With the CPI coming in at its highest level since 1981, markets experienced some mild selling contrary to the frantic buying of late, leaving behind a bit of caution in the candle patterns.  The most prominent being the potential shooting star pattern on the QQQ.  I say possible because to be valid, the QQQ price must follow through to the downside today to confirm the signal, which may be a tall order with the recent big tech buying enthusiasm.  That said, stay on your toes, avoiding complacency with another key inflation data point on its way this morning.

Asian markets traded mixed but mostly lower overnight due to inflation jitters of hot CPI numbers in the U.S.  European markets trade modestly lower this morning as they cautiously monitor inflationary data.  Ahead of the PPI numbers and big bank earnings, the U.S. futures are trying to put on a brave face pointing to flat to modest gains at the open.  However, the PPI could easily inspire the bulls or bears, depending on the report. So stay focused and flexible and be ready for price volatility as the market reacts.

Economic Calendar

Earnings Calendar

On the Wednesday earnings calendar, we have about 20 companies listed that expect to report today.  Notable reports include BAC, BLK, C, DAL, INFY, PNC, & WFC.

News & Technicals’

The CPI came in at the highest level since 1981 and slightly dampened buying enthusiasm with the worry the Fed may have to act sooner than expected.  Today we will hear for BAC, C, WFC as the big investment banks report results.  According to reports, hospitalizations are once again on the rise as the delta variant spreads throughout the country. In addition, Apple is reportedly ramping up production in anticipation of a big wave of phone upgrades to take advantage of 5g.  Norwegian Cures Line is suing the Florida surgeon general to end the vaccine passport ban because they say it will force them to cancel cruises with its first sailing scheduled for August 15^th. 

Yesterday’s mild selling didn’t create much technical damage to the index charts, but it did offer a little caution by leaving behind some concerning candle patterns.  The QQQ left behind a shooting star pattern that can sometimes signal a top, but it would require a bearish follow-through today for that to be valid.  With the recent wild enthusiasm to buy big tech no matter the price, we will need a bit more proof of bearish price action to become worried.  However, the IWM failing at its 50-day average creates some technical damage if it tries to lead the markets lower.  We will get another reading on inflation this morning with the Producer Price Index, and if that were to come in higher than expected, it could overshadow the big bank earnings rolling out this morning.  On the other hand, if the PPI comes in less than expected, I would not be surprised to see the market shrug-off inflation worries.  Stay focused and flexible, prepared for price volatility as the market reacts to the data.

Trade Wisely,

Doug