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. ~
Inside day to begin the week following the latest all time high last Friday. It is the third inside day in the last five regular trading sessions, emphasizing the current low confidence trading environment. Monday’s profile repaired the anomalies in the previous regular session’s profile.
There are six ticks of excess above 2579.25 on the market profile chart below the all time high at 2580.75. Acceptance above Monday’s high at 2577.50 could test that excess and the possibility of another new all time high. Acceleration/acceptance below Monday’s low at 2565.50 targets last Friday’s low at 2563.25, with the prominent naked point of control from 10/26 at 2560.25 and the low at 2555.50 within striking distance.
The prior week closed as an outside week to the upside, trading below the previous week’s low and closing above its high,
which could be construed as positive for higher prices. However, Monday’s price action did not test the weekly and latest all time high, and with value and the point of control developing lower, instead left excess at the high.
President Trump is expected to announce his choice for new Federal Reserve Chairman on Thursday, November 2nd, which could bring severe volatility to world markets. The odds might favor more of a balancing market until then, barring of course any other new major news events before that, including any unexpected surprises about President Trump’s alleged collusion with Russia or his tax reform plan, or North Korea’s nuclear missile program.
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