(Free) CPI Print in Focus. How Long Can the Rally Last?

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Our View

Was yesterday's rally a front for today's CPI number? It sure looked like it was! After a small early dip, it was a relentless non-stop buy program. Most days when you see moves like that, you will see a few 10-point pullbacks, but with the exception of the long back-and-fill, it was straight up.

More recently, the MrTopStep Imbalance Meter (MIM) has favored the long side (while yesterday’s $2.95B to buy helped quite a bit). The aggressiveness of putting that much money to work must be tied to something. Today it's the CPI number and tomorrow is the Fed rate decision.

In all honesty, I don't know what to expect out of today's CPI print, but what I do know — good or bad — is the fireworks start today.

Our Lean

MiM and Daily Recap

The ES traded up to 4367 on Globex and traded 4358.25 on Monday’s 9:30 futures open. After the open, the ES dropped down to 4351.75, did a MrTopStep 10 handle rule up to 4361.75 at 9:40 and for the next hour traded in a 5-point range until the futures traded down to a new low at 4351.25 at 9:43. However, it remained in the range until the ES finally 'popped' up to the 4361.75 level at 11:48, pulled back to the VWAP at 4357.50 and then made four separate new highs at 4362 at 11:48, 4365.75 at 1:08, 4368.50 at 2:21 and 4369.75 at 2:38.

From there, it continued higher, hitting 4378.25 at 2:06 and then pushed up to 4387.25 at 3:16. The ES pulled back to the 4380 level at 3:29 and rallied up to a new high at 4388.25 at 3:45, dipped a little and traded 4386 as the 3:50 cash imbalance showed almost $3 billion to buy. The ES traded 4386.50 on the 4:00 cash close and after 4:00 the ES continued higher, settling at 4391 on the 5:00 futures close, up 39 points or 0.90% on the day.

In the end, like I said in the MrTopStep chat, I thought the ES and NQ closed OK Friday but I didn't expect them to be up this much on Monday. In terms of the ES's overall tone, it was firm but the NQ was firmer. In terms of the ES's overall trade, volume was still high at more than 2 million contracts as quarterly opex is just a few days away and as we roll contracts to September.

Technical Edge

• NYSE Breadth: 61% Upside Volume

• Advance/Decline: 52% Advance

• VIX: ~$15

Yesterday’s push in the Nasdaq let us bail on the remainder of our QQQ swing from last week. Now we await the CPI results.

SPY