Market analysis for Sept. 12, 2024

Welcome back traders. Thurs. brings us PPI and Jobless claims, following up CPI's report from yesterday.  I've always said, CPI can be a bigger catalyst than FOMC. The move yesterday was something to behold, even if I was caught on the wrong side near the close. Three sigma moves (or close to that) are rare and tough to trade with credit trades. I got beat up to the tune of about a $12,000 loss. Part of that was a -$1,100 loss on scalping. It looks like I'm up about $500 now on our long /MNQ so hopefully I can regain some of that loss today. A look at the price action from yesterday shows the big reversal. 

The day started off well with not one but two successful Theta fairy trades, thanks to the CPI premium. All three of our earnings trades on GME, PLAY and WOOF ended up profitable as well but it wasn't enough to counter the calls on SPX and NDX that got overrun. It was a travel day for me yesterday so I purposely waited until later in the day to initiate our 0DTE setups. We had already recovered from the morning swoon when I put the call side on but obviously I didn't wait long enough. I'll be more patient today. Futures have been treading water overnight. PPI and Jobless claims will likely lead the way this morning.

​September S&P 500 E-Mini futures (ESU24) are up +0.24%, and September Nasdaq 100 E-Mini futures (NQU24) are up +0.27% this morning as investors braced for crucial U.S. producer inflation data while also awaiting the European Central Bank’s interest rate decision.
In yesterday’s trading session, Wall Street’s major indices closed in the green. Solar stocks soared after Wall Street largely declared Vice President Kamala Harris, who is viewed as a supporter of the energy transition, the winner of Tuesday night’s debate with former President Donald Trump, with First Solar (FSLR) surging over +15% to lead gainers in the S&P 500 and Enphase Energy (ENPH) rising more than +5%. Also, chip stocks gained ground, with Arm (ARM) climbing over +10% to lead gainers in the Nasdaq 100 and Nvidia (NVDA) advancing more than +8%. In addition, Albemarle (ALB) gained over +13% after a Reuters report indicated that Chinese battery producer CATL plans to cut lithium production levels. On the bearish side, GameStop (GME) tumbled about -12% after the videogame retailer reported weaker-than-expected Q2 revenue.
The U.S. Bureau of Labor Statistics report released on Wednesday showed that consumer prices increased +0.2% m/m in August, in line with expectations. On an annual basis, headline inflation cooled to +2.5% in August from +2.9% in July, in line with expectations and the smallest increase in 3-1/2 years. At the same time, the core CPI, which excludes volatile food and fuel prices, advanced +0.3% m/m and +3.2% y/y in August, compared to expectations of +0.2% m/m and +3.2% y/y.
“This isn’t the CPI report the market wanted to see,” said Seema Shah at Principal Asset Management. “The number is certainly not an obstacle to policy action next week, but the hawks on the committee will likely seize on [the August] CPI report as evidence that the last mile of inflation needs to be handled with care and caution.”
Meanwhile, U.S. rate futures have priced in an 87.0% probability of a 25 basis point rate cut and a 13.0% chance of a 50 basis point rate cut at the upcoming monetary policy meeting.
Today, all eyes are focused on the U.S. Producer Price Index, set to be released in a couple of hours. Economists, on average, forecast that the U.S. August PPI will come in at +0.1% m/m and +1.8% y/y, compared to the previous figures of +0.1% m/m and +2.2% y/y.
The U.S. Core PPI will also be closely watched today. Economists expect August figures to be +0.2% m/m and +2.5% y/y, compared to the previous numbers of 0.0% m/m and +2.4% y/y.
U.S. Initial Jobless Claims data will be reported today as well. Economists predict this figure will hold steady at 227K, consistent with last week’s number.
On the earnings front, Photoshop maker Adobe (ADBE) is scheduled to report its Q3 earnings results today.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 3.676%, up +0.69%.

Most of our indicators from yesterday have turned bullish.

There's still some overhang with the 50DMA. The SPY and DIA have recaptured it and the QQQ's are close.

Today is very much a continuation of yesterday, for me. PPI usuallly confirms the CPI numbers of the previous day but lately that has not been the case. I abstain from looking at levels today as well as the algos are going to run the show. I do believe today is a critical one for developing directional bias. #1. We are still fighting to establish the 50DMA's as a true support level. #2. While not trying to define support/resistance levels for today, it is important to note on the /ES 2 hr. chart a couple key areas. The red line is the 200 period M.A. and has worked as resistance overnight. The purple line is the Point of Control and has been the big resistance zone for quite some time now. If the market can clear both of these resistance levels then we enter fresh bullish territory. It won't be an easy task if past attempts are to be extrapolated into today.

Never the less, I continue with my bullish bias today and most likely will stick with that unless we can break back down below the 50DMA (Green line). 

Our trade docket for today: Continue working our IWM setup. We should be booking a profit on our two earnings plays from yesterday in KR and SIG. Continue working our QQQ trade and booking our profit on our SPY trade. We also have two more potential earnings setups in RH and ADBE. We'll work our NDX and SPX 0DTE's again. Hopefully today I'll be quicker to adjust, if needs be.

With no zoom feed today, here's a rundown of our model portfolio:
#1. Oil. /MCL We are continuing to hold our positions. Oil is getting down to a three year low. Our call side looks to be almost fully profitable and I'm planning on taking a long assignment on the three put contracts we have working. We'll look at them closer as we near expiration for a potential roll but I think this is a good level to get long oi.
#2. /MNQ. I'm still using the /MNQ long futures contract for scalping today. The cover on it cost me a loss of $1,100 yesterday so I'm looking to get some back today. I'll wait until about mid day to cover it.
#3. /NG. Nat gas hasn't moved much lately. We've covered our long about as aggressively as I'd like with this much time left. Next week we can look at adding a bit more cash flow potential to it but $900 a month is about the upper limit without over leveraging too much.
#4. /ZC. Corn continues to just hover around our short strike on our CCS. There's plenty of extrinsic in this position so as long as it doesn't push much higher I'll just let that work.
#5. IWM. Premium is good and we'll keep working that strangle today for more income potential.
#6. KR. Should be a book profit at the open.
#7. LEVI. We need about $1,000 more income to get the trade to a reasonable profit level. We've cash flowed it quite a bit. Just waiting for earnings to hit.
#8. NDX/SPX. I'll wait...agian, until later today to start the 0DTE setups. It didn't help me yesterday but I believe visability is more important than tryng to grab the most premium right out of the gate.
​#9. QQQ: We started our QQQ 4DTE late this week. We'll add to it again today.
​#10. SIg. Should be a book profit right out of the gate today.
#11. SPY. Our 4DTE SPY trade was started Monday with a bullish zebra at it's core. That's been very successful for us this week and we are well beyond our profit target so I'll be looking to lock that profit in today.

As mentioned above, we have ADBE and RH as new potential earnings plays as well.

Let's see if I can get a better result today. Yesterday was not a fun one for me!