Wednesday's Market Minute: Bullish Window of Opportunity

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There may be a window of bullish opportunity for traders in the short term after this morning’s CPI didn’t give too much of a shock. Firstly, the Nasdaq is getting support from a hugely important trendline that connects the lows of the index going back to September 2020. It’s going to take some intense selling pressure for that to break. That’s around 15,600, where we broke through on Monday but quickly rallied back to end above. 

There is big technical support, and this morning there could be some fundamental support. With month-over-month CPI inflation tempering, there is evidence that inflation due to supply chain imbalances could be peaking. Now, inflation may subside to a high enough level to keep the Federal Reserve on the tightening path it’s outlined, but that will be a different type of inflation. The next stage of inflation will be more directly tied to the job market as employers hike wages to encourage workers to return to the market to fill the roughly 11 million jobs available. 

While the challenge of inflation strikes me as a very durable trend, we could have a sufficient window between peaking supply chain inflation and warming wage inflation that creates an opportunity for equity bulls for which inflation is the main macroeconomic threat. 

The U.S. dollar breaking down this morning is evidence of this. The greenback has been closely tied to inflation and hawkish rhetoric from the Fed. A baseline view of the market right now is that rallies may ultimately be sold as tech continues to roll over in this new tightening policy regime, but the logic looks ripe for a short-term bounce. If bulls can’t take it into the weekend, beware that trendline support in the Nasdaq of 15,600 – if that breaks, we could get a sharp move lower.

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This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.