The Fed Wants a Rate Cut

…and they’re going to get it.

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I’m sorry, I tried to get a market update out earlier about the buy program, but everyone was busy. That is no excuse for messing this up more and on top of it…shorting it. What killed me was when the PPI rose less than expected. 

This was another case of front-running the number and a great example of not fighting the Fed. 

Powell & Co. want that rate cut, and hell or high water, they are going to get one — if not more. The CME Fed funds show a 55% chance of a 0.50% cut in September as traders speculate between 1 or 2 cuts — not zero cuts. This will be a huge ‘sell the news’ event, in my opinion. 

MiM and Daily Recap

The ES traded up to 5409.00 and opened Tuesday’s regular session at 5404.50. After the open, the ES traded 5401.75 and wasted no time running up to 9:52 a.m., making a new low by 1 tick at 5401.50 at 10:34, and then rallied up to 5431.50 at 11:52. It dipped to 5425.75 and rallied up to 5440.50 at 12:22, pulled back to 5431.25, and then pulled back to 5425.75 before rallying again to 5440.50. It pulled back to 5431.25 and then pushed up to 5450.25 at 12:52. 

After the high, the ES traded down to 5444.00, rallied up to a lower high at 5448.75, dropped down to 5433.25 at 1:48, rallied up to 5449.25, pulled back to 5441.25, and then rallied to a new high of 5455.75 at 3:06. It pulled back to 5445.00, rallied up to 5452.00 at 3:32, pulled back to 5448.00 at 3:40, and then rallied up to 5459.75, trading 5458.50 as the 3:50 cash imbalance showed $670 million to sell. 

It pulled back to 5459.75 at 3:52, rallied and traded at 5461.25, and traded 5458.50 on the 4:00 cash close. After 4:00, the ES sold off to 5454.00 at 4:01, rallied to 5459.25 at 4:07, and sold off to 5453.75 at 4:30, settling at 5455.50, up 87.75 points or +1.63%. The NQ settled at 19,099.25, up 469 points or +2.52%. Crude oil fell to 78.66, down 1.40 or -1.75%. The 10-year note (ZNU4) settled at 113’220, up 0.145 points or +0.40%. Gold (GCZ4) settled at 2,504.90, up 0.90 points or +0.04%. Bitcoin (BTCU4) settled at 61,380, up 2,685 points or +3.82% on the day.

In the end, it was a massive tech buy program that lasted all day and took no prisoners. In terms of the ES and NQ’s overall tone, the biggest pullback in the ES was 14.5 points. In terms of the ES’s overall trade, volume was extremely low for the size of the move up: 1.199 million contracts traded on the day.

Technical Edge

Guest Post — Polaris Trading Group 

Author: David D Dube’ (a.k.a. PTGDavid)

Prior Session was Cycle Day 1: Opening Gap higher set this cycle day bullish up trend in-motion, settling nears highs of the day, fulfilling all CD1 projected targets. Bulls returned in a big way recovering lost ground from last week’s dramatic sell-down. Enthusiasm for tomorrow’s CPI print reverberated throughout the market’s today. Range was 93 handles on 1.197M contracts exchanged.

 …Transition from Cycle Day 1 to Cycle Day 2 

This leads us into Cycle Day 2: Market’s are on the “risk-on” offensive leading into today’s CPI print. It better not disappoint! Cycle Targets have already been achieved during the prior session, so we’ll enter today with a bit of caution, as potential for high volatility spike in either direction remains elevated. As such, we’ll defer to Mr. Market to be our guide for this session.

Know Thy Plan! Our discipline of maintaining positioning that is aligned with market forces continues to serve us well, so stay the course.

As such, scenarios to consider for today’s trading.

Bull Scenario: Price sustains a bid above 5445, initially targets 5490 – 5505 zone. 

Bear Scenario: Price sustains an offer below 5445, initially targets 5430 – 5425 zone.

PVA High Edge = 5461      PVA Low Edge = 5413         Prior POC = 5445

*****The 3 Day Cycle has a 90% probability of fulfilling Positive Cycle Statistics covering 12 years of recorded tracking history.  

Thanks for reading…PTGDavid

Economic Calendar

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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!