As others have noted one way or another, Tuesday's price action felt like the calm before Thursday's Consumer Price Index storm. This is especially true in the Nasdaq Composite, where the volume on the Invesco QQQ Trust (QQQ) was the lightest since the day after Thanksgiving. But low volume notwithstanding, the price action wasn't bad and the bulls scored the W.
The QQQ closed Tuesday's session above its 10-day and 21-day exponential moving averages (EMAs) and with the 14-period Relative Strength Index (RSI) back above 50, I've slid quietly back into my bull suit. The caveat to my bullish posture is that QQQ is still trading within a choppy and generally trendless environment on anything other than a very short timeframe.
While I love to find reasons to be optimistic over a higher timeframe, the most positive thing I can point to is that QQQ is trading closer to the bottom of its multi-month price channel than to the top. If you're trading QQQ, don't succumb to fear of missing out (FOMO) if upside momentum builds ahead of Thursday's CPI report. And if you're a day trader, keep $269.50 marked on your chart as a sustained trade beneath that level likely kills the bullish momentum and sends prices back toward the $260s.
Tuesday's lower-volume rally may have resulted from traders trying to get ahead of the CPI report. With sentiment clearly shifting toward a "peak inflation" narrative, I don't think we can rule out a sharp sell-the-news reaction if year-over-year CPI comes in at or below the current 6.6% estimate and stocks gap significantly higher to start the day. At this point in the cycle, investors appear to be more concerned with the payroll figures and measuring the potential for a soft landing versus something more menacing.
