S&P Goes for Fifth Straight Gain as CPI Comes In a Little Hot

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Our View

We live in a very mixed-up world. There is an absolute overload of geopolitical tensions and economic headlines to follow. The banks start reporting Q3 earnings on Friday and there should be three main takeaways:

I told the PitBull I’m sticking with the @HandelStats study that said the ES bottomed on October 3rd 2022, rallied and sold off again, and made its low on October 14th (which set up the low of the 2022 bear market). That said, the price action points higher right now.

Today is the CPI number and according to Goldman Sachs: “We expect a 0.22% increase in September core CPI (vs. 0.3% consensus), corresponding to a year-over-year rate of 3.98% (vs. 4.1% consensus). We expect a 0.30% increase in September headline CPI (vs. 0.3% consensus), which corresponds to a year-over-year rate of 3.55% (vs. 3.6% consensus). Our forecast is consistent with a 0.24% increase in core services excluding rent and owners’ equivalent rent in September… Going forward, we expect monthly core CPI inflation to remain in the 0.2-0.3% range in the next few months.”

The market handled yesterday’s hot PPI reading with a nice rally. We’ll see what it makes of the CPI report today, as the S&P rides a four-day win streak.

Our Lean

The markets can run, but they can’t hide. If the ES gaps lower after the number and remain within its 4370 to 4420 range, I want to buy the open. I’m also starting to look for a “PitBull low” today for tomorrow’s FRYday option expiration. I’m not saying the ES can’t sell off, but it seems like if you are patient and buy into the 30 to 50-point breaks, you get paid.

Our Lean: Ideally we think higher, therefore our lean is buying the pullbacks. That said, we can’t rule out selling a good early rip either. Thursday sell-offs are meant to be bought ahead of FrYdays options expiration.

As for ES levels:

Upside: An hourly close above 4427 targets 1 sd at 4449.57. Hourly close above there targets 4460.50, then 4467.89. An hourly close above there targets 2 sd at 4481.64. DAILY/WEEKLY close above 4467.89 targets potentially much higher.

Downside: Hourly close below 4421.75 targets settlement at 4417.50. Hourly close below there targets 4405, then 4399.25, then 4393.50. Hourly close below there targets -1 sd at 4385.43, then 4367.50, then -2 sd at 4353.36.

MiM and Daily Recap

The ES traded up to 4310 on Globex and opened Wednesday’s regular session at 4402.50. After the open, the ES rallied up to 4410.50 at 9:38, sold off down to 4292.50 at 10:17, back-and-filled in a 4-pt range, and then dropped down to a new low at 4390.50 at 10:48. The ES rallied back up to 4404.25 at 11:00 and then sold off down to a 4377.25 double bottom at 1:51. After the low, the ES rallied up to 4389.25 at 2:01, back-and-filled until 2:19 and rallied up to 4398.75 at 2:26, dropped straight down to 4391.25 at 2:31 and for the next 43 minutes it back-and-filled to the upside.

The ES traded 4401.50 at 3:31 as the early imbalance showed $6 million to buy and then traded all the way up to 4409.50 at 3:47. The ES traded 4407.25 as the 3:50 cash imbalance showed $1.75 billion to buy, traded up to 4411.25 at 3:59, and traded 4408.50 on the 4:00 cash close. After 4:00, the ES rallied up to 4418.75 and settled at 4417.50, up 18.25 points or 0.42% on the day.

In the end, it was pretty much a range trade — up early, selloff then bounce late and pinned at ~4400.00. In terms of the ES’s overall tone, it was all sell programs early and buy programs late. In terms of the ES’s overall trade, volume was lower: 275k traded on Globex and 1.120 million traded on the day session for a total of 1.325 million contracts traded.

Technical Edge

ES

Can the S&P shake off a slightly hotter-than-expected CPI print?

NQ

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!