Post CPI Reversal Reason and looking forward

Price action, post CPI release –

Thursday 13 October 2022 was quite an odd for most investors/traders out there. CPI went bad – 8.2% YoY, 0.4% more than previous month, above expectations; markets indeed reacted accordingly, however then an amazing reversal took place, right when everyone braced for capitulation –

Post CPI price action, S&P 500, 13 Oct 2022.

The story behind it

As usual it’s not certain at this stage, however the broad perception now is that algos might hit an important fib level for the S&P 500. The 3505 level was a 50% retracement from Covid-19 bottom (March 2020) lows of about 2200 and Jan high of about 4800 – Credit for Katie Stockton and ‘The Maverick of Wall Street’ on this finding.

Reversal reason in action – S&P 500

Looking closely at those fib levels

Looking closely at those fib levels from March 2020 low till Jan 2021 high, we can see that they function as strong support-resistance during the past time since then –

Daily view of S&P 500

One can use a momentum indicator (MACD in the screenshot) to identity a confirmed breakout of the fib levels – and we’re definitely not on such a situation right now, thus according to TA (not fundamentals!) a breakout from current fib level soon is unlikely.

Leave a comment

Your email address will not be published. Required fields are marked *