6 stock market predictions for the coming week

This week promises to be interesting with the release of , , and dates. In addition, there was news on Friday about the takeover by the FDIC of SVB Financial Group.

While details are limited, I believe that after experiencing the 2008 financial crisis, federal officials will take appropriate action to prevent systemic threats. Once investors become more comfortable with the details, the market is likely to respond positively.

1. Bond Yields

may have fallen too much in response to Friday’s SVB news and will begin to rise again once the issue is resolved. Friday’s report not only justified the 50 basis point drop in December Fed Funds Futures.

30 Day Federal Funds Futures Daily Chart

2. Economic Data

While the increase is slight, it appears to be due to a wave of new workers entering the workforce. The number of non-labour force workers can fluctuate from month to month, so it would not be surprising if the number of non-labour force workers increases in the coming weeks and unemployment falls back to lower levels.

USEMTOT Index Monthly Chart

Meanwhile, rose by 0.2%, slightly lower than the estimated 0.3%. However, it was a close call as it was about completion. Median hourly wages rose 0.0242% in February from $33.01 to $33.09. If the number had increased to $33.10 per hour, the median hourly wage would have increased by 0.272%, rounded to 0.3%. Such a small rounding error is unlikely to have a significant impact on the path of monetary policy going forward.

Monthly AHE Index Chart

There seemed to be a flight to safety, with the market looking for safety first and asking questions later. This is not uncommon, and once the situation is resolved or better understood, much of the fall in interest rates should be reversed, with interest rates rising. Whether the Fed continues this way depends entirely on how things stand in two weeks. However, I think they will raise rates by at least 25 basis points and signal more rate hikes to come. If they unexpectedly interrupt rate hikes, it would send a warning message that they are seeing something very concerning, causing a significant change in their policy path, and that would not be optimistic for equities.

The CPI report will have the final say on the Fed’s next move.

That said, there was a lot of technical damage to the stock, and right now a drop to 4.5% seems reasonable, with support to keep it there.

US Govt 2-Yr Bonds Daily Chart

3. S&P 500

Similarly, there was a lot of technical damage to the index, with the index falling below the uptrend that created the bottom right portion of the diamond pattern pointed to last week. The index also fell below the downtrend line dating back to January 2022 and the 200-day moving average. Clear support can be seen around 3,750 and 3,800, which could serve as a place for the index to consolidate.

4. NASDAQ 100

It appears to have formed a broadening wedge pattern, indicating that it may move back down to the lower trendline in the future. The index has also fallen below the 200-day moving average and the 11,900 support level. The next significant support level for the NASDAQ 100 is around 11,500.

5. Biotech

The biotech sector has been hit hard recently. First, it was due to rising real yields and on Friday, it was due to flight from risky asset classes. It has failed to participate in the rally that started in January and is consolidating sideways.

The $75.50 level has been a point of interest for quite some time, as it held and led to a bounce every time it was tested. Friday marked the first time since last year that level was meaningfully broken. However, the ETF closed above $75.50, making it a significant level to watch this week.

6. DJ Internet Index

The situation with the is not that different from the XBI. The ETF has tested a necessary support and resistance level around $135 several times since last year. On Friday, the ETF also fell below the 200-day moving average and that support level. Regaining that support level is crucial to preventing the ETF from retesting the fall lows.

That will be all for this week.

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