Trading a Higher Open as S&P Clears 4000

It comes on better-than-expected inflation results

At 8:30 am ET, the PPI results confirmed what we saw from the CPI report last week: Inflation is under pressure.

As the Fed has made clear, it’s just one data point and we need several to confirm that inflation is truly in retreat. However, real-time inflation data points have already been suggesting it’s in retreat, while the Fed Funds futures are now pricing in a 50 bps hike in December rather than a 75 bps hike.

While it’s still a rate hike, the Fed is positioning to become less hawkish, which is driving the rally in equities and, IMO, giving portfolio managers the green light to make up some performance with just six weeks left in the year.

With plenty of Fed speakers this week, it would not surprise me if they tried to jawbone the market lower — talking the talk with hopes of not having to walk the walk. That said, the Fed’s biggest fear is “not doing enough” in the fight against inflation.

And while all that’s fun to talk about with a cigar or a cocktail in the evening, let’s drill down on price ahead of today’s action.

Technical Edge — 

• NYSE Breadth: 31% Upside Volume 

• Advance/Decline: 29% Advance 

• VIX: ~$23.50

I am still watching the CAH setup, as well as the setup in the US dollar from yesterday. 

The market gave us a pause day yesterday, which was healthy. Now it’s rotating higher.

S&P 500 — ES 

I continue to like the idea of a dip back down to the 3900 to 3920 area — prior resistance — and a tag of the 10-day ema, but I’m not sure we will get it. 

A sustained move over 4020 gets us to 4075 where we find the 200-day sma. Along the way, if upside breadth is clocking above 80%, I am a buyer on the dips (on the 15-min and 30-min charts at/near the 10-ema). 

SPY — Daily