Coiled Spring Capital Intra-week report July 15th, 2022

We believed this past week would be difficult to forecast and littered with landmines. The CPI/PPI prints and the beginning of earnings season, we thought would be a treacherous set up....and it was. The CPI print exceeded forecasts and the market got hit, and JPM issued a pretty dire outlook.

We discussed this bear flag in last week's report and we broke the trend on 7/21 to offer clues on the next move. Interestingly enough, the battleground 161.8% projection level from the Jan high, has proven formidable. Despite taking out last week's lows yesterday, we could not close below it.

We were right to be cautious into the macro events this week. Coincidentally we also wrote about extreme weakness getting bought, and that's precisely what happened. Here is an excerpt from our conclusion page from last Sunday's report:

The SPX has since now given up the 20 day SMA again. The Nasdaq has been somewhat more resilient and something we've been discussing in our newsletter for the last few weeks. Peaking inflation will support longer duration assets and the Nasdaq is littered with higher growth companies. Despite all the carnage we saw this week the Nasdaq is only posting an inside week. It's also fighting aggressively at the 200 weekly SMA (yellow).

The daily chart is back testing this DTL break but still below all MA's.

We've been talking about the $USD as a big issue for the market and its certainly helped cap any rallies. Here is the Cup and Handle continuation pattern we recently posted. The measured move target was achieved. If this rolls over from here, it would do wonders to stabilize the market.

Can we make an inference that this should start to back off here?

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