U.S. Equities Open: PPI And The S&P 500
Shain Vernier • 3 min read
This morning has been an active one on the economic news front. As my colleague Skerdian talked about earlier, it is “inflation day” with the U.S. Bureau of Labor Statistics releasing the Producer Price Index (PPI) numbers.
Going into next week’s FOMC meeting, can anything stop the rally in the U.S. Equities indices?
PPI is a number that measures the inflation facing commodities. It stands to reason that its reading has a considerable impact upon the USD and U.S. equities.
Event Previous Projected Actual
PPI (MoM, Aug) -0.1% 0.3% 0.2%
PPI (YoY, Aug) 1.9% 2.5% 2.0%
PPI without Food and Energy (MoM, Aug) -0.1% 0.2% 0.1%
PPI without Food and Energy (YoY, Aug) 1.8% 2.1% 2.0%
As a whole, the numbers are a mixed bag. Several are up from the previous release but still under expectations. Arbitrary metrics such as PPI are of limited use to the public, but academics often find deep meaning in them. Rest assured that members of the FED are paying close attention to the PPI stats and how the markets react.
The markets have taken the PPI release in stride, with the DJIA and S&P 500 down moderately. A potential retracement during the U.S. session for the December E-mini S&P 500 futures contract may give us a shot at a very cheap scalping play.
December E-mini S&P 500, Daily Chart
In this market, it is going to be a challenge to get a full blown sell off to a relevant Fibonacci retracement level. But there is a potential long trade that may come into play later on in the U.S. session.
The Trade: Trades don’t get much tighter than this. If you do not have an excellent broker, then choose a broker with the infrastructure in place to get you the best possible fills. Here is the trade:
Long December E-mini S&P 500 futures from 2486.25 (August’s High)
Stop at 2485.00 (Beneath Tuesday’s low)
Take profit at 1:1 R/R, looking for 5 ticks at 2487.50
This is a trade that should be fast and marked by heavy participation. In the event that there is not robust action to the bull from this area, the tight stop loss will serve us well!