E-mini S&P 500 Index (ES) Futures Technical Analysis – Strong Rally Fueled by Surprise Core Inflation Dip

September E-mini S&P 500 Index futures are testing the high for the session shortly after the release of the U.S. Consumer Price Index (CPI) report at 12:30 GMT. Yields are dropping, which is helping to give the benchmark index a boost.

The market is moving higher in the premarket session because the key inflation reading showed a better than expected slowdown in rising prices.

The headline consumer price index rose 8.5% in July less than expected as inflation pressures eased a little. Traders were looking for a reading of 8.7% in July from a year ago.

Core inflation rose 0.3% for the month versus a 0.5% forecast. The dip in core inflation was a surprise and that encouraged stock futures investors to buy aggressively.

On the earnings front, Disney quarterly results are due after the bell Wednesday.

At 12:50 GMT, September E-mini S&P 500 Index futures are trading 4196.75, up 72.25 or +1.75%. On Tuesday, the S&P 500 Trust ETF (SPY) settled at $411.33, down $1.66 or -0.40%.

Ahead of the opening, Tesla announced that CEO Elon Musk sold 7.9 million shares for $6.9 billion, according to SEC filings released Tuesday night.

After the dust settles from the consumer inflation report, investors may shift their focus back to the main driver of the selling this week – trouble in the chip sector. On Tuesday, Micron warned on revenue and negative cash flow. That came a day after NVIDIA slashed sales forecasts.

Daily Swing Chart Technical Analysis

The main trend is up according to the daily swing chart.

The trade through 4188.00 signaled a resumption of the uptrend. A move through 3723.75 will change the main trend to down.

The minor trend is also up. A trade through 4103.75 will change the minor trend to down and reaffirm the shift in momentum. A move through the minor bottom at 4080.75 will also mean the selling pressure is getting stronger.

On the upside the nearest resistance is a long-term pivot at 4250.25. On the downside, the nearest support is a long-term 50% level at 4169.25, followed by a minor pivot at 4057.25.

Daily Swing Chart Technical Forecast

Trader reaction to the long-term 50% level at 4169.25 is likely to determine the direction of the September E-mini S&P 500 Index on Wednesday.

Bullish Scenario

A sustained move over 4169.25 will indicate the presence of buyers. Taking out the main top at 4204.75 will signal that the buying is getting stronger. This could trigger an acceleration into another long-term 50% level at 4250.25.

Bearish Scenario

A sustained move under 4169.25 will signal the return of sellers, while taking out 4124.50 will put the index lower for the session. This would put it in a position to form a potentially bearish closing price reversal top.