The Postman Only Rings .03% Times

Year-over-year CPI came in yesterday morning BELOW expectations at +7.7%.

Many traders were positioned for a “hot number” given the recent string of hot numbers and the structure of the market itself---especially given Wednesday’s price action.

For example:

MSFT looked set to test 220.

NVDA looked set to test its 20/50 Bowtie at 130.

BILL had broken to new lows negating a nice Crouching Tiger (double down inside setup)

TGT knifed lower Tuesday with eyes for Phil D Gap at the 150 region.

ETSY looked lower angling for an inverse right shoulder at 92.

These are just a few names that indicated the market door was pried open for lower.

But a rather innocuous CPI opened up a can of whoop @$$ on players loaded for bear.

It’s as if an agenda to ambush shorts and allow a graceful exit for Blackrock and Sequoia et al,  was unleashed to calm the waters after the Crypto debacle on Wednesday.

You can’t have a guy named Bankman cause a run on the banks can you?

You can’t make this stuff up.

The whiff of a stick save after Wednesday’s napalm was in the air.

I say this because after a massive 118 point open on the SPX, the index grinded higher all-day nearly doubling the opening print into the bell.

In a conspicuous change of character from the recent days,  intraday volatility was absent…as was the habitual fade from up to down that has marked the tape.

In sum, the CPI report produced a 1200 point DJIA advance and a 207 point SPX advance.

I see this furious response to a vapid report as another warning regarding the illiquidity of the current market.
ILLIQUIDITY is the mother of INSTABILTY.

Allow me to explain.Markets this week have been producing new records in both directions.

The NYSE on Wednesday November 9, 2022 produced extreme -1946 net advances  (1946 net declines) as the DJIA fell a significant 646 points.

Then on Thursday, the DJIA advanced 1201 points.
The two day swing was the highest of the entire year with a total of 1848 points.

Wednesday’s slide produced net declines of an extreme -1946,

But then Thursday’s market advance scored net advances of +2525…another record for 2022.

Not only were net advances for the day a near record, but the net swing between net declines Wednesday (-1946) and net advancers on Thursday (+2525) set a record for the year and a record for ALL TIME at + 4471 on the NYSE.

TRIN is a short-term trading tool that measures volatility in the stock market.

TRIN represents the relationship between advancing and declining issues by measuring their volume flow.

A rising TRIN depicts a weak market and a falling TRIN depicts a strong market.

The highest TRIN reading of this entire year occurred in today’s first hour at 2.80.

The aforesaid record swings in price, net advancers and TRIN are just three examples of the record swings between negative and positive and back to negative again, occurring almost daily this month.

I show these current market characteristics because they warn of something much more significant.

These price, breadth and TRIN record swings warn that markets have become unstable.

These record swings from one session to the next are warning that this market demonstrates insufficient liquidity to absorb trhe surges and plunges.

These warnings indicate that just as we saw today following within seconds the release of October CPI numbers…

Instability and illiquidity may soon produce a record setting price move.

While I have been pointing to the possibility of 4100 in mid-November for a month, I clearly did not think the market was set up for the biggest rally in two years on Wednesday.

I should have been. Wednesday’s price action disabused me of the idea of 4100 at this juncture.

There is no way one could have known that an innocuous number could have perpetuated a melt-up.

Yet, when a market doesn’t do what it’s advertising, that is when, in hindsight, you want to listen.

That is when the market is talking.

And it was talking about a Gap & Go.

While the SPX may run to 4100 in mid-November it must get past the current region first.

The QQQ chart below shows it is at an important pivot.

The first line to look at is the white dotted line.

It is a  High to Low Line.

Notice the confluence of lines at the 280 region.

There is a white dotted upper trend channel line.

A blue trend channel line.

A Fibonacci 55 day moving average (red)

In particular notice the TWO key retracement lines, the dotted red and the dotted black horizontal lines.

The Q’s have a little more room to probe higher before hitting their head on beaucoup resistance.

If the Q’s clear the 281 region, the indication may be that it is on a trajectory to 300.

What about the SPX?

My Square of 9 Wheel has some interesting synchronicities.

1)      November 15/16 (red) is 90 days/degrees from the important August 16 (red) secondary high.

2)      Straight up and across from this mid-November date is the 482 (4818 all-time high)m purple.

3)      Notice that I full price rev or 360 degrees below 482 is 398 or 3980. Not too much higher than Thursday’s close. Could a 400 SPY strike be the agenda today?

The takeaway is that 3980 is an important pivot as it is 360 degrees below 4820.

Of course the SPX has criss-crossed 3980 many times this year.

However, TIME and price square-out with mid-November and the SPX is spiking into this region.

As well, it must be said that August 16^th was a Time/Price sqauare-out with the 482 all-time high and that mid-August proved to be a major pivot…the secondary high

Consequently, we have a T-Square measuring off the 482 all-time high.