Last Friday's session ended better than it began, but I didn't see anything to change my view materially.
Tech-related buying took a pause, which is good. Still, the Invesco QQQ Trust (QQQ) and many leading tech stocks continue consolidating above their 5-day and 10-day exponential moving averages (EMAs). The iShares Russell 2000 ETF (IWM) found dip buyers under $170 support, but Friday's rebound wasn't what I would characterize as earth-shatteringly bullish. My complaining aside, I'm looking to trade the IWM long this week, but only when it's holding above its day timeframe volume-weighted average price (VWAP).
The SPDR S&P 500 ETF (SPY) isn't nearly as weak as the IWM, but it's also a far cry from keeping up with the QQQ. With some luck, we can break free of last week's $390 to $400 range and establish something loosely resembling a trend. I want to avoid the chop on this ETF; I'm on the sidelines until price is above $400.
Speaking of breaking free, there's a battle emerging between what the Federal Reserve says it wants to do with interest rates and what traders expect the Fed to do. The rate decision is scheduled for May 3, and while the Fed has signaled that an additional quarter-point hike or two may be appropriate, the market is placing an 83% probability of the Fed keeping rates unchanged. Fast forward to the July 26 meeting, and traders are already pricing in a nearly 59% probability of a 25-basis-point rate cut. And by the Dec. 13 meeting, the fed funds futures indicate a 70% probability that rates will be between 3.75% and 4.25%.
If you're curious, the market places a 0.1% probability of rates ending 2023 where they are today, which is 4.75% to 5%.
Regardless of where you think rates will be at the year's end, I like how the iShares 20+ Year Treasury Bond ETF (TLT) is consolidating around its 200-day simple moving average. While I am long the TLT from last October in a long-term account, I wouldn't begin trading it until it's above $109.50.
