CPI Data : Buy The Rumor, Sell The News?

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Recap + Sentiment Check🌤️ : Good afternoon my friends, hope everyone has had a wonderful week so far as we look to extend our winning streak into the second week of March and finish the last 2 trading days of the week strong. As we take a look at yesterdays movement I essentially predicted both the bull and bear cases to the point. I mentioned that a clear of 4195 would trigger a mini short squeeze into the 4260-4280 resistance zone and $ES $SPX $SPY ended up putting the largest green day in since June of 2020. This is another reminder to keep your bias limited as massive moves are happening both ways even though we are in a downtrend. However, keep in mind that trading around news events like CPI is an extremely unprovable game and I recommend everyone stays out of their positions until this news has completely settled. Markets turn into a minefield of traps for the first hour or two after the data is released which makes things tricky as a whole. Additionally, new traders must keep in mind that the first move is usually a fake (if we start shooting upwards, we will more often than not reverse sharply trapping all longs and extend to the downside).

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Market Overview🔥: As CPI will be reported by the time that I send this out as data is released at 8:30 AM, price has rejected the multi-month previous support level of 4260-4280 and has now turned it into a massive resistance. My core support level for the market is now 4140 as this is a core macro uptrend channel controlling the COVID bull market and so far this has held. If bulls want to establish a significant low, this would be the area to do so. This level has already caused a 120+ point run. Currently I am watching 4260-4280 as the critical resistance with 4295 not too far ahead. Additionally, the RSI is overbought meaning that bulls are running out of steam and need to coil/recharge if they want to break this zone with momentum. As it is clear that CPI makes everything less certain than usual I am prepared to play longs or shorts which is why I have exited all my positions and taken all profits off the table (as you can see on twitter where I update all my live positions). However, the fact that we have lost 4260 on the pullback overnight has lead me to think that the initial spike from CPI data might be sold off and force us to create lower lows. The lowest point that bulls would want to see price dragged down to would be 4195 which is now a MUST HOLD. If we lose this level, I will start eyeing shorts. Furthermore checking seasonality, the bottoming process generally begins in the first half of March so we should not see any new lows created, but keep in mind that if we do create new lows we would need to recover extremely quickly (drop to 3990s then recover by mid next week) otherwise seasonality is invalidated for now. As usual, be sure to manage risk at each level as I am now 100% entering this morning after taking profits off the table a couple of hours ago before things get volatile.

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Gameplan (Bull)🐂: With 4260-4280 being a critical resistance and holding for now, bulls look like they are running out of energy ahead of CPI as we have sold off substantially overnight. This deep pullback could mean 2 things, CPI will fake most people out and shoot up at the beginning and the cause a bull trap, or CPI would be the catalyst for a major low being put in. I am going with scenario 1. Bulls should prefer basing above 4200 and above 4260-4280 resistance we should see 4295, 4340, 4385 (Strong Resistance), and 4420 (Strong Resistance). Above 4420 would break us out of the downtrend channel from January Lows and start the move towards 4700.

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Gameplan (Bear)🐻: The bear case is quite simple, as bears are in control for now. Supports to be broken are 4260, 4245, 4200. Once the 4195 level is broken and turned into resistance this is a MASSIVE win for bears. Below 4195 we are headed to trendline support @ 4140 and I would not be a buyer here. Once 4140 is broken we will start a significant melt down to 4110 (Weak), 4060 (Strong), 3990s (Strong). I would favor the 3990s for a potential major low and profit taking by the shorts.

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Cams Thesis 😏 : (Be careful for a “pump n dump” with CPI Data!!!)

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Levels📈

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$ES Resistances : 4260-4280, 4295, 4345, 4440, 4420

$ES Supports : 3990-4000, 4060, 4140, 4175-4180, 4195 (Major Level To Hold) 

$SPY Resistances : 426-428, 429.5, 434.5, 440, 442

$SPY Supports : 399.5, 406-406.5, 414, 417-418

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$ES 15M Chart😬

$SPY 15M Chart😬

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