Equity markets have rallied this week, this is what we are looking for across the E-mini S&P, E-mini NQ, and E-mini Russell post CPI
E-mini S&P (September) / E-mini NQ (September)
S&P, yesterday’s close: Settled 5459.00, up 89.25
NQ, yesterday’s close: Settled at 19,137.50, up 464.75
Tuesday was a banner day, the PPI report showed slower inflation than expected and big tech led indices higher. Now, the July CPI report is due at 7:30 am CT, but there are two predominant themes traders must key into that I’ve discussed in each of my videos; volume on the rally and potential front-running of CPI. Although yesterday’s volume was an improvement, it certainly was not anything to write home about, and this will leave both the E-mini S&P and E-mini NQ vulnerable to overhead technical supply, which I will discuss in a moment. Also, with a better than 50% probability the Fed will cut rates by 50bps at its September meeting, we must ask ourselves if markets are beginning to be offside. We believe the Treasury market does have an additional bid due to geopolitical concerns, but there is no doubt that pricing in a 50bps cut could be a bit overzealous. Additionally, the recent Nonfarm Payroll report was not as awful as it seemed due to some idiosyncratic conditions, and yesterday’s PPI report was brought down by Auto Wholesales and Machinery. In one scenario, coupled with yesterday’s move, this tells us a light CPI could be priced into the E-mini S&P and E-mini NQ. We could also see a similar reaction to the June CPI report, where tech ended up softening, and it was the Russell 2000 and small caps that became the beneficiary. Regardless, it will be critical to see how the internal reaction to the report settles out and what opportunities arise.
The E-mini NQ cleared major three-star resistance, aligning with a gap from the August 1st settlement, but the E-mini S&P still faces this task. Furthermore, the 21-day moving average looms as a resistance market as both indices attempt to chew through the heavy selling on that August 1st reversal day post-Fed.
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