Core PCE lies ahead. Brace for impact!

Hope you enjoyed a short, calm Thanksgiving week. Don’t get too complacent about that tiny breakout we are seeing in the DOW as we are faced with a major market moving binary event next Thursday. Fed’s favorite inflation gauge, i.e CORE PCE comes out on Thursday morning. This single number will determine if we get a Santa Rally to end the year or this rally fizzles out.

DIA 9m daily – Trying to break out. 

LAST WEEK

THIS WEEK

We are definitely seeing signs of a breakout. And if we weren’t faced with CORE PCE next week, all the technical indicators are pointing towards a breakout and a possible test of $355. However, pay no attention to this until we see how the market reacts to CORE PCE on Thursday morning. If PCE is tame, I fully expect a Santa Rally and a re-test of $355 in as little as 10 days.

SPY 6M daily – Not bad

SPY is chugging along slowly and following DOW’s lead so far. However, momentum and strength indicators are showing a slight weakness.

QQQ 6m daily – Looking nasty!

I have pointed out this divergence in the market for weeks now. The entire tech sector is looking plain ugly. Because of this, I am not going full bull with this market. Staying balanced between bearish and bullish trades is the way to go. It is okay to slightly lean bullish or bearish in your expirations. But don’t go too heavy in any one direction.

Market moving events next week

We have important jobs data coming out on Wednesday, along with Powell’s speech and Fed’s beige book being released. I expect market volatility starting on Wednesday. This ends with the CORE PCE number which comes out Thursday morning. I will be holding on to my put spreads until Thursday as we have no idea what next week will bring.

Earnings 

Surprisingly, we have a decent amount of companies reporting earnings next week. If PCE doesn’t tank the markets, I hope to see some buying opportunities next week.

Macro Analysis (VIX)

We are getting pretty close to that safe zone below 20. CORE PCE will decide if we get an end of the year Santa Rally or not.

Spread Tracker 

See notes in the image below. If PCE stays tame, I will be taking bullish trade for all expirations until Jan 7th.

Key Takeaways

  • CORE PCE  – That’s it. 
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