How to trade "Inflation Week" 📈 - Thursday Brief

Morning traders!

Thursday report coming in hot this week.

With CPI posting today & PPI tomorrow, let’s cut to the chase and dive right into it.

Before that though, we released our Substack referral rewards this week.

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Impact Snapshot

• Key Earnings:   

• CPI shows first monthly uptick in U.S. annual inflation rate since June 2022

• U.S. initial unemployment claims rose in late July

Market Evaluation

Overall US CPI moved up to 3.2% in July from 3.0% in June, ending the streak of 12 consecutive declines in the YoY rate of inflation.

US Core CPI (ex-Food/Energy) moved down to 4.7% YoY, the lowest reading since October 2021.

Markets rose after inflation data reinforced speculation the Federal Reserve will pause its interest-rate hikes in September.

The S&P500 halted a two-day decline. Gains were led by the megacap tech space, which sold off in the previous session.

Treasury two-year yields, which are more sensitive to imminent policy moves, dropped two basis points to around 4.8%.

The dollar fell against most of its developed-market peers. Fed swaps priced in slightly lower odds of another rate increase this year.

The core consumer price index, which excludes often-volatile food and energy costs, rose 0.2% for a second month.

That marked the smallest back-to-back gains in more than two years.

Meantime, weekly jobless claims rose to 248,000 and topped estimates.

On the Asian front, Japan's Nikkei share average ended higher on strong corporate earnings.

Meanwhile, Chinese and Hong Kong shares closed higher after China lifted a ban on foreign group tours, which boosted airline and travel-related stocks.

As we’ve mentioned on the previous newsletter the markets were anticipating the “catalyst” for the next directional move and it has gotten exactly that.

Since the CPI release, markets broke out, ES made the first new higher high of the week. Tomorrow, eyes on the PPI inflation & Consumer Sentiment reports as they will show the bigger picture and is likely gonna bring another volatile session in play to close the week.

Markets Breakdown

Wednesday’s session offered a re-test of the lower side of the distribution in anticipation of the CPI release of today.

Volatility was present as bears took the prices to the downside target we’ve posted on Twitter here at 4478, a new monthly low.

Which managed to stop the selling pressure at the exact level and bounce off to hit the next upside targets we’ve had written on our ON session report.

As we’ve written on Twitter here, the 4493 level got weakened which on it’s way down once it was broken on Tuesday.

Price found no trouble to pierce thru and use it as resistance on the few attempts to range above.

Once a major support gets broken like that, it will always weaken it on the next re-test, indicating price tried to range bellow it.

Holding above 4493 and using it as support targeted 4518 which triggered a selling aggression that got the price to a downside level of 4483.

In today’s session for ES, price ranged on our key pivot before the release of CPI and made a a move to hit the 4523 zone then pulled back to 4493 area.

That was the precise move we were anticipating, a shift volatile candle to move on both directions hitting the levels and retracing back until it finds, again it’s fair value.

The bullish scenario we were looking since the ON session played out as NY session opened at the pivot then took out both 4523/4534. Read the Twitter post here.

For the rest of the day going into tomorrow we would look at the pullback zones to be re-tested as well as the next zones where price is likely to face resistance on the upside continuation.

ES

The targets we look for until NY close & Targets to pay attention Tomorrow:

• Main pivot: 4520

• Upside Levels: 4550/4570/4591

• Downside Levels: 4509/4493/4481

That’s all we got for you.

We’ll see you for our Sunday report. Have a great weekend!

-The QuantVue Team

Disclaimer: Futures and options trading carries a significant level of risk and may lead to substantial financial losses. The content provided in this newsletter is solely for informational purposes and should not be construed as a trade recommendation or financial advice. It is essential for readers to independently assess and make their own investment decisions, taking into consideration their personal financial situation and risk tolerance.