E-mini S&P 500 Index (ES) Futures Technical Analysis – Stock Traders Focusing on Core CPI

September E-mini S&P 500 Index futures are edging higher on Wednesday as investors prepared for inflation data to set the pace of interest rate hikes by the U.S. Federal Reserve and the impact of rising prices on the strength of U.S. economic growth.

Economists are predicting another month of 40-year high headline inflation that could further solidify expectations for a big rate hike when the Fed meets on July 26-27. However, economists are also saying that “core” inflation may have cooled.

At 11:48 GMT, September E-mini S&P 500 Index futures are trading 3836.25, up 12.50 or +0.33%. On Tuesday, the SPDR Gold Shares ETF (SPY) settled at $160.84, down $0.59 or -0.36%.

CPI Expectations

The Labor Department’s report, due at 12:30 GMT, is expected to show the Consumer Price Index (CPI), which tracks the prices that urban consumers spend on a basket of goods, jumped in June on both a monthly and annual basis by 1.1% and 8.8%, respectively.

However, so-called “core” CPI, which excludes volatile food and energy prices, is seen cooling down to 5.7% year-on-year.

After today’s CPI report, investors will shift their focus to the official start of earnings season. JPMorgan Chase & Co and Morgan Stanley will be the first among big U.S. banks to report quarterly results this week, kicking off the second quarter-reporting season in earnest.

Short-Term Outlook

Trader reaction to the minor retracement zone at 3845.50 and 3870.25 is likely to determine the direction of the September E-mini S&P 500 Index on Wednesday.

Bearish Scenario

A sustained move under 3845.50 will indicate the presence of sellers. The first target is the short-term 50% level at 3794.50. If this level fails then look for the selling to possibly extend into the short-term Fibonacci level at 3757.75, followed by a main bottom at 3741.25.

A trade through 3741.25 will reaffirm the downtrend. This could trigger the start of an acceleration to the downside with 3639.00 the next major target.

Bullish Scenario

A sustained move over 3870.25 will signal the presence of buyers. This could trigger an acceleration into the resistance cluster at 3922.00.

Taking out 3922.00 will change the main trend to up. This could lead to a test of the next main top at 3950.00, followed by the intermediate Fibonacci level at 3988.75. This is a potential trigger point for an acceleration to the upside.