Jump to content

US CPI preview and what comes next for US stock indices

Recommended Posts

The collapse of three regional US banks triggered liquidity and financial stability concerns; further aided by evidence of cooler US inflation data allowed the Fed to pause its rate hiking cycle and possibly ease monetary policy.


bg_usd_dollar_361507471.jpgSource: Bloomberg

 Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 14 March 2023 

The collapse of three regional US banks triggered liquidity and financial stability concerns. If there were a good time for calm heads to prevail, it would be right about now.

This would be further aided by evidence of cooler US inflation data evening (11.30pm Sydney time), allowing the Federal Reserve to pause its rate hiking cycle and possibly ease monetary policy if required.

The worst scenario (outlined below) would be stickier-than-expected inflation which would call for higher interest rates when the exact opposite is needed to calm frayed nerves.

January's inflation numbers

Headline inflation fell to 6.4%YoY in January from 6.5%YoY in December, notably less than market expectations of 6.2%. Core CPI eased to 5.6% in January from 5.7% in December but above market forecasts for 5.5%.

What is expected this month?

  • Headline inflation is expected to increase by 0.4% in February, taking the annual inflation rate to 6%YoY
  • Core inflation is expected to rise by 0.4%, with the annual rate at 5.5%YoY.

What to watch for

  • The rise in inflation in February is expected to be driven by gains in used car prices (+0.5%), reflecting rising used-car auction prices
  • Strong demand for air travel and elevated jet fuel prices will increase airfares by 8%
  • Providing some relief, shelter inflation is expected to continue to decelerate.

Equity markets: the good and the bad

The range of expectations for tonight’s headline number is from 5.8%YoY up to 6.3%YoY, with the median estimate at 6%YoY.

  • If headline inflation were to come in a 6.2%YoY or higher, it would further shake risk sentiment
  • If headline inflation were to print at 5.9%YoY or lower, it would support risk sentiment and more latitude for the Fed to pause its rate hiking cycle and potentially cut rates.

S&P 500 technical analysis

After two weeks of toying with the support from the 200-day moving, a definitive break lower was viewed at the end of last week.

Providing the S&P 500 remains below the short-term resistance at 3950 from the 200-day moving average and a cluster of horizontal resistance at 4025/35, it would indicate that the corrective rally from the October low is complete at the 4208 high, and the downtrend has resumed.

In this case, the next downside target is the 3788 low from December 22nd, followed by support from the October lows at 3600/3500.

S&P 500 daily chart


ES1_2023-03-14_15-35-41.pngSource: TradingView

Nasdaq technical analysis

Overnight the Nasdaq has springboarded again back above the 200-day moving average at 11,947, which contrasts with the S&P 500 and Dow Jones and keeps open the possibility of higher levels for the Nasdaq. As such, providing the Nasdaq holds above 11,947 (closing basis) allows the rally from the October lows to take another leg higher in March towards the August 13,740 high.

Aware that a sustained close back below the 200-day MA at 11,947 would confirm that the rally from the October lows has been corrective and the downtrend has resumed.

Nasdaq daily chart


NQ1_2023-03-14_15-41-20.pngSource: TradingView

Dow Jones technical analysis

Late last week, the Dow Jones broke and closed below the range lows 32,570/32,350 area it had spent the past fourth months trading above.

Providing the Dow Jones remains below the resistance formerly, support at 32,550/600, the expectation is for the Dow Jones to trade lower towards support at 30,000.

Dow Jones daily chart



DJI_2023-03-14_15-51-53.pngSource: TradingView

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 29/09/23 12:41
  • Posts

    • Liquidity is either buy or sell side and liquidity Purge...CHoch change of characters is simply MSS market structure shift. Confusing 
    • Hello, Hope this finds you well. I have prepared the calculator. Attaching the same for your perusal.  https://1drv.ms/x/s!AlwK9pqvvQo_aWChCgsxdHMqpLw?e=0zW5co   The yellow cells are the inputs and the color coded region is the P&L.  As mentioned and highlighted, 80 trades with win rate of 50% would lead to P&L of 1000.  Similarly, the other sheet in the calculator is based on the profit and loss per trade for given trade number and win rate.   The cells can be changed as per scenario to get insights.    please let me know if any clarity is required. 
    • Nikkei 225, FTSE 100 and S&P 500 try to recover into month end Outlook on Nikkei 225, FTSE 100 and S&P 500 as the oil price, US yields and greenback retreat from their lofty heights. Source: Bloomberg  Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 29 September 2023 11:36 Nikkei 225 stabilizes as September draws to an end The Nikkei 225 stabilizes into month-end despite Japan consumer morale falling to a six-month low as better-than-expected preliminary industrial production and a positive close on Wall Street aided Asian stock markets to stem their September falls. The Nikkei 225 thus managed to stay above its Thursday low at 31,665.4 which was made close to the 25 August low at 31,563.2. Were this level to give way in October, the August low at 31,251.2 would be in focus. Immediate resistance to contend with is the 22 September low at 32,167.9, followed by the mid-September low and the 55-day simple moving average (SMA) at 32,396.5 to 32,464.9. While below this area, bearish pressure retains the upper hand. Source: ProRealTime FTSE 100 bounces off support into month end The FTSE 100 is trying to build on Thursday’s Wall Street led gains following dovish comments by Federal Reserve (Fed) members Goolsbee and Barkin and better-than-expected UK revised business investment numbers. The 200-day simple moving average (SMA) at 7,650 is thus back in sight. Potential stumbling blocks above it can be seen at the 7,688 June high and also between the 7,723 July peak and the current September high at 7,747. These highs will need to be bettered for the psychological 7,800 mark and the 8 May high at 7,817 to be back in play. Minor support sits at Wednesday’s low at 7,553. A fall through this week’s low at 7,523 would open the door to the psychological 7,500 region. Source: ProRealTime S&P 500 ends nine straight day fall A retreat in the oil price, greenback and US yields amid dovish Fed talk and sharply lower revised consumer spending have helped the S&P 500 stem its nine straight day fall to 4,239 and led to a small positive close on Thursday. While this week’s low underpins, the late June to August lows at 4,328 to 4,337 will be eyed. First, though, Thursday’s high at 4,318 will need to be exceeded. Below the September low at 4,239 lies the major 4,214 to 4,187 support area which consists of the early and late May highs and the 200-day simple moving average (SMA). Source: ProRealTime
  • Create New...