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This week will be full of economic data, but the big data will come on March 1 and 3, when the ISM manufacturing and services indexes are released respectively. The ISM manufacturing survey is expected to rise to 48 from 47.4 last month. Meanwhile, the ISM manufacturing prices paid index is expected to rise to 45 from 44.5 in January. The job report is not due this week and is delayed until March 10.
This will put extra focus on the ISM reports as they will provide February’s first inflation and employment reading. But overall, I think these two reports are unlikely to do much to reverse the current trend of rising rates and a stronger dollar. However, hotter numbers could result in trends in rates and the dollar growing stronger.
The dollar has broken a downtrend and probably has room to run between 105.75 and 106 before running into any meaningful resistance.
Meanwhile, the 2-year has also broken out; I think it’s heading above 5%. The weekly chart shows no major resistance level until the 2-year hits 5.1%, a rate last seen in 2007.
The iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE:LQD) has fallen sharply and is at support currently. A break of support at $105.50 would signal that the LQD has further to fall, with gaps at $104 and $100.80 potentially the next stops.
The iShares 20+ Year Treasury Bond ETF (NASDAQ:TLT) has a similar look to the LQD, but the TLT has further to fall before testing support at 99.50. But with a gap at $94.50, a further decline in the TLT seems likely.
The S&P 500 broke below the October uptrend by gapping below it, completing the bump and run reversal pattern. The index isn’t oversold yet based on the RSI and could have much further to drop, given how much rates have risen thus far. For now, the next major support level comes at a long-term downtrend of around 3,900 and then around 3,780.
The iShares Biotechnology ETF (NASDAQ:IBB) has broken down after failing to move meaningfully above resistance at $135. Biotech is a good proxy for where the market thinks rates are going because these companies tend to be long-duration growth assets, and higher rates affect them the most. Therefore, watching the IBB can provide insight into where equity investors think rates are heading. Currently, it appears that the IBB is likely heading lower to around $121, which means rates may be heading higher.
The First Trust Dow Jones Internet Index Fund (NYSE:FDN) is back below $136, which had been strong resistance for much of the fourth quarter of 2022. It appears that the January rally may have been a false breakout attempt. Unless the FDN can quickly re-establish that breakout, the ETF is likely to head lower toward $118.
Adobe (NASDAQ:ADBE) finished below all the lows between the end of November and the beginning of January, around $325. This suggests a potential bearish change in the trend for the stock. Furthermore, there is a significant gap to fill at $300.
Have a good week.
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