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CPI Report Doesn't Disappoint but Can Bulls Take Control?
CPI results were in-line or below expectations
Danny Riley
August 10, 2023
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Our View
I don’t think people read the Opening Print because they don't understand what's going on. This newsletter has never been about being the smartest; it's about applying street smarts.
I am not saying the markets won’t shake off the current sell off — eventually it will — but I think no matter how far it rallies it's all part of a big bear market dead-cat bounce. That doesn't mean the ES can’t trade up to 4900, but as the news piles up and the possibility of war continues, the index markets — not just in the US but all over the world — will be susceptible to further down drafts.
And if Putin uses a battlefield nuke in Ukraine, the Dow will drop 5,000 points. I know this may seem like a scare tactic, but there are a lot of loose cannons floating around and should one go off, I think it will be followed by more. Chaos tends to follow chaos.
At the end of the day, we all need to live our lives but we also should be preparing in case something does. What does that mean? That ones on you!
Long-time readers know that I’m a bull at heart. As I have always said, the S&P can make good news out of bad and can shake off a few headwinds at a time. However, let’s not pretend there aren’t concerns out there.
Our Lean — Danny’s Trade
This is Danny Riley’s personal trading plan for the day.
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MiM and Daily Recap
The ES traded up to 4536.25 on Globex early Wednesday morning and opened the regular session at 4519. After the open, the ES traded 4521.50, made a double bottom at 4509.25, traded up to a lower high at 4517 and sold off down to 4478.25 at 11:56. From there, it slowly traded back up to 4495.25 at 12:51, basically doing exactly what we said it would do. After a small dip, the ES rallied up to 4504.50 at 12:22.
The ES did a little back-and-fill just under the VWAP and at 2:33, it traded up to 4518, 39.75 points off the low and then sold all the way off down to the 4486.75 level as the 3:50 cash imbalance showed $3.9 billion to sell, traded down to 4483 at 3:58 and traded 4486.25 on the 4:00 cash close and settled at 4493.25, down 25.25 or 0.64% on the day.
In the end, the patterns remain the same: Rally late in the day, up-tick on Globex and sell off after the regular session open and make a low in the 11:00 to 12:00 time frame.... In terms of the ES’s overall tone, it remains weak. In terms of the ES’s overall trade, volume was HIGH with 186k ES trading on Globex and 1.39 million on the day session for a grand total of 1.58 million contracts traded.
Technical Edge
NYSE Breadth: 36.5% Upside Volume
Advance/Decline: 44% Advance
VIX: ~$15.75
The CPI report is going to drive a bulk of the early action today — and maybe all of the action. We have had a very controlled pullback thus far and despite falling in 6 of the first 7 sessions in August, it’s been a very mild correction from a percentage standpoint.
That’s as the S&P has suffered a peak-to-trough correction of just 3.15% so far.
If the CPI report dials up the selling pressure, we already know where to look for support (we’ll go over it again below). If it creates a bullish reaction, let’s see if it has the ability to “stick” the move and clear resistance. If it ends up being another rally to sell, then this correction is not likely over.
SPY
#KISS
Either look for a deeper test of the ~$442 to $443 area on the downside or a push to the $451 to $451.50 area on the upside.
A close back above the 10-day and 21-day moving averages (and thus $451.50) could open the door to $453, then $455.50 (gap fill).
SPY Daily
Upside Levels: $451 to $451.50, $453, $455.50
Downside Levels: ~$445, $442 to $443.50
S&P 500 — ES Futures
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Open Positions
Bold are the trades with recent updates.
Italics show means the trade is closed.
Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be break-even (B/E) or better stops.
** = previously mentioned trade setup we are stalking.
Economic Calendar
