An intense selloff hit Wall Street on Monday as traders got rattled by worries of entrenched inflation and a possible recession. The S&P 500 slumped nearly 4% to enter a bear market, now off more than 21% from its record high in January.
The selloff came just in time for the latest Fed meeting, which will see FOMC officials meet over the next two days and announce policy changes and economic forecasts on Wednesday. Expectations over the past month priced in a half a percentage point rate hike, but an up-shift transpired following the elevated CPI reading seen on Friday. Traders now see a 99.8% chance of a 75-basis-point move, according to the CME Group’s Fed Watch tool that measures pricing in the fed funds futures markets.
FOMC meeting begins
6:00 NFIB Small Business Optimism Index
8:30 Producer Price Index
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Prior Session was Cycle Day 2 (CD2): Markets tumbled during this session as there was no where to hide from the persistent selling barrage. “Risk-Off” is the current theme across the investing spectrum. Range was 143 handles on 2.169M contracts exchanged.
…Transition from Cycle Day 2 to Cycle Day 3
This leads us into Cycle Day 3 (CD3): Price is currently below CD1 Low (3896) as the bulls have quite an uphill trek to recover this level, given the current “risk-off” sentiment, though historical odds support an attempt at recovery. Expectation is for continued elevated volatile price moves as traders search for more stable levels. Keep in mind VIX and QUAD OPEX along with FOMC are on tap for this week, so keep your seat belts securely buckled. As such, estimated scenarios to consider for today’s trading.
Bull Scenario: Price sustains bid above 3780, initially targets 3800 – 3815 zone.
Bear Scenario: Price sustains offer below 3780, initially targets 3750 – 3745 zone.
PVA High Edge = 3816 PVA Low Edge = 3761 Prior POC = 3780
Range Projections and Key Levels (ES) Sept 2022 (U) Contract
HOD ATR Range Projection: 3857; LOD ATR Range Projection: 3705; 3 Day Central Pivot: 3933; 3 Day Cycle Target: 3896; 10 Day Average True Range 103; VIX: 34
Nasdaq 100 (NQ)
Today is Cycle Day 3 (CD3)…Price is currently trading within prior value zone (11508 – 11312) during overnight trade activity. Contract Rollover…OPEX/VIX and FOMC are all clustered within a tight time period this week, so expectation is for continued elevated volatility. As such, there are two estimated scenarios to consider for today’s trading.
Bull Scenario: IF Bulls sustains bid above 11430, THEN initial upside estimate targets 11485 – 11520 zone.
Bear Scenario: IF Bears sustains offer below 11430, THEN initial downside estimate targets 11355 – 11312 zone.
PVA High Edge = 11508 PVA Low Edge = 11312 Prior POC = 11430
Range Projections and Key Levels (NQ) Sept 2022 (U) Contract
HOD ATR Range Projection: 11746; LOD ATR Range Projection: 11132; 3 Day Central Pivot: 11992; 3 Day Cycle Target: 11849; 10 Day Average True Range: 402; VIX: 34
Trade Strategy: Our tactical trade strategy will simply remain unaltered…We’ll be flexible to trade both long and short side from Decision Pivot Levels. Continue to focus on Bull/Bear Stackers and Premium/Discounts. As always, remaining in alignment with dominant intra-day force increases probabilities of producing winning trades.
Stay Focused…Non-Biased…Disciplined ALWAYS USE STOPS!
“Knowing is not enough, We must APPLY. Willing is not enough, We must DO.” –Bruce Lee
*****This trade strategy report is disseminated for “education only” and should not be viewed in any way as a recommendation to buy or sell futures products.”
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