E-mini S&P (December) / E-mini NQ (December)
S&P, yesterday’s close: Settled at 6013.00, down 18.75
NQ, yesterday’s close: Settled at 21,189.50, down 28.25
Right as traders may have caught their breath after the post-election ripper and Thursday’s Fed rate cut, here comes CPI. Yes, inflation data certainly does not have the impact on markets that it has had over the last two and a half years, but today’s report should not be taken lightly. A hotter than expected number is likely to deter the Fed from cutting another 25bps in December. According to the CME FedWatch Tool, there is currently only a 62% probability that they do. However, there is an overwhelming perception the Trump White House will stoke growth, in contrast to recent recessionary fears.
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Is a steady dose of rate cuts necessary for the market to rally in 2025? There is a 45% probability the Fed cuts 50bps across its next three meetings through March, down from 61% a week ago. On the other hand, Core PCE, the Federal Reserve’s preferred inflation indicator has been below 3% for an entire year. In fact, the Fed does not want to see inflation below its 2% target and will lean on its symmetric inflation targeting goal to allow it to run above 2% for an equal period in which it was below 2% during the prior decade.
Estimates for today’s October report are Core CPI +0.3% m/m and +3.3% y/y, flat from September, and for headline +0.2% m/m and +2.6% y/y, up from 2.4% in September.
E-mini S&P and E-mini NQ futures have peeled back slightly, and further would be healthy. Given the stall at higher prices through the first two sessions of the week, overhead resistance has been established and adjusted in our levels below. A knee jerk lower midday yesterday was quickly defended against our key 5985 support in the E-mini S&P and 21,086-21,098 in the E-mini NQ, which have also been adjusted slightly. However, we see these only as key supports, and the tape will be left heavy upon continued price action below our Pivot and point of balance at…
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