Sept 14, 2023 Missal: Deflationary Inflation

Having it both ways.

Image 1. Sellers hesitated at 4500 today. The Simpsons and our second saloon reference.

Day Review

A note on CPI. It was not a surprise (at least to me and some other market participants, and the average consumer and renter) that inflation isn’t exactly coming down. Core CPI came in 0.3% vs 0.2% m/m, not accounting for the higher cost of fuel. However the response was more tepid than I expected pre-market. I was wrong on that one. We saw a low volume with no interest by either side to initiate to price discovery mode - will that be data tomorrow (PPI, retail, unemployment) or more likely the FOMC event next week, which will set policy based on the latest inflation data?

The Asian session and European sessions saw a very tight range of 10 points before CPI landed, so not much to write about there. We held the important 4500 level until the data, when sellers aggressively pushed to briefly trade below 4500 (4995 - mark this one down). A lack of further initiative saw buyers pick up to open at ETH VAH, an early bullish hint. Indeed buyers rallied to pivot 4523 where sellers entered the picture. A retest through open saw a push below ETH VAL however selling once again tapered off.

Once again prices went above the pivot only to see significant absorption from D to J periods, a significant portion of the day. A lack of progress and volume saw weak/late longs liquidate positions into close. More patient buyers stepped in at ETH VAL to bid up the day just under the day pivot.

While the profile suggested absorption above 4520, I can’t help but point out the lack of seller initiation and overall effort. They could be holding out for higher prices - especially ahead of opex week. This is the third day of delta neutral close and three days of balance - value has been drifting downwards but buyers continue to hold 4501 in RTH. The other important level being 4550 to the upside, so no surprise we are balancing here.

Tomorrow is PPI, unemployment, and retail data 8h30EST which may see volatility in either direction. I will raise the pivot to 4529 given the buyside liquidity at this level.

Image 2. Interest to the upside greater than downside. Weak long shakeout. (30m bars)

Thursday’s Missal

Pivot 4529. This level will be an important gauge especially in ETH. Plan is largely unchanged given the third day of balance. Every successive day of balance typically results in a larger outside move. Buyers are gaining price acceptance over 4500 as short-term value is now at 4525, up from 4467 (medium-term at 4526 from 4467).

• Buyer scenario. Buyers above 4532 balance VAH can aim for a test of the poor high at 4539. Above 4550 can potentially squeeze shorts to repair poor structure from early August, with 4571 and gap fill to 4591 above. Their LIS is 4501 below.

• Seller scenario. Time spent below 4520 will likely target an attempt at Wednesday low 4503 and CPI low 4495. This can open poor structure to 4478. Bids may be found along the way at 4489 medium-term LVN.

  Recall the contract gap below to 4461.75.

• Notes. PPI, unemployment, and retail 8h30EST can introduce volatility. VIX under 13.4 can support buying while sellers want to see over 14.7. Keep watch on AAPL below 175 which can make headwind for the indices. NVDA over 460 can give some risk-on, as well as BTC over 26.7k. CL over 90 can cap upside in the indices.

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Image 3. Important levels in context of profiles.

Don’t maintain bias in the face of contradicting information! Capital preservation is key.

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