Good morning traders, you may have thought inflation data was over but it’s not. This morning we have PPI at the same time of jobless claims. PPI is another inflation measure but on the wholesale side. If it exceeds estimates: stocks fall, bonds fall, yields rise and the dollar gets stronger. If estimates miss: stocks rise, bonds rise, yields fall and dollar gets weaker. Something that is more important to me on the technical side is that we are starting a topping process on the weekly. It won’t be long before the daily and the monthly catch up to it in starting their topping process which will be faster than normal mean while we should see some large range two-sided trade. It’s important to note that the Bollinger band is tightening as volume drops along with the flattening of the MACD.
Key levels to watch for … Resistance (jack) 414-415(queen) 416and (king) 417-418area. Support (jack) 413 (queen)412-411and (King)410-409. The main thesis for the day is a BEARISH bias closing below 412.85 with a projected target/low of between 412-409. Alt thesis is BULLISH bias closing above 412.85 with a projected target/high of between 413-418. The main channel we are in is between 397-416. Yesterday, market strength and breadth opened gap up filling a previous gap in order flow but falling from the start with a couple nice bounces before the third bounce found its way back close to below the highs of the morning. I expect strength to open a little stronger and find weakness on the day carrying over into premarket Friday. We have Harmony between the technical side which is (BEARISH) and the Quant side (BEARISH bias). The futures have a bearish bias for the day with harmony between the technical (bearish) and the Quants (bearish). Scenarios for the day:
1) Expanded Range Day structure. we could get a premarket pop. Experience some dip buying early bringing us back to test resistance and giving another try at breaking resistance but rolling over on the day. Vise versa 35% probability
2) Rounded reversal day type structure. We could get a continued push higher toward jack or queen resistance area and find midday chop around either queen or king resistance before going back down with the same energy or force we went up with the first part of the day or vice versa. 34% probability
3) Trend day down we open gap down and start with a push back toward the previous close. We find resistance on or before the previous close then begin the downtrend for the day. We usually find midday chop around either possible queen or king support area (key to watch today is for a failed trend day where we push up from target) 31% probability