All Eyes Are on the CPI

Here are the levels to know now.

I want to keep this short and simple and have the Game Plan in your hands well before the CPI reading at 8:30 a.m.

The CPI report is going to be the market-driver today. The PPI (released yesterday) has two readings: PPI and Core PPI. Core came in in-line (at 0.3% vs. 0.3% exp.) while PPI came in hotter (at 0.4% vs. 0.2% exp.)

I don’t know if that kills the likelihood of a cooler-than-expected CPI print, but it doesn’t seem to bode well. Everyone is talking about the CPI report, as expected. But they are talking about it because if there’s any hope that the Fed will pivot, it will be on a lower-than-expected inflation print.

I just don’t know if a cooler print is coming, and if it does, I don’t think it will be significantly cooler. The PPI just showed that there wasn’t a drastic dip in inflation. 

I don’t think the Fed will pivot, either. At least not based on this particular CPI print. And if the print is hot, then you know what? The Fed definitely isn’t slowing down on the rate hikes. 

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I don’t know — I’m no economist, I just follow price. But this is what it seems like to me.

That said, it’s going to be an algo run regardless. Hot numbers and they’ll tank it. Cool numbers and they’ll likely rip it. 

Technical Edge — 

• NYSE Breadth: 46% Upside Volume

• Advance/Decline: 38% Advance

• VIX: ~$33.50

Game Plan: S&P, Nasdaq, Bonds

This market seems tired of going down, but just doesn’t have the buying power to give us more than just a few dead-cat bouncing of varying strength. 

I know the CPI report is important, but it seems like the Fed is going to do what it’s going to do regardless of tomorrow’s print. 

S&P 500 — ES 

The move to the downside has certainly decelerated over the last few sessions. The problem? Bulls just can’t seem to gain any momentum to the upside, while it keeps “deliberately” closing below the June low. 

From here, the 3570 to 3580 level remains key. The morning dip to this level held firm and bounced hard. That was the only good trade of the day. 

Tomorrow, this level is either going to break on a bearish reaction to the CPI print or we’re going to rally. 

If the ES breaks 3570 to 3580, there are two paths to watch: Does this zone become resistance or is it reclaimed? If it’s resistance, 3520 to 3500 (or lower) is in play. 

On the upside, 3640 is the first level to watch, along with the declining 10-day ema. Above that and the 3700 to 3725 area is in play, along with the 21-day. 

SPY