CPI came in lower on the headline number and lower vs expectations on the Core. Market rocketed up to over 418 at the open.
The very interesting thing here is that we not only moved so much in premarket but we held it all day long and closed near 420. That is a very bullish sign.
We are at major resistance on the QQQ, so we will look more into that in the technical analysis section below.
What to Expect on Tuesday?
We have PPI in the morning. This could pour some cold water on the bullish move we got today, but I am not seeing it as a major indicator honestly.
Current Positions and Plays:
I am all cash heading into tomorrow. Just waiting on confirmation on whether we break above this QQQ resistance.
What Do I Think?
SPY Technicals - We are just outside of overbought on all the major charts, 30 min, 1 hour, 4 hour and on the Daily.
SPY Fibs for ATH to 2022 low - 421 is the .50 and 435 is the .618.
SPY Fibs for COVID low to ATH - 418 is the .236. I hated every second of this @mcarter.
QQQ Technicals - We are just outside of overbought on all the major charts, 30 min, 1 hour, 4 hour and on the Daily.
QQQ Fibs for ATH to 2022 low - 339 is the .50 and 322.54 is the .382.
QQQ Fibs for COVID low to ATH - 315.59 is the .618. Looking at this as support.
WTF is Going On?
CPI has been released so where are we headed?
This is the billion dollar question. First we need to answer a few questions.
Why we moved up on a CPI reading that is still at 8.5%?
Two words sums up why we moved up, New Data. The market has the old data, the higher data and is going to react to updated data. And the inflation data came down, and more importantly the core came in flat from the previous month's number. Peak inflation narrative now has data to back it up. Fed's current rate hike plan now has data to back it up. So more importantly this puts ice on any emergency rate hikes or 100 BPS hikes in September.
Is that CPI Reading enough to move us up any further?
This was the big data release for this month. Inflation is the key thing the Fed is focused on controlling. So yes this CPI number offers optimism in the Fed's plan. So will it be enough to break over some technical resistance? That is what I am looking for. There is a lot of money on the sidelines, and does this start bringing that money back into the market. I think if SPY closes the week over 420, it is a big bullish win.
Ok, so what can bring us lower?
We will answer this question that no black swan events come in. We have the PPI tomorrow morning and that can pour some cold water on the market, but it is not a major data release. The next major landmine is looking like the statement out of the Jackson Hole Symposium from JPow at the end of this month on the week of the 22nd. Then we have PCE data afterwards. Bears only have technical resistances now to hang their hat on. We are overextended on the charts and it is ripe for a major pullback. But until that starts, don't guess on it. I lost $10k guessing it for the last two weeks.
So what is your plan?
I am watching QQQ like a hawk. If we break above 327, then I am going to play calls up to 335. When we hit that mark I will start to build a long term short position since the VIX will be low. This market will cool off and face reality that the bear market is not over due to QT and more Fed tightening. I don't know when exactly it is coming down, so I will make sure to give myself enough time. If we start to reject heavy at 327 and can't break over it, then I will play the downside as the current resistance at 327 is valid.
THE PLAYS OF THE DAY for THURSDAY for SPY:
Scenario 1: If QQQ breaks 327, grab calls up until 338. This will take a few days, maybe even a few weeks. So I will grab longer dated expirations. I like playing the SPX here on the upside as it has other components to keep it propped up.
Scenario 2: If QQQ is rejected at 327. Grab calls for a short term scalp for a play to 323. Then see how it handles that level as that is key support.
NOTE: I am turning into a swing trader for various reasons, so please keep that in mind moving forward. My options plays will be always a few weeks out because of this.