 Hey everyone, this is Mike Kramer of Mock capital checking in today is Wednesday October 11th Tomorrow will be Thursday October 12th, and we'll have the big CPI report coming at 8 30 a.m The PPI report actually came in hotter than expected today And this is something to keep an eye on for tomorrow. It was interesting because within this PPI report We actually saw food and prices actually rise at a much faster pace than what was the previous month Producer prices final demands for food were up 0.9 percent in September and that was versus a decline of 0.5 percent last month So not exactly sure how if this is going to feed right into CPI tomorrow But it is something worth noting and at least being aware of Because that certainly came in hotter and see PPI overall came in hotter on the headline in the core the Food energy and trade year-over-year came in a little bit below So for tomorrow at least we're looking for CPI to rise by 0.3 percent Month over month 0.6 percent last month X food and energy looking for an inline 0.3 percent Year over year is expected to dip to 3.6 percent to 3.7 Course expected to be four point one down from four point three At least based off of CPI swaps. We're looking for a three point five five number This is basically in line with what these street estimates are But what's interesting is that when we look at some of the other models we have the Cleveland Fed which is estimating three point seven we have The the Kalshee Website which is an online marketplace Forecasting three point seven you have the Bloomberg economics Forecasting a three point eight five year-over-year number So there is quite of a dispersion between all three of them in the past at least the CPI has You know come in below most of these expectations in the past. So this is something to be aware of Just because the last month we saw CPI actually come in ahead of the swaps the Bloomberg estimate and the Kalshee estimate the only one that missed was on the Cleveland Fed But the swaps have tended to be the more accurate at least in recent months. So Again, we're looking for the three point five number But there is some largest version between some of the models and given that you had a hotter food price index on the on the on the PPI and then also this month interestingly the manheim Used auto index actually increased on a month over month basis and again There's not a direct relationship But you can see that to some degree when these when this index is rising you're seeing You know the month over month number in CPI rising so Again, if you're gonna kind of I guess bet on something I guess the data sort of suggests maybe there could be an upside surprise tomorrow If you want it to play that because certainly it looks like there's a couple of data points That suggests that there's an upward bias to this number And so, you know when we look at the equity markets overall And we look at the S&P We had this We had this rally now the last couple of days and I have some Elliott wave patterns drawn out because I'm trying to map out where we are and What I found interesting to this point is that we've rallied this was a 100% extension off of wave a nearly perfect hit And then it looks like we have a five wave Impulse down and then we had an ABC restructure retracement up this retracement to this point is a seventy eight point six percent retracement of this decline and This and this extension is almost a 100% extension off of wave a so You know at least you've seen now the S&P 500 rally four days in a row and five out of the last six days and so there's certainly An argument to be made that you know, we could be seeing a trend reversal here I guess the other thing if we look at you can see that we're basically now at the the base of this Gap at forty three seventy five sometimes these can serve as resistance levels as well So, you know, I think the CPI data tomorrow is going to tell us a lot about which way the markets going to move This was a pretty big, you know rally into the close So off of the Fed minutes and so I would think that it wouldn't be surprising obviously if we got a hotter number to Undercut this low pretty quickly tomorrow and then fill this, you know gap down here and Then potentially setting up a steeper drop on the flip side, you know You take out this high really quickly and you know You have the opportunity to fill the gap up to forty four hundred and maybe even go all the way to forty four twenty the problem though is that you have The market right now at least the options market is only pricing a seventy five basis point move in the S&P 500 based off of a long straddle position For the if you buy a put in a call for exploration tomorrow So the markets really not pricing in a huge move and CPI and that would imply that we see, you know a subdued Sort of move and you know, maybe you get You could probably get a move up to around forty four, you know, twenty or so forty four hundred Likewise, you could maybe get a decline somewhere into the, you know forty three forty region and certainly it doesn't seem all that Potentially hard to maybe even retest the forty three hundred region Another thing that's worth noting is that the the call wall is around forty four hundred right now and We look at tomorrow's expiration date We look at the gamma levels at least as of today There was a very large amount of call volume here at forty four hundred and that's likely to serve as some form of resistance as Well to limiting the upside if we go out to October 20th Exploration date you can also see that there's a very large amount of call and put gamma here up at forty four hundred And that's also likely to act as a level where you're likely to see the market top out on a move higher so again At least the way it seems right now There's certainly a wave count to suggest that maybe this is the end of the rally here And we're due to see a steeper decline While the upside seems a little bit more limited right now given how the options market is positioned going into tomorrow's report When we look at the NDX This is also an important level here. You can see we were testing this 15,240 region we tested it three times now over the last couple of days So again a better than a hotter than expected CPI report I would think leads to us undercutting this low Pretty quickly tomorrow and then with the opportunities to fill some gaps down to 15,045 or so likewise, you know, you can see that there's a clear trend line in Here and again, this would be your you know your upside here to 15,325 there's also a Gap at this level here that could potentially serve as another target for the S for the Nasdaq on the upside at 15,470 but that would require going through this trend line and Again, I don't really know at this point whether or not the Nasdaq is going to have the juice to do that Just because we've already seen a Fairly, you know steady advance four days in a row up five out of the last six days So again, this is something to be to be mindful of it looks like at this point We've come back above this this big uptrend and so at least for now You know you can make an argument that yes, we're still in a downtrend You have you know a low here a lower low here and you still have you know a series of lower lows So really until you start getting above this level here It's really tough to say you're out of the woods for the longer-term picture when you look at the Dow The index really continues to just go nowhere. It looks like right now At least we're seeing you know what could potentially be a Reverse head and shoulders when you look at it really quickly on the Dow Which would suggest maybe there's also a little bit more upside here But again, this is largely Going to be dependent upon the data because when you know head and shoulders patterns fail They tend to serve as continuation patterns. And so if you were to See the neckline break here around this 33,000 850 region I would think that that probably means that you could see Something, you know larger another 3% tack on and maybe get back up to and start testing this 34,600 region again Likewise if this turns out to be a failure And again, it looks like you have an ABC pattern here Which would suggest that maybe this is the start of a retracement We can measure this out and you can see that that's also almost a 100% extension off of this leg higher So again, this could mark a potential high for the Dow and if this were a If we were to get a hotter number tomorrow, I could see us gapping below this 33,600 region and maybe testing 33,250 or so in the coming days. So again, there's potential for upside on all of these I think that it's going to really be dependent on the data I think if you had to have a bias in terms of the way the data comes in Again, this is a tough call. It's very tough to call CPI But again, you have a food number that clearly came in hotter how that feeds into the CPI Could there be a one or two month delay? But certainly you have to think that there's a potential there the manheim use car index certainly has a relationship to the upside based off of what we've seen in the past and You don't you definitely have a few models that are pointing to Higher CPI rates. So again, this The only thing really pointing to something lower or something more in line at this point is a swap market and this has been a fairly accurate Reading over the last few months. So best of luck tomorrow. I hope you find this helpful. Talk to you soon. Bye