Houston, we have a problem
The Fed’s preferred inflation gauge just came in hot again, crossing back above the symbolic 3% threshold and pushing rate cuts further out of reach.
Wednesday’s CPI print had kept hopes alive that inflation was cooling (driven largely by its heavy weighting on rental costs), but today’s numbers just killed that optimism dead.
The Core PCE Price Index (excluding food and energy) came in at +3.1% for January, up from December’s +3.0% and above the consensus estimate of +2.9%.
Inflation has now been running above the Fed’s +2% target for nearly five years. Add in a tough international backdrop, with the Iranian conflict layered on top of an already messy tariff situation, and the Fed has no choice but to sit tight and wait it out.
Markets may not like it, but rate cuts are going to have to wait.
The retrospective
Buyer-led pushes toward daily Support 1 [1][4] never made it to their target. Short seller attacks toward daily Support 2, on the other hand, hit the mark every single time [2][3][5].
Today's trading plan
*This is not investment advice. This trading plan is shared purely for educational purposes, to give you a window into the preparation and reasoning of one experienced trader among many.*
Until proven otherwise, short sellers are still in control and staying relatively disciplined about it.
With that in mind, I’m continuing to play the downside, targeting the buyer stop-losses sitting in the kill zone around 46,624 points, and potentially the monthly Support 3 level at 46,425 points if selling pressure holds up through today’s session.
Note: Dow futures contract rollover in effect. I’ve switched to the June expiry, and all price levels from yesterday’s trading plan have been updated accordingly.
Happy trading!
Maxime holds two master’s degrees from the SKEMA Business School and FFBC. As founder and editor-in-chief of NewTrading.fr, he writes daily about financial trading.
The phony war
Controlled Skid
Peace pipe