Market Chops Along After Wholesale Inflation Data Release

Following the U.S. Consumer Price Index (CPI) on Tuesday, all eyes were on the U.S. Producer Price Index (PPI) today. 

The wholesale inflation data report was released an hour before the opening bell. The data did not immediately send the market tumbling as the CPI inflation report did on Tuesday, but it did indicate that inflation is not under control.

The importance of this data is that the Federal Reserve (Fed) closely follows inflation data as a measure for how aggressively it continues raising benchmark interest rates, as stated in Simpler Insights. The Fed loudly called for holding to its goal of lowering core inflation to 2% annually, a non-negotiable target. 

With the highly anticipated Fed meeting next Wednesday, the effects on the market may be felt later rather than immediately. For a PPI vs. CPI breakdown, click here. 

Directional swings, chop highlight market session

While there were directional swings throughout the stock market session, price action was non-directional. When price swings occurred, there were a few pivotal moments worth noting.

The first pivot of note came at the point of control (POC) at 3,930. The market was able to hold this level for a time. The market quickly turned around from lows on the day, defending that level of support. Many of the Simpler Trading team members will watch this level closely in the coming sessions.

Once the market shifted, it flew toward the psychological level of 4,000. This level was previously described as the line in the sand by Simpler Trading. The line in the sand is where the bearish sentiment stays intact as long as the market is below it. 

A cover pop hit today, but did not break through 4,000. This left the market vulnerable.

The vulnerability of staying below 4,000 on the S&P 500 futures (/ES) was shown later in the day when the midday sell-off brought the market back to its lows of the day.

Once again, the market ran into POC at the low of the day. This point yielded similar results, sending the market back to previous levels. The rally off this level shows the significance of this level in coming sessions. 

Key levels, reports set up next big move

The battle between the psychological level of 4,000 and POC at 3,930 will be a testy battle to watch in the coming sessions. Breaking either of these levels could send the market quickly higher or lower. 

The key points are still the 15-day and 50-day simple moving averages (SMA) at 4,040 on S&P 500 futures (/ES) and the 21-day exponential moving average (EMA) above at 4,057.

On the downside, the psychological target of 3,900 is still a target area on the chart that should be considered in a trading plan.

The next economic reports are expected early  Thursday morning with the initial jobless claims and retail sales releases. These reports could provide catalysts to help send the market toward its next big move.

Stock market fights to close positive

The Nasdaq and the S&P 500 were positive to close the day after a choppy session. The S&P 500 futures closed up .038%, gaining 15 points, while the Nasdaq futures closed up 0.92%, a gain of 113 points.