Trading Plan for Wednesday, May 15th 2024

Trading Plan for Wednesday, May 15th, 2024

Market Sentiment: Bullish, but extremely overbought after 9 consecutive green days. Expect high volatility and the potential for a substantial rug pull triggered by the CPI data release.

Key Supports

• Immediate Supports: 5257 (major), 5215-17 (major), 5208 (major)

• Major Supports: 5162 (major), 5133-36 (major), 5096-5100 (major)

Key Resistances

• Near-term Resistance: 5272 (major), 5302 (major), 5329-32 (major)

• Major Resistances: 5362-64 (major), 5398-5402 (major)

Trading Strategy

• Expect Volatility: Prioritize capital preservation during the CPI release and limit your trading activity.

• Long Opportunities: Look for failed breakdowns at 5257 (if not already broken) or 5215-17 as potential long entry points after a CPI sell-off. Consider the 5162 and 5133-36 zones for deeper longs, but only on quick recoveries and failed breakdowns.

• Short Opportunities: Due to the bullish trend and the unpredictable nature of CPI day, avoid shorting unless the market reacts very negatively to the data. Monitor potential back-tests of 5302 or 5329-32, but proceed with extreme caution.

• Level-to-Level Focus: The breakout from the downtrend channel has created a volatile environment. Trade the provided support and resistance levels rigorously and take profits aggressively.

Bull Case

• Holding Support: If 5217-20 holds after the CPI dip, there's potential for continued consolidation within the 5236-5261 range, setting up for a later breakout towards 5285, 5294, and 5302+.

• Ultra Bull Case (Unlikely): ES would need to hold above 5257 (extremely unlikely) to continue upwards with minimal correction.

Bear Case

• Breakdown Signals: A convincing break below 5217-20, especially if the CPI news is negative, triggers a larger dip. Monitor failed breakdowns at 5162 and 5133-36 for potential long entries.

News: Top Stories for May 15th, 2024

📉 U.S. April CPI Report Released: The U.S. Bureau of Labor Statistics announced April's Consumer Price Index (CPI) figures, indicating a slight moderation in inflation with headline inflation at 3.4% and core inflation (excluding food and energy) at 3.6%. This data is crucial for understanding the Federal Reserve's future interest rate decisions (U.S. Bureau of Labor Statistics).

📊 Impact on Federal Reserve Policy: The CPI data implies a cautious approach from the Federal Reserve regarding interest rate adjustments. Despite a slight decrease in inflation, the rate remains above the Fed's 2% target, leading to market uncertainty about potential rate cuts (Federal Reserve).

🛢️ Sector-Specific Inflation: Significant contributors to the CPI increase included gasoline and shelter costs, which together accounted for over 70% of the monthly rise. Gasoline prices increased by 2.8% in April due to seasonal factors and changes in refinery practices (USA Today).

📈 Global Inflation Trends: The International Monetary Fund projects a global inflation rate decline to 5.8% for 2024, down from 6.8% in 2023. This trend is attributed to tighter monetary policies and a drop in energy prices, though regional variations persist, with hyperinflation in Venezuela and lower rates in developed economies (IMF).

🌐 Market and Trade Impact: High inflation rates can increase export prices, making goods less competitive globally, while countries with lower inflation may see more stable consumer prices and better trade balances. Geopolitical tensions and supply chain disruptions continue to influence these dynamics (UNCTAD).