CPI Data Likely to Call the Tune Today

Markets opened down very slightly on Tuesday and meandered around in lower territory until 11 am.  From that point, all 3 major indices sallied hard (especially in the QQQ) for an hour.  After 12 pm, all 3 then drifted bullishly, closing near the highs.  This left strong white candles that followed through on Monday’s intraday rally, but have yet to test their T-lines (8ema).  On the day, SPY gained 0.91%, DIA gained 0.49%, and QQQ gained 1.50% as the rotation out of tech reversed on the day.  The VXX fell 3.5% to 17.82 and T2122 spiked up into the overbought territory at 87.92.  10-year bond yields fell to 1.742% and Oil (WTI) spiked 4.15% to $81.48/barrel.

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During the day, Fed Chair Powell spoke to the Senate in hearings on his renomination.  He told the Senators that the economy is healthy enough and needs a tighter monetary policy to control inflation and that the Fed will tackle the problem.  While he avoided any specifics on actions or timing, he did say that this will include the end of Bond Purchases, interest rate hikes, and a significant reduction in the Fed Balance Sheet (selling bonds and mortgage-backed assets). Powell also explained that there were two key factors that caused the Fed to be wrong about inflation.  First, he said the Fed expected supply chain issues to be resolved SUBSTANTIALLY faster than they have been.  Second, he said the Fed expected a much quicker and more significant return of the workforce (reducing wage pressure) than materialized with the “great retirement.”  While his testimony on inflation was not new, markets did take heart from the session and stocks rallied

Just before the close, a Federal District Judge granted the FTC a second chance to file suit against FB.  FTC Commissioner Khan is expected to refile the suit alleging that FB engaged in illegal monopolistic activity.  FB did not have time to react during the day on Tuesday, but after hours the stock is pulling back.

C announced Tuesday afternoon that it is exiting retail and small business banking in Mexico. This is the latest move in the company’s shift toward focusing on operations centered around global wealth centers.  There are several “potential” candidates to purchase the C Mexican operation, but none are listed in the US.  The C Mexican banking operations accounted for $3.5 billion in revenue and $44 billion in assets during the first 9 months of 2021 and the company was Mexico’s third-largest bank. 

Overnight, Asian markets were mixed green across the board with the lone exception of Malaysia (-0.07%).  Hong Kong (+2.79%), Japan (+1.92%), and South Korea (+1.54%) led the gainers.  In Europe, markets lean heavily to the green side with only two smaller exchanges in the red at mid-day.  The FTSE (+0.55%), DAX (+0.18%), and CAC (+0.43%) lead the way in early afternoon trade.  As of 7:30 am, US Futures are pointing toward a flat open ahead of the CPI data.  The DIA implies a +0.08% open, the SPY is implying a +0.08% open, and the QQQ implies a +0.16% open at this hour.  10-year bond yields are flat and Oil (WTI) is up half of a percent in early trading as we wait on the CPI data.

The major economic news scheduled for release Wednesday includes Dec. CPI (8:30 am), Crude Oil Inventories (10:30 am), the WASDE report (noon), Fed Beige Book (2 pm), and Dec. Federal Budget Balance (2 pm).  However, there are also 2 Fed speakers (Brainard at 10 am and Kashkari at 1 pm).  The major earnings reports scheduled for before the market is limited to INFY, JEF, and WIT.  Then after the close, KBH reports.

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Markets seem to be waiting on the CPI data this morning before traders decide how to move next. With T-line resistance tests in all 3 major indices in the immediate future, keep an eye on the markets before you chase individual tickers. Yes, we have had two white candles. However, this is not how uptrends are measured. So, be careful of getting caught in the "buy the dip" rush. Also, remember that intraday whipsaw (like Monday's massive reversal) continues to be the norm lately.

Remember that the first rule of making a lot of money in the market is to not lose a lot of money in the market. So, don't be stubborn. When you're wrong, just admit it and take your loss. (That's why we set stops.) Stick to your trading rules and on managing the things you can control. Don't chase, trade with the trend, keep consistently taking profits when you have them, and move your stops in your favor.


Swing Trade Ideas for your consideration and watchlist: ITUB, BABA, WFG, TME, AA, BWA, T, APA. You can find Rick's review of tickers on his YouTube Channel here. Trade your plan, take profits along the way, and smart. Also, remember to check for impending earnings reports. Finally, remember that any tickers we mention and talk about in the trading room are not recommendations to buy or sell.

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