Index Drifts a Bit Lower Ahead of CPI

This is a market that I think will continue to see a lot of choppy behavior, with the 4200 level above could offering a bit of a barrier.

• The S&P 500 Index drifted a little bit on Tuesday as we are awaiting the CPI numbers on Wednesday.
• The CPI numbers will give us a bit of a hint as to where the Federal Reserve will be looking as far as monetary policy is concerned.
• Keep in mind that the market is likely to see a lot of noisy behavior ahead of this announcement, and then most certainly after it.

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Keep an Eye on CPI

The Core CPI is going to be the measurement to watch and is expected to come in at a 0.5% month-over-month reading. If it comes in hotter than that, the S&P 500 will almost certainly get sold into. If we break down below the 4100 level, it’s likely that the market could go down to the 4000 handle. The 50-day EMA is sitting underneath there and could offer support as well, but it’s closer to the 4900 level.

This is a market that I think will continue to see a lot of choppy behavior, with the 4200 level above could offering a bit of a barrier. If we were to somehow break above there, then it’s likely that we could go to the 4300 level. Keep in mind that we are at a major area of noise in the past, and an area where I think a lot of “market memory” could come into the picture. The size of the candle is neither here nor there, but the fact that we pulled back from a shooting star is not a huge surprise. I suppose you could take a look at this through the prism of a “hint”, as we had formed a hammer followed by a shooting star, and then actually had a bit of a body in this negative candlestick. However, if there is enough of a surprise from the announcement, that could cause the volatility to pick up in either direction.

When you look at the chart, you can see that I have attached a blue box where we had action previously, and I think this is what we are struggling with right now due to the “market memory” in that general vicinity. This is a market that continues to see a lot of interest, so it’ll come down to whether or not Wall Street thinks it’s going to get it’s fixed.

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