Volatility Soars Ahead of CPI


Joseph Rangel

Mar 13th 2023  .  3 min read

Volatility Soars Ahead of CPI

The S&P futures experienced a tumultuous night of trading, setting the stage for a volatile Monday. The Implied Volatility (IV) was exceptionally high in index options prior to the opening bell, indicating that the market was expecting significant volatility throughout the day. The banking crisis has been a major topic of discussion in the market, leading retail traders to prepare to enter the market at the opening.

Furthermore, economic events scheduled for the week have contributed to the current market volatility. At the opening bell, the market appeared to push indexes lower but managed to maintain pre-market lows. Subsequently, there was a surge in buying volume, leading the market to soar. Market psychology played a significant role in the trap that was set during the trading session.

Despite the negative shift in macro sentiment, the market does not necessarily have to move downward on a daily basis. The flashy headlines, fear of missing out (FOMO), and “easy” money mindset contributed to the psychological trap before the subsequent surge in the market. To hear more about how the banking crisis lead to this monumental bear trap, join our live twitter space, Wednesday, March 15th. Add a reminder to your calendar.

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Upside Resistance Still Being Respected Despite Today’s Rally

The Nasdaq was the first index to approach the resistance level created by the 200 and 50-day Simple Moving Averages. However, it failed just before the cash session. In contrast, the S&P 500 had more room to move higher to reach their respective averages. The Nasdaq continued to experience a surge in the market, while the overall market moved in tandem towards the 21-day Exponential Moving Average in the Nasdaq and the 200-day SMA in the Dow Jones futures.

The significance of the top of today’s session is that the moving averages were respected throughout the trading session. However, by the end of the session, there was a decline in the indexes as they gave back some of the gains made during the market’s opening hours. Notably, the S&P 500 and Dow Jones futures returned to negative territory for the day, whereas the Nasdaq futures closed the day in positive territory, highlighting the current strength in the technology sector.

Economic Events for Tomorrow 

The U.S. Consumer Price Index (CPI) is scheduled to be released at 8:30 a.m. Eastern time tomorrow. The report’s contents are likely to heavily influence market movements tomorrow and for the remainder of the trading week. The Federal Reserve (Fed) is facing a critical decision in the coming weeks regarding the basis point rate hike, and these CPI numbers will play a significant role in their final decision.

Currently, the Fed’s decision range is between 0 and 50 basis points, and the market has been closely monitoring and pricing in the likelihood of each decision. As a result, market volatility has been elevated before the decision, which is set to be announced on March 22, 2023.

Market Rips Higher but Closes Negative

he Nasdaq closed the session in positive territory, while the S&P 500 ended the day in negative territory. The S&P 500 futures closed down by 0.17%, losing 6.5 points, while the Nasdaq futures closed up by 0.44%, adding 49 points. However, the Dow Jones futures closed in negative territory, down 0.29%, and losing 91 points.

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