Back to back rallies left multiple anomalies, poor structure in the prior two regular session daily market profile charts. Early volatility saw price trade back into the prior day’supper distribution after a gap opening higher.
Long, stretched out profiles with multiple anomalies are often at least partially repaired soon after. Thursday’s volatile trading left more anomalies of it’s own.
The late pullback low at 2719.50 could be an early short term trading reference on Friday; acceptance above that level keeps the bullish sentiment intact, while failure to find acceptance above that level could see price repair some of the anomalies from the poor structure below.
The prior recovery high from 2/7 at 2726.75 could also be a level to keep an eye on, depending on where price opens.Trading below that level probably leaves good odds of testing the lower reference.
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Wednesday morning is the release of the US CPI data, which could bring more volatility. A higher number could pressure stocks, a lower number could boost stocks.
Early focus could be on price acceptance in regards to each distribution from Tuesday’s profile, with potential balance trading scenarios applying:
Look above or below a distribution and either find acceptance and developing value at the higher or lower prices, or look above or below a distribution and fail, returning back into that balance and targeting the opposite end.
With the recent market volatility, eemaining within a distribution for a considerable period probably has the lowest odds. Tuesday was also an inside day, a large move away from either side of the range is possible.
Tomorrow at 8:30 AM ET/1330, the US CPI will be released. With all the focus on inflation since the US employment report, this will be a key release for rates, stocks and the dollar as well. If it moderates, it could go a long way toward easing fears about the inflation scare, 3 or 4 tightenings in 2018 and the stock market concerns. Conversely, if it surprises to the upside, the higher yields, lower stocks and 4 tightenings will be back in play.
The expectations are the following:
CPI MoM 0.3% vs 0.2% last month
Core CPI MoM 0.2% vs 0.2% last month
YoY for CPI is expected to decline to 1.9% from 2.1% last month
YoY core is also expected to decline to 1.7% from 1.8% last month.
Recent History Of This Indicator
Inflation may be under new scrutiny but one place it has been hard to find is in consumer prices. And not much price traction is expected to appear in January’s report with the core rate (less food & energy) seen up a modest 0.2 percent with the year-on-year expected to fall 1 tenth to 1.7 percent. The consensus for the headline CPI is a gain of 0.3 percent for a yearly rate that is also down 1 tenth, at 2.0 percent. ~