The Week Ahead

Credit downgrade, earnings preview, stocks to watch + SPY analysis

Good Morning, Substack.

Economic Calendar

• Monday, May 19

  • 2 Fed Speakers (pre-market)

  • U.S. Leading Economic Indicators

• Tuesday, May 20

  • 4 Fed Speakers

• Wednesday, May 21

  • Fed Listens Event (2 Fed Speakers)

• Thursday, May 22

  • Initial Jobless Claims

  • S&P Flash U.S. Services/Manufacturing PMI

  • Exisiting Home Sales

  • 1 Fed Speaker

• Friday, May 23

  • New Home Sales

  • 1 Fed Speaker

• Sunday, May 25

  • Fed Chair Powell Speech at Princeton’s Baccalaureate Service

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Over the Weekend

Moody’s downgraded U.S. credit rating after the May monthly opex, sparking a brief sell-off as futures opened the week lower.

Stock market futures via CNN

History of Credit Downgrades

U.S. credit downgrades do not occur often. That being said, in recent history, there were two instances in which the U.S. credit rating was downgraded: 2011 and 2023.

U.S. Credit Downgrade + S&P 500 reaction

2011 saw a sharp sell-off, while 2023 saw a much calmer initial reaction. When comparing the two previous credit downgrades, two main divergences stand out.

1. The initial Sell-off

   1. 2011 rapid and volatile

   2. 2023 muted and close to a non-event

2. 3 Month Performance

   1. 2011 saw the S&P 500 rebound and make new highs following the credit downgrade. After 3 months had passed since the S&P’s downgrade, the S&P 500 had gained roughly 4.5%

   2. 2023’s credit downgrade resulted in the S&P 500 selling lower in the ensuing 3 months. After 3 months had passed the S&P 500 was over 7% lower than when U.S. credit received the downgrade from Fitch

History tells us that a muted initial reaction (such as the one we are seeing to begin this week) has the potential to see continued weakness over the coming quarter of trade. However, there is not enough credit downgrades in recent history to warrant this analysis as more than a loosely correlated hypothesis.

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Earnings Calendar

Most anticipated earnings the week of 5/19 via eWhispers on X

• Tuesday, May 20

  • HD

    

    HD daily via TrendSpider

    As HD is set to report earnings Tuesday before the market opens, market makers have accumulated over $4m in positive gamma exposure at the 390 strike.

    

    HD net Γ via Vexly

    Any sustained trade >390 can potentially target the $2m in gamma exposure at the HD 400 strike.

  • BILI

• Wednesday, May 21

  • BIDU

  • TGT

  • TJX

    • TJX shows two main gamma pivots heading into earnings, 125 and 135.

      

      TJX net Γ via Vexly

  • SNOW

    • Pivot = 180

      • Long above

        • Target 200

      • Short below

        • Target 160

        

        SNOW net Γ via Vexly

  • ZM

  • URBN

• Thursday, May 22

  • BJ

  • AAP

  • TD

  • INTU

  • ADSK

  • WDAY

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How We Found UNH’s Recent Bottom

A few variables presented themselves in succession during Thursday's trade that made for a potential bottom attempt.