On Thursday the markets may be particularly sensitive to the PPI data if it is reported as anything other than its expected .3% value.
My reason for expecting a market reaction is not based on the state of inflation, but rather the squeezed state of the SPY and QQQ.
Yesterday I discussed how squeezed or compressed markets tend to have big moves when they break out of consolidation patterns.
I highlighted the Biotech ETF (IBB) and the Semiconductor ETF (SMH) as two areas of the market to watch because of their consolidation patterns combined with squeezed conditions. SMH broke out of its consolidation yesterday, and continued to rally today.
IBB has not broken out yet.
In both the SPY and QQQ, the price compression as measured by the width of their 20-day Bollinger Bands is the lowest it’s been all year.
This compression, combined with the last 2 and 3 days, respectively of price consolidation, is likely to lead to a trend day very soon.
Inflation news could be just the catalyst the market needs to get moving.
The breakout could be in either direction.
In short, the market is likely to trend in the direction that it breaks out beyond the last 2-day range in the SPY and 3-day range in the QQQ.
However, I would not consider the market having successfully broken out until it also breaks its 30-minute Opening Range in the same direction as the daily range breakout.
Furthermore, I’d watch out for an initial gap lower, followed buy an Opening Range breakout to the upside. If this O.R. breakout occurs higher than the prior day’s daily low, the bulls may run the markets to new weekly highs.
S&P 500 (SPY) Consolidation day. 285 is key level to hold. 284 Should be a support area, 282 is pivotal support. 286.63 is the all-time high.
Russell 2000 (IWM) Bounced off the 50 and 10 DMA. Lots of resistance near 169. Look for support around 166.50 and 166.
Dow (DIA) Weak consolidation day. 258 is the next swing high. 254 is support to hold.
Nasdaq (QQQ) 3 days of consolidation at 182 level which is resistance. 182.93 is the all-time high, and the key support is at 179 then 177.75 then the 50 DMA at 175.62
KRE (Regional Banks) Nice up day. Needs to clear 63.00 level which is also around the 50 DMA. Then the big number to clear is 63.50. Range low is 61 areas and near the 200 DMA.
SMH (Semiconductors) More gains after yesterday’s nice breakout of a month of consolidation. Should hold 107.50 now. More support at the 50 DMA which is also today’s low at 106.80. 109.50 could be resistance. Other key levels will be 110 and 111.
IYT (Transportation) Inside day. Look for it to hold 200 and any move higher to continue. 205 is big resistance, and 206.73 the all-time high.
IBB (Biotechnology) Weak day, but held prior day low. If it can get through 119 then it has a good shot to break 120 which is the big level to clear
XRT (Retail) Consolidation day. Sitting at the top of a multi-week range. A break over 51 would be big.
IYR (Real Estate) Pulled back to the area of the 10 DMA. Needs to hold 81.
XLU (Utilities) Another consolidation day that tested 10-day MA and the breakout level. A move higher could run.
XLP (Consumer Staples) Another pullback day testing the Friday breakout level of 53.75. A move higher could run
SLV (Silver) 14.70 has to clear
URA (Uranium) Over 13.30 will be better
USO (US Oil Fund) Broke 14. If it continues lower tomorrow, momentum shifts to the downside.
TLT (iShares 20+ Year Treasuries) Consolidation day and still under 119 which looks like a resumption of the downtrend. Resistance at 119, and the 120 area. Support at 118.
UUP (Dollar Bull) 25.00 should be support. Small retracement from the top of big range.
LIT (Lithium) Nice up day, momentum may be shifting up. Watch for a confirmed phase change
CANE (Sugar) Watch for move over 7.16.
DBA (Agriculture) Over 17.80 starts to get interesting.
DBC (Commodities Index) Touching the 50 DMA. Over 17.41-50 this starts to get interesting.