Todays session began with an initial spike following the inflation data, which came in unchanged at 2.7%. However, as the cash session progressed, we began to see a sell-off that pushed price back below the 7000 mark. Our designated long and short levels did not trigger until the tail end of the day. We had marked the 6968 Value Area High as the short pivot and 6978 as the long level. Fortunately, at the close of the session, we saw a move down to 6978 that caught the near-exact low of the day. Price bounced directly off this level, rallying 25 handles back above 7000 in just 25 minutes.
While the levels performed accurately, the S&P finished slightly lower. The fact that inflation remained unchanged after four releases at this 2.7% area is something the Fed will have to interpret closely. While some claim a 2% target is unrealistic, I believe it is achievable but will simply take more time.
For two months, we have utilized three primary value areas. While they have evolved, they remain the dominant structural levels below current price. We are currently witnessing an attempt to break out above the highest value area; price is starting to hold and build new value above it. This is a very healthy technical move. In a trending market, we want to see price break out of a value area, establish a Low Volume Node (LVN) as a gap, and then begin building a new value area at higher prices. The current break over 6968 suggests a robust move that is successfully holding market structure.
Turning to stocks:
Insulation Stocks (IBP & BLD): Despite the mixed macro data, both saw sharp moves into the close. Both are up 3% today and over 20% in the last four sessions. These stocks are pricing in lower future inflation and are currently sitting at or above all-time highs.
ASX: Saw a strong gap up today, clearing nearly $19.00 after our initial entry in the 11-12 range.
SHEL: After getting crushed from 75 down to 69, we held longs at $73.45. Price has nearly returned to break-even, closing just above 73 as it firms up in the balance area above 70.
LBRT: This energy play is starting to break out through highs. I expect sharp continuation in the coming weeks.
ZGN: Currently holding at highs around $11.00. We gave this at 10.42 (currently 10.79), and I am pricing in a 30% move up to 13 before sellers intervene.
Now let’s shift our focus to tomorrows levels.
Tomorrow’s Game Plan (Paid)
Primary Levels: I will be sticking with our current framework as the volume profile structure remains intact. The low volume node between our value areas creates two very distinct setups.
