PPI came in lower on the headline number and lower on the Core. This confirmed the CPI reading was not a one of.
SPY rocketed up to 425 and got us in a way over extended and we pulled back to under 420 near the close.
We are still at major resistance on the QQQ and SPY. This rally looks to be topping.
What to Expect on Friday?
We have UoM data at 10am. The last few weeks when this data was released, it has cause a positive pop in the market. I expect the same thing to happen today.
We have to keep an eye on 2 things, DXY and Oil. If the DXY goes up, that normally means commodities go down. If commodities go down, that helps keep inflation under control. If the DXY starts to drop, Oil will go higher and that will push us to a higher inflation reading in the future. But... DXY going up also does not help equities, so the DXY is going to be the key for me going forward.
Current Positions and Plays:
I have some SPX calls as I think we have about 2% left on this rally. I grabbed it near the 421 level on average.
What Do I Think?
SPY Technicals - We are neutral on the 30 min, 1 hour, and almost overbought on the 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 still 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 (Repeat)?
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 FRIDAY for SPY:
Scenario 1: We open up flat (+/- 1 or 2 points) - Sit back and wait for the 10am UoM data and see if we get above 327 on the QQQ. If we go up, grab calls. If it goes down, grab puts. We are at an inflection point but we will not have any major moves in this market. So you can scalp very small moves, but it also is a little safer to hold as we do not have any events to trigger larger moves.
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.