Stocks Range Ahead of CPI
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Stocks have established highs, then immediately rejected them, and are continuing the sideways correction. We mentioned that 4178 and 4188 will be very hard to break, as they correspond to relative highs from a previous range held in June. We are seeing support from 4122, but we are on the precipice of a vacuum zone below to 4068. There is another vacuum zone below that to 4009. The Kovach OBV has leveled off so if nothing signficant happens, then we should maintain the current range. All eyes are on CPI today, which will provide a reading on the massive inflation we have been seeing as of late. This will give us more insight as to the Fed's plan to raise rates, potentially by 50bps at the September FOMC. Don't expect much action in stocks until at least 8:30AM EST, when the data is released.
Nota
Stocks surge on CPI data, which came in really high at 8.5%. This is still considered a 'beat' because the estimate was 8.7%. It's hard to imagine a world where 8.5% inflation is considered a 'good' print, but this is our 'new normal'. The implied odds of a 75bps rate hike at the September FOMC have fallen by 30%.
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