The CPI was higher than expected this morning, as Kraft-Heinz quietly raised their prices by 20% yesterday. The CPI number does not seem to be driving the market any lower than the overnight range that preceded CPI publication.
Some sellers showed up yesterday, but they were not particularly serious. Our downside plan worked to the letter for day trading.
We are trading close to yesterday’s regular session low. Opening or sustaining prices below it would be unhelpful for bulls. The overnight low at 4656.75 is the key downside reference today. A drop below that level puts 4642 into play. From there, watch each of the virgin points of control and gaps below us for support.
If we head north, the first task is to stay inside yesterday’s range and continue balancing. Watch market internals and tempo for clues. Also, watch the direction of developing value today.
Traders can justify anything here in 20/20 hindsight. What I always think about is how the market could fool most people. Bulls might think the October low is in, and the market should be in party season until April. Then, the market could turn around and put in a new low.
Bears might be giving up after this parabolic run only to miss their chance. The best encouragement I could give the bears is kind of like walking a plank over a steep crevice. If you look down from these price levels, any reasonable trader should get some vertigo.
So, if we can stay inside yesterday’s range, I will hat tip the bulls. Sustained activity on weak internals below the 4650ish area keeps the correction going.
Swing traders should still be holding cash. Recall from last night that DBC and IWM are on the table. I will let you know if we tee them up.
A.F. Thornton