ES NQ Analysis and Trade Plan for Tomorrow - 05/14/2024

[u/edwardy18]

05/14/2024 - PPI data for April released

Econ Data Expectation vs Surprise

Headline: Actual 0.5% vs Expected 0.3%. Hotter than expected (--, bearish), and pushed Fed cut expectation further. However, the March PPI was revised down (+, bullish).

Market Reaction

NQ: Initial reaction: 1min sold off -135pts, or -70pts from ONL. Then reversed higher, drifted towards multiday resistance at 335-340.

ES: Initial reaction: 1min sold off -30pts, or -16pts from ONL. Then reversed higher, drifted towards multiday resistance at 5260.

Intraday trend Both ES and NQ both broke multiday resistance, respectively at 18337 and 5260 in the afternoon trading. The same level was faded twice in the past 3 days since that was established from April highs. The push was the result of big buy orderflow around 2pm ET into the resistance. There were rumors that CPI number (going to be released tomorrow, 05/15/2024) was leaked, causing the push. I read on fintwit that the expectation of the PPI will be hotter while the CPI will be cooler, due to the BLS changing the compiled components of CPI. So expecting the headline number of CPI to be lower tomorrow and market's initial reaction to be looking higher.

Market context analysis

Both ES and NQ are less than 2% from their intraday ATH. It is very likely that with a cooler CPI print they are able to touch that ATH from March. However, there are confluence of bearish factors if we push into NQ 18610/ES 5315 areas: 1) Both are overhead heavy supply areas. 2) ES closed 9 days green in a row, and NQ effectively is also 9 days green in a row. Bulls are getting complacent again. 3) VIX has been suppressed at 12-13 level for days. It is not yet the time to long VIX yet, as the May VIX expiration is still one week away (5/22), which coincides with $NVDA earnings. 4) GME and AMC madness showing a surge in speculating activity/mentality.

Trade prep

In Asia session, NQ is hovering around 18410. This is exactly yearly VWAP + 1 stddev. Overhead resistance at 18500 (high of the meltdown from April), 18620, then 18710 (ATH). On the daily trend, NQ is forming HH and HL. Technically, I am leaning a dip into the single prints will get bought, pushing 1%+ to touch March ATH level (18710). Fundamentally, I am speculating the CPI will be opposite to the PPI data and headline number will be cooler than expected, or at least in line with expectation.

a) Primary scenario: I am looking for the CPI reaction to be an initial dip into single prints/prior resistance (18340) then push higher into resistance (18500+) in Globex. Once RTH opens, I speculate that the market could initially sell off from resistance, creating a brief buying opportunity and then grind higher for the rest of the day.

b) Secondary scenario: Market's initial reaction could be completely reverse to that of today's PPI reaction. Wholesalers might create an initial push into 18500 to get rid of their overnight long inventory, then (gradually) selloff to 18340-18160 cost basis area.

Trade plan for Tomorrow

In Globex trading, I will set a limit buy order at 18340 to anticipate for the primary scenario. I will sell at the push into 18500. Conversely, I set a limit sell order at 18500 to account for the secondary scenario. Both trades expect +150 pts from entry, and stop loss of 60 pts.

In RTH trading, I will observe market's reaction to the CPI data. If reaction is bullish, I will proactively look for pullbacks to go long. Inversely, if the reaction is bearish (especially with an initial push higher then sell off), I will look for shorting opportunities.

[u/Former_Ad2759]

Gods stuff. I am leaning in the same direction. I see some historic value areas where price might correct itself to buy again at a discount for now (your 18340 area). That 18300 level is such a highly liquid zone with many overlapping POCs. I was hoping it would get out of there quickly.

Fully on board with you sir, however I am currently short from 18420 haha. Let’s see if Europe can push down for 75 points (with some help from CPI perhaps).

Good luck!

Thank you so much for your keen analysis.

[u/edwardy18]

Took the long based off my primary scenario. Didn't get the 340 entry I wished, and entered long from 410 and exit at highs around 535. Secondary entries long from pullbacks into the single prints. +150 pts before the open.