CPI Data Is On Tap
Can we break out of the trading range?
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Our View
There is always a reason for the stock market selling off and yesterday it was the US government debt ceiling negotiations. Today’s market-moving news will be the Consumer Price Index (CPI) and tomorrow’s will likely be the PPI report, then on Friday is the weekly options expiration.
As we all know, today’s release is one of the most market-moving economic indicators and I believe that a good share of the weakness over the last two days is related to this morning’s release. The big question is, will it be enough to break the current buy-the-dip mentality?
I highly doubt that, but it could provide both buyers and sellers some new trading opportunities.
“Our estimates suggest core inflation experienced a short-lived pick-up in April, with no further acceleration beyond. We forecast core CPI increased by 0.38% (vs. 0.3% consensus), matching the March pace, while strong energy prices should lift headline CPI inflation (0.46% vs. 0.4% consensus).”
Our Lean
The ES is nearing the 50% retracement (4113) from Friday’s high to last week’s low. Should the ES break the 4100 level, we could see a retest of the recent low (near 4062).
On the upside, I have yesterday’s high at 4142.50 and the recent high around 4163 marked on my charts. Above those levels and I’m looking at the 4175 to 4180 zone, then 4205 and 4220 as more stiff resistance.
Our lean is to wait until after the number to get a better feel, but as I said, I doubt today’s CPI number will reverse the current trend/trading range.
MiM and Daily Recap
The ES traded down 4134 on Globex and opened Monday’s regular session at 4135.50. From there, it sold down to 4131 and took out the Globex low, popped up 4143 at 10:00, pulled back to a higher low of 4133 at 10:10, then rallied to a lower high of 4142 at 11:15. The ES fell into a “lazy” trading range, slowly pulling back to the 4133 area around noon and trading in a tight range for almost an hour.
Just after 1:45, it traded 4136.50 then popped up to 4145.25, pulled back to 4143 at 2:45, then dropped to 4135 five minutes later. That’s when the ES entered a low-volume downtrend. It traded 4137.50 at 3:50 as the cash imbalance showed $123 million to buy, dropped to 4132.50, then traded 4134.50 at 4:00. The ES settled at 4135.25 on the 5:00 futures close, down 18 points or 0.45% on the day.
In the end, it was another low-volume snoozer ahead of today’s CPI print. In terms of the ES’s overall tone, neither side could gain momentum, although 4133 held as support most of the day. In terms of the ES’s overall trade, volume was painfully low at 966K contracts.
Technical Edge
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NYSE Breadth: 45% Upside Volume
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Advance/Decline: 39% Advance
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VIX: ~$18
A couple of anemic sessions when it comes to volume. It seems like everyone’s waiting for the CPI number to decide what to do next. Hot numbers and traders will know the Fed is in a tough spot. Soft numbers and maybe the “Fed is done raising” chorus gains some momentum.
S&P 500 — ES
There are levels in between (of course) but if we get the typical wide-range CPI reaction, it’s good to know the outer edges of the recent range.
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Pivot: 4163
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Upside Levels: 4175-80, 4198-4206, 4242
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Downside levels: 4100, 4075-80, 4063
SPY
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Upside Levels: $414-16, $417.50 to $418.30
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Downside Levels: $407 to $408, $403 to $404
SPX
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Key Pivot: 4150
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Upside Levels: 4165-70, 4187, 4200
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Downside Levels: 4085, 4050
QQQ
No changes.
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Pivots: $323.50, $321.30
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Upside Levels: $325, $328-29, $331.50
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Downside Levels: $321, $318.50, $315 to $316
NQ
Still stuck between 12,950 and 13,300. Can CPI break it out?
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Upside Levels,370, 13,450, 13,500
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Downside Levels: 13,140, 13,080, 13,000, 12,950, 12,900
Guest Post
Topic: PTG Taylor 3 Day Cycle
Prior Session was Cycle Day 1 (CD1): Normal Cycle Day 1 as price declined establishing a new low at 4131.00 on exceptionally narrow range and light volume, as traders await the all-important CPI print. Prior range was 22 handles on 965k contracts exchanged.
…Transition from Cycle Day 1 to Cycle Day 2
This leads us into Cycle Day 2 (CD2): Big event for today is the CPI Print @ 8:30. Market’s reaction should set the tone for the next directional move. As such, scenarios to consider for today’s trading.
Bull Scenario: Price sustains a bid above 4145, initially targets 4155 – 4160 zone.
Bear Scenario: Price sustains an offer below 4130, initially targets 4115 – 4110 zone.
PVA High Edge = 4140 PVA Low Edge = 4133 Prior POC = 4137
*****The 3 Day Cycle has a 91% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.
For more detailed information for both bullish and bearish projected targets, please visit: PTG 3 Day Cycle and/or reference the Cycle Spreadsheet below:
Link to access full Cycle Spreadsheet > > Cycle Day 2 (CD2)
Thanks for read
PTGDavid
Open Positions
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Bold are the trades with recent updates.
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Italics show means the trade is closed.
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Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be B/E or better stops.)
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** = previous trade setup we are stalking.
Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B
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META — We did actually get the daily-up, but no 15-min close above. I debated making that note in there, but didn’t. Let’s see if META can hold $229 to $230 today.
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First target, $237-39. Down to ½ or less at $240+
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CRM — Closed above $200. Ideally, $207 to $208 is the first target zone. Conservative bulls can stop out below $195. Aggressive buyers may use $188 to $190 as their stop-out.
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** CMG — watch for a test of ~$2,000 and a tag of the 10-day ema off of yesterday’s setups. If it triggers, half-sized position IMO.
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On the upside, $2030+ is the ideal first trim.
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** PEP — watch for setup on the 10-day. Otherwise, the higher R/R level is down around $186 to $187 and the 21-day.
Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders →
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MCD, PEP & KO, WMT, PG — XLP
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LLY
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NVDA, CRM
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MSFT, AAPL, META
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ULTA, LULU, CMG
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GE
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HCA
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DKS
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WYNN
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MELI
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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