Magnificent Seven Advance Pre-CPI, We Have Seen This Dance Before
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Our View
The ETF buy programs and buy stops have catapulted the ES to new highs. I don’t think many people expected this, but this is what happens when traders are short and complacent in slow, low-volume grinds. Is the low in for October? Usually, the ES puts in a power move from the 8th to the 10th of the month or by mid-month
Our Lean
Today is all about the Consumer Price Index. Federal Reserve Governor Lisa Cook speaks at 9:15 am, Chicago Fed President Austan Goolsbee has a TV interview at 10:00 am, Richmond Fed President Tom Barkin speaks at 10:30 am, and New York Fed President John Williams speaks at 11:00 am.
Our lean: these markets can run, but they can’t hide from the elephant in the room—the Israeli/Iranian conflict, which I said should start to warm up after Yom Kippur on October 12. In the meantime, it’s all about the CPI report and a deluge of Fed speak. Everything has been pumped up ahead of today’s CPI release, and if you look back at the last few, the markets have rallied in front of better numbers. Do they buy or sell the ES? The ES has rallied 97 points (1.7%) and the NQ has rallied 470 points (2.35%) in the last two sessions, so my guess is they sell the news on a big gap up. If the ES gaps down hard and there’s decent Globex volume, I’m buying the open or the first drop under the gap down. I was off yesterday, but it wasn’t hard to see what was going on—meaning low volume and a big, fat, “thin to win” trade. Easier to manipulate when it’s like that.
Power has been going out all night. The generator has been great, but as soon as it kicks in, the electric goes on, and I have to reset everything. The hurricane south of West Palm brought high winds, heavy rain, and micro-tornadoes. Not the greatest time for #FloridaLife, but it’s the risk we take.
GoldmanSachs September CPI
Goldman Sachs: What We Expect From the US DJIA September CPI Report on Thursday
Goldman Sachs anticipates a modest increase in the US September CPI, forecasting a 0.28% rise in core CPI, reflecting ongoing price pressures in specific categories while expecting a slight decline in energy costs.
Key Points:
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Core CPI Forecast:
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Goldman Sachs predicts a core CPI increase of 0.28%, surpassing the consensus estimate of 0.20%. This rise is attributed to:
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Used Car Prices: Expected to increase by 1.0%.
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Airfares: Anticipated to rise by 0.5% due to residual seasonality effects.
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Car Insurance: Forecasted to rise by 0.7%.
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There is expected moderation in shelter components, with Owner’s Equivalent Rent (OER) projected to rise by 0.35% and primary rent by 0.31%.
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Headline CPI Forecast:
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A 0.10% increase in headline CPI is expected, driven by:
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Food Prices: Anticipated to rise by 0.2%.
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Energy Prices: Forecasted to decline by 2.1%.
Year-over-Year Rates:
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The forecasts imply a year-over-year rate of 3.16% for core CPI and 2.27% for headline CPI.
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Implications for Core PCE:
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Goldman Sachs projects a 0.22% increase in core PCE for September, with updates to be provided following the CPI and PPI releases.
Conclusion:
Goldman Sachs’ expectations for the September CPI reflect continued inflationary pressures in certain sectors, particularly used cars and airfares, while signaling a potential easing in energy prices. These trends will be closely monitored as they may influence future monetary policy decisions by the Federal Reserve.
MiM and Daily Recap
The ES made a 5780.75 low and a 5806.75 high on Globex, opening Wednesday’s hurricane-filled trading session at 5799.25 with 132k ES contracts traded. After the open, the ES traded up to 5805.25, then sold off to the low of the day at 5793.75 before rallying 46.25 points up to 5840.00 at 11:57. It then sold off 12.75 points to 5827.25 at 12:21, rallied to 5834.50, and sold off 10 points down to 5824.50. After that, it rallied up to 5835.50 at 1:33, sold off 16.75 points down to 5818.75 at 1:54, rallied again to 5834.50 at 2:33, and then sold off 8.25 points at 2:08, dropping further to 5826.25 at 3:06. It popped up to 5844.50 before selling off to 5837.50 at 3:45 and traded at 5839.50 as the 3:50 imbalance showed $153 million to buy, eventually trading at 5841.00 on the 4:00 cash close. After 4:00, the ES dropped to 5796.75 and settled at 5841.25, up 40.75 points or +0.70%. 0.81%. In the end, when the Magnificent 7 go up, so does the stock market. In terms of the ES’s overall tone, it was firm. In terms of the ES’s overall trade, volume was low, with 132k ES contracts traded on Globex and 968k during the day session, for a total of 1.1 million contracts traded.
Technical Edge
Daily Market Recap 📊
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NYSE Breadth: 62% Upside Volume
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Nasdaq Breadth: 55% Upside Volume
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Total Breadth: 59% Upside Volume
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NYSE Advance/Decline: 55% Advance
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Nasdaq Advance/Decline: 50% Advance
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Total Advance/Decline: 52% Advance
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NYSE New Highs/New Lows: 163 / 28
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Nasdaq New Highs/New Lows: 190 / 149
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NYSE TRIN: 0.73
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Nasdaq TRIN: 0.83
Weekly Market Recap 📈
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NYSE Breadth: 52% Upside Volume
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Nasdaq Breadth: 56% Upside Volume
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Total Breadth: 54% Upside Volume
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NYSE Advance/Decline: 43% Advance
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Nasdaq Advance/Decline: 40% Advance
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Total Advance/Decline: 41% Advance
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NYSE New Highs/New Lows: 453 / 62
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Nasdaq New Highs/New Lows: 404 / 311
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NYSE TRIN: 1.10 (calculated from weekly data)
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Nasdaq TRIN: 0.78 (calculated from weekly data)
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VIX: ~20.75 (down)
Guest Posts:
Jeff Hersch – Stock Trader’s Almanac
Election-Year Octoberphobia Hangs Over
From one October day to the next, the market seems unable to decide which direction to take. Historically, election-year Octobers have been particularly challenging, ranking as the worst month of the year since 1950. However, in the past 21 years, October has been fair—ranking #4 for the DJIA, S&P 500, and NASDAQ, #5 for the Russell 1000, and #6 for the Russell 2000. Yet, October also carries a history of major market declines, contributing to the phenomenon known as “Octoberphobia.”
As of the 10/8 close, the DJIA, S&P 500, NASDAQ, and Russell 2000 are all still in the red for October, seemingly following the typical election-year seasonal pattern. The Russell 2000 is struggling the most, down 1.57% as of today, while the NASDAQ is faring better, down just 0.03%. The S&P 500 and DJIA are off by 0.20% and 0.59%, respectively. If the market continues to follow the patterns of past election years, more sideways movement is likely as we head into mid-month. A more decisive move lower in the latter half of the month, ahead of Election Day, remains a possibility.
Geopolitical tensions are high, with Israel’s response to Iran’s recent missile attack still pending. Last Friday’s better-than-expected jobs report pushed the 10-year Treasury yield back above 4%, effectively dampening expectations of another significant Fed rate cut. Inflation data later this week, with the CPI on Thursday and PPI on Friday, remains crucial, but unless there’s a significant surprise, it may not move the market much given the solid employment numbers.
ES – S&P 500 Futures – Daily
Last Week
Today
NQ – Nasdaq 100 Futures – Daily
Last Week
Today
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!
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