Thoughts from the gut going into next week.
I still think the $USD is key to watch as it and SPY have had inverse correlation that has been pretty clear especially this past month. It could bounce a bit near term as its near the bottom of the range (94.00 - 101.00) it's been in since early 2015... A range that looks like a stretched out rounding top when looking at the weekly. 94.00 area is pretty important from a chart perspective and looks to equate to about SPY 208. $USD could be due for a bounce after the past week, but we will wait and see. This bounce could pull markets back towards SPY 200 or lower, but the $USD only looks to be going lower in the coming months as I expect no rate hikes and from a chart perspective 94.00 to 90.00 is thin for what that is worth. Not saying we go straight there, but USD looks toppy and we could see equities at all time highs if the dollar - equities correlation we have seen keeps up and Janet keeps being Janet.
Last week my thoughts were we would remain range bound in the 195-205 range for the foreseeable future. That hasn't really changed much. 195 is possible, but think 200-210 range is more likely unless the fed starts hawk talk.. And they're due to get a lot of face time in the next week or so.
So I expect a pull back towards 200 once this rally fades and the dollar bounces off its 15 month near term support. Might be SPY 208, but who can really say. I'll reassess then, but my feeling is range bound into June FOMC. There is a ZERO % chance imo we see a rate hike before September and I highly doubt we see one this year. I would be shocked if we didn't see the $USD fall through 94.00 and SPY take out its 52 week highs going into the summer on the tails of a dovish June FOMC (no rate hike).
Won't project too far after that... No idea what fed will do or where we will be, but I think the first chance to get real short will be as those highs get taken out and that rally fades in July maybe August imo. Until then I think it's sideways with a bias to the upside.
Levels to watch for me are $USD 94.00 to the downside and SPY closing above 208. We see one or both of those and bears should hit reset imo. I may even consider getting long for the push from 208 to 213 as we head out of June's meeting with no hike. Think long term puts from now until June are just a premium burn.
Just my $.02
