No one wants to think about it, but we all know the economy is in a state of flux. According to a Wall Street Journal poll, 60% of Americans are concerned about record downward job revisions, 63% are concerned about inflation, 67% are concerned about affordable health care, 61% are worried about housing affordability, and 57% are concerned about the national deficit. Plain and simple, there are “reasons to be concerned,” and these are just a few on the list.

I often wonder how the economic downturn is affecting people who were already having a hard time because I really don’t see lower prices anywhere, other than at the gas pump. Currently, the CME’s Fed Funds are showing a 93% probability of a September rate cut. Come hell or high water, Trump wants lower rates, and today’s CPI data will be a determining factor. Below are CPI estimates from JP Morgan and Goldman Sachs.

JP Morgan CPI
According to Fabio Bassi at JP Morgan, the “Fed put” is in full effect: “We expect moderate weakening in the macro data, but enough to trigger a prompt Fed response in September.” Historical experience indicates that the full impact of tariff pass-through still requires a 3- to 5-month lag. Therefore, the upcoming series of economic data is crucial for the September meeting’s decision. Among these, the July CPI to be released this Tuesday will clearly show the beginning of tariff-driven inflation, with the core CPI expected to accelerate from 0.23% to 0.32% year-over-year.

Goldman Sachs CPI
Goldman Sachs economists predict that the core Consumer Price Index (CPI) will rise by 0.34% in July, pushing the year-over-year rate to 3.1%. They also anticipate that the overall CPI will increase by 0.27%. These forecasts suggest that inflation, particularly driven by tariffs, is expected to continue rising.

In yesterday’s Our Lean, I explained the pattern the price action has been following when the ES opens higher—gap up, pullback, and then double pump—and that’s exactly what happened. The ES gapped higher, sold off a little, and then started to rally before reversing. This not only set up the price action for the day, it also led to the 3:50 imbalance, which came out $1.2 billion to sell and then pushed the market down to new lows. In terms of the overall tone, the ES made a 1-week high (mid-day), and the NQ made a new all-time contract high. In terms of the ES’s overall trade, volume was low at 1.038 million contracts traded.

Our Lean

Fed Governor Michelle Bowman said she supports an interest rate cut at the September FOMC meeting and favors three interest rate cuts this year. This looks exactly like it did around this time last year, when the Fed started calling for multiple rate cuts by the end of the year while inflation was rising. I want lower rates, and I hope today’s number helps ease my concerns. At yesterday’s 6431.50 high, the ES was only 37 points away from its 6468.50 all-time high.

Our lean: Maybe I’m wrong, but I think today’s CPI number could be a market mover. If inflation jumps higher than expected, the ES and NQ could drop like a rock—but for how long? If the ES gaps way up, it could go higher as all the headlines will be blasting away about more rate cuts. I still think the ES has good support at the 6375–6380 zone, and below that, I’m watching 6355, 6325, and 6311. On the upside: 6430, 6450, 6475–6480, and 6499. There’s going to be a big two-way trade, with the first part of the three parts of the day starting on Globex. I want to get a look at the price action, which I’m sure there will be a lot of.

ES – Levels

The bull/bear line for the ES is at 6403.75. This is the key pivot level for today and will determine directional bias. Above this level, bullish sentiment is favored, while sustained trade below keeps the bias bearish.

Currently, ES is trading at 6399.75, just below the bull/bear line, showing a slightly bearish lean in the pre-market. If price holds below 6403.75, expect potential downside moves toward the lower range target at 6359.50, followed by deeper support at 6318.25. A break below these could open the door to further weakness.

On the upside, resistance sits first at 6422.75 and then at the upper range target of 6447.75. A sustained break above 6403.75 and strength through these levels would shift momentum back to the bulls, with a possible test of 6488.75 if momentum accelerates.

Support levels to watch: 6387.50, 6359.50, 6318.25. Resistance levels to watch: 6422.75, 6447.75, 6488.75.

Overall, the market is in a neutral-to-bearish stance below 6403.75. Bulls need to reclaim and hold above this pivot for any significant upside follow-through. Our long-range model is still bullish.

NQ – Levels

The bull/bear line for the ES is at 23,661. This is the key pivot level for today. A move and hold above this line would favor bullish momentum, while remaining below keeps the bias bearish.

Currently, ES is trading at 23,638.75, which is below the bull/bear line, indicating weakness in the early session. If sellers maintain control, the next downside targets are 23,453, our lower range target, and then 23,257.25. A break below 23,257.25 could open the door to deeper declines.

On the upside, immediate resistance is at 23,677.5, followed by 23,764. The upper range target for today sits at 23,869. If buyers can reclaim 23,661 and push above 23,869, a move towards 24,064.75 becomes possible.

Overall, the intraday bias remains bearish below 23,661, with sellers in control unless bulls can reclaim and hold above this key pivot.

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