and potentially stabilize equities. If not, expect volatility below.

For the upcoming week a couple of big events on the macro front, the first being the potential start of tariffs. The second being Friday’s jobs number, which will be closely watched for any signs of weakness that would add to the growth slowdown concerns that bubbled up over the past week. Here’s a look at this week’s expected moves in the major indices/etfs, followed by the economic calendar of potential catalysts:

Expected Moves:

• SPX/SPY: 1.5%

• QQQ: 2.5%

• IWM: 2.6%

• TLT: 1.6%

Economic Calendar: 

• Monday: 

  • 10am: ISM Manufacturing

• Tuesday: 

  • Tariffs go into effect?

• Wednesday: 

  • 10am: ISM Services, 2pm Beige Book

• Thursday: 

  • 7:30am: Challenger Job Cuts

  • 8:15am: ECB Rate Decision 

• Friday: 

  • 8:30am: Non Farm Payrolls

In addition to the above catalysts there are Fed Governor speeches sprinkled throughout the week.

Earnings season is winding down but we continue to hear from some important names. Large retailers reporting this week (TGT, COST, etc.) may give us a little more insight on the consumer, while AVGO gives us even more data from the semi space:

Earnings (with expected moves):

• Monday

  • After hours: OKTA 12%

• Tuesday

  • Premarket: TGT 8.3%, BBY 7.6%, SE 11.3%

  • After hours: CRWD 8.6%, 

• Wednesday 

  • After hours: MRVL 12.3%, ZS 10.3%, MDB 13.2%

• Thursday

  • Premarket: JD 8.7%, M 8.9%

  • After hours: AVGO 8.8%, COST 4.0%, GAP 11%

We’ll be back tomorrow to kick off coverage in what looks to be a news filled week with the potential for more volatility.

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