March 15, ES Plan and Missal: Just the Tip
Option premium pyre
Image 1. Just the TIPS. Iceberg
In Treasury inflation protected securities (TIPS), a fixed interest is paid on fluctuating principal, theoretically offering a partial hedge against inflation (without bringing discounted cash flow into the picture). With today’s PPI coming in very hot, will this become the asset allocation of choice?
Not while the market is still in a bull cycle. Sellers did show their hand today, repairing some of Tuesday’s structure, and while they did manage to take out 5200, they were not able (or interested) to take it further, closing back within Wednesday’s range despite the red day!
We can expect the potential for wide and frustrating moves Friday. Strong directional trade is less likely as option premiums are collected before expiration.
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Minister’s Missal
I will have more to say on this week’s inflation prints over the weekend. I will keep this Missal short as I have some other obligations. The main question heading into the the weekend is if sellers have more planned into open, or is this merely building fuel for another test of ATHs in the next few sessions (doubtful tomorrow, given opex).
I think whichever side prevails will likely see the next 150 or more points in that direction. But before we get ahead of ourselves, let’s focus on 5222 heading into tomorrow. Not only was this the Thursday afternoon high, it is also an area of seller defense, the VAH, as well as confluence with Tuesday CPI premarket high.
Image 2. Tuesday through Thursday RTH
Friday Opex Plan and Levels
Pivot 5222. Consumer sentiment at 10h00EST.
a) Support at 5202 and time above the pivot look to fill Thursday’s A period singles where sellers may step in at 5231. A break of PDH 5242 can gate to 5256-58 which if broken could see 5271 on heavy volume.
b) Defense of pivot and time below 5215 targets a break of 5202. An hourly close below targets PDL 5188 and 5171 further below, 5180 may offer a bid along the way.
c) The magic number for sellers in VIX is 15.00 which can support downside price discovery. Note that this seems to be a consistent level of contention. Buyers want to see the index below 13.60 for possible momentum above Thursday’s highs. AAPL with hourly closes above 174 and NVDA over 890 can support risk-on. BTC may find some support at 68k for a possible retest of 70.6k.
Any updates will be shared premarket.
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