Recap: In the lead-up to the CPI release, the market touched white channel resistance at 5287 and then sold off for 110 points to support at 5182-85. Bulls arrived there and got price back inside of last week’s range, at which point I went long targeting a gap close to 5208. On occasion I will take a trade in two of my accounts, and did so with this trade. Unfortunately I entered late in one of these accounts, and that trade began to de risk but stops were taken on the pullback. In the other account though, I secured profits at 5208 and let the trailer get taken out profitably when continuation higher failed to materialize. Later on, the market again tested 5185 support with similar buyer enthusiasm that pushed the market higher by 30 points in 30 minutes, though most of today was balanced conditions.
Balance/Trend: The market is firmly back inside of the old balance area, which has a slight upward bias to it which held firmly today. Price is now ~134 points off of all-time highs set nearly two weeks ago, which means that a bearish trend channel is beginning to form that reflects action over this time period. The market firmly rejected the backtest of the white channel today and this means that this breakout is confirmed and that the trend higher over the longer term is beginning to moderate.
Analysis: The last mile of inflation has been a tough fight as consumer prices are still high. The market was pricing in a >55-60% chance of rate cuts beginning in June as of just this week, but this figure has plummeted to 16.5% while the chances of July rate cuts have fallen to just below 36%. Bulls still control the market in the long term, but as these new cracks emerge in the economy, bears are exerting some influence to break up this five-month rally. For now bulls will want to hold price above the pink structure in the 8H charts and then recover core supports to get back on track. A failure to do so should result in continuation lower, whether that be tomorrow or Friday or into next week.
Detailed Trading Plan & Charts