Welcome back everyone!
Lets dive into the recap for todays session then move on to tomorrows analysis.
Recap of chat:
Today was a rocky session for the entire market, as I anticipated that the dip would be bought on the indices. However, selling persisted throughout the session, offering only a small opportunity to take a profit of 20% on the SPX contracts. My thesis was straightforward: identify a support level this week using the volume profile and go long, expecting a bounce. Unfortunately, this strategy did not come to fruition.
Maintaining a short bias is challenging when the market is in one of the strongest uptrends ever seen. Being on the wrong side of the trend is acceptable, as I know that once this market bounces, it will quickly return to buying support and seeking new highs. This is one of the main challenges of sticking with a trend. The days of reversal can be quite rigorous in terms of volatility, making it difficult to navigate.
Despite the setbacks, I remain confident in my overall strategy. The key is to stay patient and adapt to market conditions, knowing that the trend will eventually resume its upward trajectory.
Depending on the outcome of the PPI report, I expect this dip to be bought. This determination is based solely on whether the PPI comes in unchanged or hotter than expected. The best-case scenario for bulls is an unchanged PPI. Even a hot PPI can be favorable, as it builds concern that inflation has yet to completely decline, similar to what we saw in the CPI report today.
A hot PPI will indicate that we are not close to rate cuts, which brings fear back into the Fed. The later we cut rates, the better, as we want to see this market continue to rally. Other than this, there really isn't much to cover. As usual, the levels will be posted below, and I will see everyone in the chat tomorrow.
To provide more context, it's important to understand the significance of the PPI (Producer Price Index) in relation to market expectations. The PPI measures the average change over time in the selling prices received by domestic producers for their output. It is a key indicator of inflation at the wholesale level. An unchanged or hotter-than-expected PPI suggests that inflationary pressures are still present, which can influence the Federal Reserve's decisions on interest rates.
In this market environment, bulls are looking for signs that inflation is under control, as this would support the case for rate cuts or at least stability in interest rates. Conversely, a hotter-than-expected PPI indicates persistent inflation, potentially delaying rate cuts and causing short-term volatility. However, this can also be interpreted positively which is where I stand. The later the Fed cuts rates, the stronger this rally becomes.
Now let’s move on to my thoughts for tomorrows session!