Powell in Focus Ahead of CPI Later This Week

Bulls remain in control

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Our View

I try very hard not to get all crazy about the election or, for that matter, be an alarmist. As I have said many times, I don’t watch FOX News or any news channel for my daily viewing. Being tied to the MrTopStep trading room, LiveSquawk London, and my new app on my phone, — and of course, the internet — is more than enough…maybe more than enough.

My good friend Joel has FOX News on in his kitchen, living room, and bedroom all going at once. The PitBull is also on what I call a news overload. He is up in Saratoga for the summer, watching his horses run, and as much as I keep telling him to enjoy his life and go have fun, he can’t. He fully admits to being a trading junkie, but today he was all charged up, saying the markets are going to fall. He says the S&P and NASDAQ can’t keep making new highs with negative breadth.

He continues to say that some well-known market timers are looking for a high into the middle of July. The PitBull added that his work shows possible weakness going into the fourth week of August. He is also concerned about a constitutional crisis going into the election and mentioned Nixon’s departure from the White House in 1974. The last thing he said is that there is going to be a mess at some point.

I could just copy part of this article I found about what happened after Nixon resigned, but this is a really good story and, as much as I hate to say this, reflects the current environment. From the start of 1973 to when Nixon left office, the S&P fell 50%.

Our Lean

All that aside this is what we know:

The S&P and NASDAQ continue to be bought on the pullbacks
Volume continues to be low, which favors the upside and buying the pullbacks
The trend is our friend until further notice
The ES has rallied ~135 points from its July 2nd low to yesterday’s high. That’s over 5 days but only 3.5 sessions. Further, the ES is up 432 points from its May 31st low.

Why do I point that out? Because it’s always good to know how far and how fast the ES has gone up. After all, it won’t go up forever… Dont forget, the S&P made its 34th new record high this year.

Our lean: Buying the 20 to 30 point pullback worked great yesterday, with the ES dipping 27.5 points and bouncing higher. I’m still looking to stick with the trend for now and buying those same 20 to 30 point pullbacks. Powell will be a cheerleader today and the MIM’s $5.5 billion to buy was the tip off to the next few days.

CPI Key to the Next 100 Points

It’s all over the place about the CME fund signaling a September rate cut. While I have been right on with the rate-cut BS about cutting rates six times this year, I again have to say boo to this too.

According to analysts at Citi Research we should “get ready for a bonanza of rate cuts from the Federal Reserve that starts in a few months and extends all the way into next summer.” The bank cited fresh signs of a slowing economy for its view that the Fed will trim rates by 25 basis points eight times, starting in September and extending to July 2025. From what I remember… The first rate cut is bearish.

I don’t know how Thursday’s CPI number ends up, but from the sound of the Fed Minutes saying they were seeing a very gradual reduction in inflation to Powell’s unending push for rate cuts, the ES and the NQ could be off to the races if we get a good CPI number. Tell me I’m wrong, but this tape looks painted.

MrTopStep Levels:

How to use MTS levels

MiM and Daily Recap

ES Recap

The ES made a low at 5610.75 on Globex, climbed up to 5631.75, and opened Monday’s regular session at 5629. After the open, the ES traded 5627.75 and then rallied up to 5636.00 at 9:34, pulled back to 5630.25, rallied up to a higher high at 5637.50, traded 5630.75 and then made a lower high at 5634.25 at 10:15. From there, the ES sold off to a new low at 5623.75 at 10:37, rallied up to a 5630.00 double top at 11:23 and sold off down to 5621.50 at 11:39, rallied up to another lower high at 5626.75 at 11:54 and then sold off down to a new low at 5617.25 at 12:11.

After the low, the ES traded up to 5623.25 and then pulled back to the 5619 area at 1:22, rallied back up to 5628.00 at 1:42, pulled back to 5623.50 at 2:04, rallied up to 5627.00 and then dropped down to a new low at 5615.25 at 2:48 and then rallied back up to 5625.00 at 2:58. The ES sold back down to 5619.25 at 3:30, traded up to 5623.50 at 3:46 and traded 5623.00 as the 3:50 cash imbalance showed $5.5 billion to buy. From there, it rallied up to 5629.25 at 3:56, dropped down to 5624.25 and traded 5625.75 on the 4:00 cash close.

After the cash close, ES traded up to 5629.75 at 4:08 and settled at 5628.25, up 6.75 points or +0.12% and made its 35th new all-time high in 2024. The NQ settled at 20,683.25, up 63.75 points, +0.31%, gold settled at 2,365.80, down 31.9 points or -1.33%, crude oil fell to 82.27 a barrel, down 0.90 cents or -1.08%, Bitcoin closed down 125 points at 57,165, down 0.22% and the 10-year treasury yield was steady Monday at 4.267% but has dropped roughly 0.2 percentage points since the beginning of the month.

In the end, the ES and NQ closed higher but the price action seemed off. This could have to do with the low volume and not reading the small buy and sell programs as well, but I think the markets acted tired. In terms of the ES and NQ’s overall tone, they acted firm but tired. In terms of the ES’s overall trade, volume was low at 915k contracts traded.