Good evening team,
The US inflation data showed another miss on the MoM report with a 0.3% increased compared to a 0.4% forecast. The stock market might not be ready for a breakdown from the rising wedge structure so we need to be prepared for another move to the upside despite all the negative economic conditions. A second miss on the inflation forecast is playing into the FED’s transitory theory meaning they could look to push back bond tapering. This is giving the stock market something to cheer about.
SP500 Daily Chart
The rising trend line has failed to break down, there has also been a doji candle close, which can indicate a reversal. So, we need to play what we see here and buy into the FED’s transitory theory.
SP500 4 Hour Chart
Trade Setup: BUY market execution, current price 4485 (Focus Markets), stop loss 4435 and take profit left open.
Stop loss: 50 pips
We will have both a short and long trade running at the same time. Theoretically, one position should win and one should lose. Our sell trade is at breakeven, so I favour a move to the upside in the short term.