Knocking on the ceiling, but nobody's home
May CPI and SpaceX IPO this week
Quick summary:
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SPY is trading just below all-time highs around 760, with strong support from key moving averages below but clear resistance and narrowing breadth at the top.
Friday’s blowout May jobs report (172k vs 80k expected) sent Treasury yields to 4.54% and sparked a 2.6% selloff in the S&P 500 as rate hike fears returned. The sell-off was halted on Monday and the we got a strong reversal today.
On the 4-hour chart, momentum is rolling over and price action is showing early signs of a topping structure near the all-time high, with no convincing follow-through to the upside.
The daily trend remains technically bullish above the 200-day SMA (around 683), but breadth divergence is a warning sign that the rally is losing participants.
Wednesday’s May CPI is the key event of the week, with hot data likely pushing SPY below 730 to 735 support, while a cooler print reopens the path to new all-time highs ahead of the June 16 to 17 FOMC meeting next week.
Also a big event this week is the SpaceX IPO on Friday. I will do a special post on that before the event, to give you my thoughts on how this might go.
Charts
SPY came into this week looking wobbly after a brutal Friday session. The S&P 500 dropped 2.64% last Friday, while the Nasdaq plunged over 4% for its worst single-day decline since the tariff turmoil of early 2025. The catalyst was a one-two punch: the May nonfarm payrolls report showed 172,000 new jobs, roughly doubling consensus expectations, which pushed the benchmark 10-year yield sharply higher to 4.54% as rate hike odds climbed. Good news became bad news, fast.
Heading into this week, we recovered briefly on Monday as just as Tuesday opened on a high, it plunged in the next two hours, hitting a support zone around 730-735. On the 4-hour chart, momentum has started to flatten and in some cases roll over. A sell signal was issued from a pivot top point earlier in the week, and it has been struggling to sustain any upward follow-through since. The structure is not yet broken, but it is clearly stalling.
The daily chart tells a more nuanced story. The rally off the April lows has been impressive, but market leadership has grown increasingly narrow, with only about half of S&P 500 stocks trading above their 200-day moving average, raising questions about the underlying health of the move. Elliott wave analysis suggests the S&P 500 likely completed its final rally wave near the target zone around 7,620, and worsening breadth divergences point toward a potential correction or larger multi-month decline beginning now. That does not mean a crash is coming, but it does mean the easy part of the rally is likely behind us. What the bulls need to see is a clean consolidation above 755 followed by a decisive break and hold above the all-time high. What the bears need is a failure here and a return toward the 730 to 735 range, and ideally a push below. Neither scenario is confirmed yet. Price is in no man’s land, and that is exactly the kind of environment where patience matters more than conviction.
The macro calendar this week adds another layer of complexity. Wednesday brings the May CPI and core CPI, with economists expecting higher energy prices to continue lifting headline readings, while Thursday sees May PPI and initial jobless claims, and Friday closes out with the University of Michigan’s preliminary consumer sentiment gauge for June. The CPI data arrives in the context of energy prices that have already been accelerating inflation, making the job of new Fed Chair Kevin Warsh considerably more difficult when it comes to any potential rate cuts.
The next FOMC meeting is a two-day event on June 16 and 17. That means this week’s inflation data will be the last major input before the Fed speaks. If CPI comes in hot, expect yields to jump again and SPY to test that 730 to 735 support more quickly than many are currently pricing in. If it surprises to the downside, the all-time high becomes the immediate target once more. Either way, this week has the ingredients for real directional movement, and traders sitting on the sidelines waiting for clarity may not get it until Wednesday afternoon at the earliest.
Finally, on Friday we get the gargantuan SpaceX IPO. Could this be the reason why some of the stocks are selling off, to generate some liquidity for the SpaceX entry? Certainly. More on this in the next post this week.
The competition
The market handed us a plot twist last Friday with a jobs report that nearly doubled expectations, sending yields flying and chips tumbling, and now all eyes are on Wednesday's CPI print to decide whether SPY tests its all-time highs or retreats toward the 730s. Watch that inflation number closely when setting your prediction this week, because it is the single data point most likely to define where we close.
Stay focused and keep climbing the ranks!
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