CPI 3/10 '22
Run for the cover!
Tomorrow is the first of the key event risks followed by FOMC and the OPEX next week. These events have a way of getting resolved on their own. We can all speculate what will happen, however at end of the day market will go where it wants to go.
I was on the fence about sending a plan at all today as it is very highly likely the levels will not mean much tomorrow as the market gets into price discovery mode with a blatant disregard for any technical analysis.
But I will use this chance to share some personal thoughts and my own bias, FWIW.
I think you are probably looking at a ultra wide range tomorrow which will stop out folks on short end as well as the long side before deciding next steady move which may well be to the upside (I think 4500).
Internet, predictably is very bearish. Their main bear case is following:
Extreme inflation. They are saying CPI may be 8%. I agree. CPI could be as high as 8% if not more.
Wage stagnation: wages not catching up fast enough and will lead to recession. Yes that is a risk but so far we are not in recession. I think we are very far from recession (may be 2 quarters out).
End of QE: today marked end of historic FED QE. Though how long it lasts is any one’s guess. I think we start getting more stimmy very soon. The politicians will find a reason.
Ultra low volume: yes volume was very low today which is normal headed into an event of this magnitude.
All of these are very bearish factors. But take them with a grain of salt because it matters where we are in terms of price structure. These factors are very bearish at 4800 whereas some of it, if not all, may be priced in at 4100.
I have my own factors which I feel are bullish. I have been sharing them over the weeks here on this newsletter. Rehashing some of them:
US Gas had a sharp move lower today. While trends take a lot to reverse this may be some sort of a beginning of the end to insane pain at the gas station. 8 dollar gas!
Ukraine Conflict: there seems to be some early signs that things may be headed back to the negotiation table and hopefully next couple of weeks mark an end to this bloody conflict. Both sides seem more open to talks and find some middle ground.
Look I can go on and give several arguments to support my side of the story because I want the market to go up, however it may matter little tomorrow as the market may be back in price discovery mode. And if this happens, all theories and hypothesis are not worth the weight of the paper they are written on.
Sometimes not doing anything is better than doing something.
For example, yesterday night everyone was quite bearish calling for capitulation and what not! My own plan called for sellers to emerge at 4234 (though I was quite lucky to recognize very early in the morning at 1 AM that was not to be the case, I shared that with the folks on Twitter at 4230 before that massive rally).
What ended up happening? We opened in Asia at 4150 and closed almost 150 handles higher in the US.
If you had done nothing yesterday and actually were bullish today at 4234 per my plan scenario # 2, you did quite ok today. What was low of the session? 4233. High of day? Almost 4300!
My point is once we get the confirmation on the tape, there will be enough opportunities during the cash session. There is really no need to speculate and sweat over levels which will be naught in less than 8-9 hours anyways.
Make sure you are on my Telegram and Twitter to get my tweets as soon as the updates are posted.
Here is my Link to the trade plan and that beauty that 4234 was today! I also reiterated this with my LIS in tweet at market open.
With this context and background, my plan is to wait for the CPI print to hit the wires and observe market orderflow may be during the first hour or even two before making that first move. I may send a follow up post in Substack around 6 AM with some levels, so keep an eye on your inbox, check your SPAM.
Before signing off, I do want to share some thoughts though:
I think whatever the CPI number is, market may get bought if it dips into 4224/4234 range. If this breaks, then next support comes in at 4160-4187 range.
On the upside, there is minor resistance at 4327, I do not see much resistance above it until 4425. These are intraday trading levels however I have no change in bias as far as Investor Tic is concerned.
Which means GOOG looks poised for a move higher, MSFT and AMZN, TSLA etc all look great to me.
ES traded 4271 at time of this blog.
Chart B: NQ fell a little short of 13800 today, but I think once/IF it close back above 14238, it is going to make a large move towards 15000 again. Now 13750.
To summarize, I like to wait for a confirmation, especially after a low volume day like today. If that means sitting on my hands for a day or two, then so be it.
In general I feel we have seen the highs in Gas or are very close to seeing one, though 108 is a good support and may not give up without a fight. I feel this may be the peak CPI when it comes to the Energy component of it. My take is also that the FED will try (pretend) to fight this inflation but will not be able to do anything about it.
This will fuel some of my favorite names like GOOG and MSFT to new highs IMO. BTW these are up massive from the levels I shared. One is up almost 150 handles the other about 20. Many other wins, like AMZN going from 2700 to that 3100 post split.
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I'm done looking at TRIN. It's become far too complicated of an indicator. Thanks for the warning though!
Could you please give us an orderflow update on BABA 😘