Market Chops and Drops into CPI


Cody Huelster

3 min read

Market Chops and Drops into CPI

With election results and the Consumer Price Index (CPI) report as looming catalysts, most of the morning was spent in an indecisive and choppy range. When potentially market-altering events are on the horizon, it is not uncommon for uncertainty to be found in the market. Sideways or volatile price action can indicate big money on Wall Street getting positioned for what could be coming in the next few days. 

Opening bell leads to indecision 

When the opening bell sounded, the S&P 500 futures held a psychological level of 3,800. Our previous Simpler News article, “Markets Capitulate on Election Day”, mentioned this level as the line in the sand moving forward.

This level held as support during the opening drive and sent the market higher off of it. A rally could not start as the selling pressure began to step in after a move of 25-points off 3,800 occurred. This 25-point range is where the price was contained for most of the morning before finding some downside continuation.

When there is a clear line in the sand, a trader can use this level to gauge the market. If the price holds above, an upside move can generally be anticipated. Conversely, downside continuation may persist if the price is below. 

Line in the sand breaks, sending market lower

Once the level of 3,800 broke, the buying pressure was no longer strong enough to continue holding the market up. After breaking the critical level, the rest of the cash session was spent in a downward trend. This price action was not indicative of panic selling, rather than controlled selling. It does not come as a surprise that the market wants to be around the 21-day exponential moving average heading into a significant market event. 

Market-altering event before open tomorrow 

Tomorrow, the most significant catalyst of the week is set to take place at 8:30 a.m. Eastern as the Consumer Price Index will release its data report. 12-month change is expected to come in at 7.9%, which would be a 0.03% decrease from the previous report. Any number lower than the estimated 7.9% may potentially move the market higher. Indexes may fall if numbers are released and come in higher than 7.9%. A coin flip scenario will be if data reveal the same as the median forecast; markets may react either way. 

Levels to have on your chart

Some important levels to be aware of on the S&P 500 futures chart include the psychological levels of 3,750, 3,800, and 3,850. In some more extreme cases, a reaction may put 3,600, 3,650 in play to the downside. On the upside, a severe response could put 3,900 in play. 

Key moving averages that also need to be considered are the 15-day and 50-day simple moving averages (SMA) at 3,810 and 3,800, respectively. In addition, the 21-day exponential moving average (EMA) at 3,785.

The stock market green on Election Day

The Nasdaq and the S&P 500 were negative to close the session. The S&P 500 closed down 2.09%, losing 79 points, while the Nasdaq closed down 2.40%, a decline of 254 points. The Dow followed, closing down 1.92%, falling 637 points.