inflation strikes back - recession confirmed?

What’s up traders. Back again with our Thursday market brief.

With some ugly inflation prints this week, is a recession on the horizon? Will the FED hike us into oblivion? Let’s break it all down…

Impact Snapshot

• U.S. initial jobless claims up 3,000 to 220,000 in latest week

• Producer price index increases 0.7% in August, above forecast

• European Central Bank raises interest rates by 25 basis points

• U.S. retail sales climb 0.6% in August, above forecast 

Market Evaluation

The last 2 days offered a series of market-generated information which will play a crucial role on the fundamental side of things for the market’s directional move ahead.

U.S. wholesale prices jumped 0.7% in August to mark the largest increase in 14 months, fueled by rising energy costs, in a sign inflation is likely to persist for a while.

Retail sales came in above economists’ expectations for the second month in a row. But while consumer spending seems robust on the surface, there are some signs shoppers are still under pressure.

The producer price index increased a seasonally adjusted 0.7% in August, higher than the 0.4% estimate and the biggest monthly gain since June 2022.

Markets Breakdown

Yesterday’s overnight session remained quite balanced in the early hours until the time of the CPI report approached.

We formed a range-bound balance between 4504 and 4518 which was our key area of resistance that bulls wanted to break out in order to find meaningful continuation above and explore higher prices.

At the time of the CPI report, the price bounced exactly at the 4518 target of interest and retraced to the downside on our pivot at 4501 which saw the aggression from the sellers momentarily stalling. 

This was the exact scenario we’ve pointed out with aggressive selling/buying on both directions on the exact time of release in a single candle

Despite the volatility, the price remained within the value area of the overnight session with the RTH open seeing an upside attempt that stalled and re-tested the overnight lows around our pivot area of 4500s

Price showed that it found acceptance on the range above the 4518 and a retracement back on the highs occurred on the late hours before NY close.The upside target of 4532 offered a great overnight target that we’ve mentioned on yesterday’s brief as the price saw several rejection in today’s overnight open.

Despite the volatile session, the price action remained within the value area of the overnight inventory and the RTH saw an extension above 4518, indicating acceptance within the range area above.Volatile sessions can rob a short-term trader from looking at the bigger picture.

ES

The overnight inventory edged higher, exploring higher prices since the close from yesterday’s session, forming a value area between the yesterday’s POC and 4538 which was the indicated resistance we’ve pointed.

In the NY session. trading was confined within the range of the ON inventory with the price not managing to breakout on either side of this strong consolidation range.

Our first target we were watching at 4538 was reached and we want to see it holding as support to see meaningful continuation on the levels above.

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

• Main pivot: 4518

• Upside Levels: 4538,4553,4563

• Downside Levels: 4508,4493,4481

That’s it for this Thursday’s report.

We’ll see you Sunday for our weekly update!

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