4/18 Trade Plan
Hello and welcome to another installment of my daily e-mini trade plan. For any new readers, welcome! In this newsletter I discuss levels, scenarios and market analysis for the S&P500 market.
Last night I discussed 4156 on ES and 13000-050 as the key support levels to keep the bullish narrative alive on both indices.
Today we opened at/near support at 4161 ES and well above the support zone shared on NQ with the opening print at 13162.
The first 30 minutes was a directionless chop fest. After the first 30 minutes, both indices started trending downwards. ES tookout 4156 support which flipped resistance during lunch hours. However NQ was still well above that 13050 support level. The tech index came down into 13075 area before turning back up. Around 1:00 we saw ES takeout 4156 with a fierce move higher. This move stuck, and the index continued to climb, momentum traders and shorts forced to cover pushed up the bid. We settled the session back near the top of the range/key resistance at 4180.
The afternoon rally as interesting to me. Even with such a strong move to the upside, only ~1m contracts exchanged hands today. In fact I can identify several similar structured auctions this month. Buying the dip has been the move this month. Each time the market pulls back we see an afternoon rally. But we never trade much more than 1 million contracts. There is still too much liquidity in the system. After all look take a look at the FED balance sheet
One year worth of QT almost entirely erased in one swoop last month. And remember, markets track liquidity.
Last night I touched on the fact that while headline inflation is coming down, core inflation seems to have found a sticking point around 5%.
Headline inflation has fallen from a peak of 9.1% now down to 5%, core inflation has not budged much falling from a peak of 6.6% to 5.6% as of the latest print. These are two very different trends, and headline inflation is heavily weighted towards energy which is the primary reason we have seen a slump in headline inflation. Core inflation on the other hand seems to have embedded itself here and I don’t see this resolving anytime soon. Rates must remain higher for longer to tame this inflation beast.
You can read more about my longer term view on the market here.
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