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Our View
After back-to-back rallies, it was healthy for the market to take a pause on Monday. With this morning’s PPI numbers on tap, it made even more sense.
In yesterday’s OP, we noted several of the PitBull’s trading rules, the first of which says the ES tends to fail 20 points above a big figure a few times before it builds up enough momentum to push through. In this case, that was ES 4000.
Wouldn’t you know it, the ES ran to 4017.50 yesterday and then faded hard, falling more than 50 handles from the high.
The second rule is that the ES tends to rally early in the week during a bear market, which despite the recent price action, we’re still in. Third — and lastly — the future tends to get weak heading into the imbalance reading at 3:50.
Today we get a look at another set of inflation numbers with the PPI results. The market will be watching this closely (note: it was lower than expected and the market is rallying as a result).
With plenty of Fed speakers on tap this week, they will likely try to push their hawkish rhetoric — aka jawboning — even as the market is sensing a shift in policy.
Our Lean — Danny’s Take
The ES closed weak yesterday and has now made three consecutive daily attempts above 4000 if we include this morning’s sanction. So far, each rally is failing to stick.
While not as important the CPI number or the October jobs report, I continue to be a cautious bull going into today's PPI number. However, yesterday's weak close was not exactly a ringing endorsement for the bulls.
Further, we already know Fed Governor Christopher Waller has already dismissed the CPI number as just another data point that the markets have already gotten way in front of. And we also know from Powell's comments during the last Fed meeting that we should expect rate hikes in December and into the new year.
Our Lean: