Weekly Outlook 12/29/22

A Steep Retracement

Last weeks Price Action

Last week was a picture perfect turnout on how we were to close out 2022. Look below as I predicted these prices to trade but also to mark the swing highs.

Few traders like myself anticipated a rally into 4150 which is a very attractive swing orderflow level. After catching spike to 4150 we then sold remainder of the day giving clue that the latest CPI print lower isn’t as good as it seems. The problem with Inflation moving lower is it needs to move 0.5-1% lower not a small 0.1-0.2% to show there is progress being made by the FED. The very next day we had FED Interest rate decision which came out as 50bps causing 64 handle sell in S&P500 leading into Powell. This has not put the Bull in the casket as we have traded up from 4141 down to 3855, a -6.9% decline called out all on Twitter! Make sure to turn notifications on to not miss out any updates sent throughout the day.

Piecing this all together is telling me clearly that we should not trade back above 3975 until Inflation can make solid progress of a decline at least coming in at -0.5%. Remember at the end of the day, the FED is raising rates solely based on CPI prints. How can we possibly trade into 4200 and above while inflation remains to sit sky high at 7.1%. Long term bearish view still intact and will not change when inflation has not budged.