CPI Game Plan - 09.05.2023

S&P 500 day of indecision lends more support to the bearish case, and the sellers are likely to appear with more force and somewhat better success today. The weak seasonality together with hawkish Fed bets (3m T-Bill made a new high at 5.31% now), will keep exerting pressure on the banks and their deposits situation).

Today‘s outlook is bearish, pointing to a break below 4,136 on a closing basis – and the countdown to recession keeping a lid on risk-on metrics (cyclicals, smallcaps) is on. Even crypto joined, which is a good sign no matter daily improvement in Nasdaq market breadth.

Depending on the strength of pre CPI positioning – my detailed prognosis for all of this week‘s macroeconomic data can be found in yesterday‘s extensive article - the bears can think about 4,128 (quite minor support) and crucially 4,115. Choppy day with a bearish bias is what‘s most likely ahead as tomorrow‘s hotter than expected inflation data would spur stock market selloff.

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Let‘s move right into the charts (all courtesy of www.stockcharts.com) – today‘s full scale article contains 6 of them.

S&P 500 and Nasdaq Outlook

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Poor moves in KRE, XLF, XLB and XLI while tech including semiconductors continues underpinning the markets, don‘t bode well for good S&P 500 returns on the long side. Following the break of 4,039, the selloff would accelerate, but we‘re still long way from that figure. The preconditions are however in place, and crypto with banking are but the only indications.

4,078 break is the ultimate bearish objective to give them the clear upper hand (midweek?), and start ushering passive indexing readjustments aka broader synchronized selling.

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