Weekly Wisdom: CPI & PPI Slightly Hot

Greetings fellow traders and welcome to your September 14th edition of Weekly Wisdom: Levels to Know and Moves to Look For!

Now let’s get to what we’re currently seeing in these crazy markets and what we have our focus on going forward.

Taking a look back on this week, September 12 – 15:

• Tuesday’s NFIB Small Business Index came in-line at 91.3 vs 91.6 expected.  
• CPI came in slightly hotter than expected on Wednesday morning after a very slow and choppy start to the trading week. Although some of the numbers were slightly higher than expected, volatility was still subdued and chop continued in the Wednesday session.   
  • US CPI MoM: 0.6% [Est. 0.6%, Prev. 0.2%]
  • US Core CPI MoM: 0.3% [Est. 0.2%, Prev. 0.2%]
  • US CPI YoY: 3.7% [Est. 3.6%, Prev. 3.2%]
  • US Core CPI YoY: 4.3% [Est. 4.3%, Prev. 4.7%]
• Wednesday’s Federal Budget Balance update was a miss at $89.3 billion vs -$251.0 billion expected.  
• We were then delivered PPI on Thursday morning, along with some other economic data points:
  • US PPI MoM: 0.7% [Est. 0.4%, Prev. 0.3%]
  • US Core PPI MoM: 0.2% [Est. 0.2%, Prev. 0.3%]
  • US PPI YoY: 1.6% [Est. 1.2%, Prev. 0.8%]
  • US Core PPI YoY: 2.2% [Est. 2.2%, Prev. 2.4%]
• Retail sales were a beat at 0.6% vs 0.1% expected, core retail sales were also a beat at 0.6% vs 0.4% expected.  
• Weekly unemployment claims were also a beat at 220,000 vs 226,000 expected.  
• Friday, September 15 ends the week starting with the Empire State manufacturing index update and import prices m/m, both at 8:30 a.m. ET. This will be followed by industrial production m/m and capacity utilization rate at 9:15 a.m. ET. Then we’ll get the University of Michigan’s consumer sentiment and inflation expectations index at 10:00 a.m. ET.

Here’s what we are eyeing next week, September 18 – 22:

Level Highlights:

• $SPX futures spent the majority of this week chopping sideways as we waited for economic data on Wednesday and Thursday. We wrote last week that $SPX futures should try to hold 4420 on any further downside or else we risk our weekly trend breaking. $SPX futures made a low of 4483 early this week and have spent the rest of the week chopping between that low and 4550 on the upside.  
• Bulls are now looking for a close over 4550 for a move higher toward 4580-4600 resistance. Bears may be getting a bit nervous after a couple of false break downs earlier this week – a close back below 4500 would be exciting for the bears should they see it, otherwise bears may need to wait for downside extension on the $VIX in order to come in on the other side of this market.  
• $VIX has managed to work lower this week throughout the markets chop, coming down from a high of 15 made last Thursday down to the low 13s this Thursday. $VIX has managed to base / find support around 13-12.80 throughout the summer. Bulls are looking for $VIX to breakdown through 13 in a real way and bleed lower toward the 12 level. Bears are looking for $VIX to hold support and give a pop off of the 13 level back up toward 15, which should hit $SPX futures back down. 

Upcoming News:

• Monday, September 18 we’ll get the September NAHB housing market index at 10:00 a.m. ET.  
• Tuesday, September 19 gives us updates for building permits and housing starts at 8:30 a.m. ET.  
• Wednesday, September 20 brings us the next FOMC meeting and rate decision at 2:00 p.m. ET, followed by Powell’s press conference at 2:30 p.m. ET. Markets expect rates to hold steady at 5.50% with odds of another hike in either November or December rising slightly.
• Thursday, September 21 brings us our weekly unemployment claims, the Philly Fed manufacturing index, and the current account update all at 8:30 a.m. ET. This is followed by existing home sales and the Conference Board’s leading economic indicators index at 10:00 a.m. ET. 
• Friday, September 22 ends the week with flash manufacturing PMI and flash services PMI at 9:45 a.m. ET.

Here’s Your Chart of the Week:

Via Nomura Vol, Reuters Graphic, Saqib Ahmed: The second half of September is usually a rocky time for the markets after the September OPEX which is usually the biggest options expiration of the year. “In 26 of the last 33 years, the S&P 500 fell in the week following September options expiration, with a median drop of 1%”

Source: https://twitter.com/WallStJesus/status/1701889505374998878/photo/1

SPY Daily Update:

$SPY found support at 443 last Thursday and managed to bounce at the end of last week, chopped the first half of this week, and is now attempting to push higher with CPI and PPI data out of the way. We pushed through 446 and 448 resistance in the second half of this week and are now approaching the next resistance zone of 450-451.

SPY Weekly Update:

$SPY is working on a second inside week in a row this week with lows of the week at 445 and highs so far just over 450. Soon enough these inside weeks will break one way or the other, and then it’s a matter of getting follow through or we risk a false break higher.  

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-Patrick Hawe

Disclosures

Patrick Hawe’s current positions:

*As of 11:48am ET September 14, 2023

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