Last week was characterized by what we saw as slowing inflation on the August reports (both CPI and PPI). Many components within Wednesday’s CPI report continued their downward trajectory.
E-mini S&P (September) / E-mini NQ (September)
S&P, last week’s close: Settled at 5629.75, up 27.50 on Friday and 210.25 on the week
NQ, last week’s close: Settled at 19,530.25, up 83.00 on Friday and 1,072 on the week
It is Fed week, and the committee’s policy decision is Wednesday at 1:00 pm CT. According to the CME FedWatch Tool, derived from Fed Fund futures, they are expected to cut rates by 50bps with a 63% probability. This is up from a 50/50 coin flip Friday morning.
Last week was characterized by what we saw as slowing inflation on the August reports (both CPI and PPI). Many components within Wednesday’s CPI report continued their downward trajectory. However, Shelter accounts for 36% and rose to the highest level since April. Producer prices are a leading indicator of consumer prices, and Thursday’s PPI report was mixed at face value, but looking more granularly, it was clear that revisions for July created lower base comps and propped up August m/m reads. Ultimately, outside of CPI’s Shelter, one could become more fearful of recession-like demand which likely stoked the CME FedWatch probabilities.
With the Fed’s preferred inflation indicator, the Core PCE Index, below 3% since December, keeping rates at 5.25-5.50% is how you cause a recession.
Between now and the decision, we get NY Empire Statement Manufacturing today at 7:30 am CT. Retail Sales, Industrial Production, and updated Atlanta Fed GDPNow tomorrow.
The E-mini NQ has pulled back slightly from the overnight highs on news that Apple’s first weekend of pre-order sales for the iPhone 16 is slow, coming in at -12.7% y/y.
On Friday, we noted it was prudent to monetize the massive rebound to some degree at the least. From a purely technical perspective, both the E-mini S&P and E-mini NQ could spend a day or two digesting the recent run, maybe pulling back slightly, and this would be very healthy. As the opening bell gets underway today, weakness below our Pivot and point of balance at 5621-5627 in the E-mini S&P and 19,447-19,483 in the E-mini NQ will encourage a critical test of our first wave of major three-star support. This level comes in for the E-mini S&P at…
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