Pre-Market Outlook 7/13/2021

Inflation came in hotter than expected for the third month in a row this morning, sending futures down a bit deeper into yesterday’s regular session range but nowhere near the low. Yesterday’s distribution made the same “p” pattern as the prior day. This is a minor data point to carry forward that tells us that there are still some shorts covering from the one-day selloff of last week. We now have two of these single print patterns back to back.

Even with the CPI shakeup, overnight inventory is relatively balanced and only slightly net short. Futures are also trading close to overnight halfback at the moment, which tells us little about how the open will play out. NASDAQ 100 futures showed relative strength before the economic data but have now fallen more in line with the S&P 500.

The better trades should develop later rather than earlier in the session. I will favor the buy-side only if prices are above the top of the single prints at 4344.25 from yesterday.

Trading into the single prints has the potential for long liquidation. Carry forward that the overnight high could not make a new all-time high which increases the odds that there are some longs with poor location near yesterday’s regular session high. Think in terms of old business versus new business. Old business will always be transacted first.

A.F. Thornton