Clearly, we have a big week in the works with CPI and PPI inflation reports with a ton of attention on the next read of inflation. Here are the CPI expectations according to Bloomberg:
No doubt, this will be interesting and garner much attention tomorrow. The implications of a lower CPI are that the Fed can begin to slow the pace of their interest rate hikes, and vice versa, the Fed may stay the course and raise interest rates a few more times this year which would be a further weight on equities.
What I want to focus on is the price action, specifically where the QQQ (NDX - Nasdaq 100) finishes the week. Why, the QQQ?
The QQQ (NDX) is a “riskier” area of the market, and I want to see the “riskier” areas of the market outperform as a sign of strength
QQQ is -27% ytd which is a healthy correction
QQQ is at a crucial area on the weekly chart using VolumeAtPrice , $297.74
QQQ Weekly chart
What does this chart represent?
The weekly chart of the QQQ includes a shaded area with lines known as a Value Area. The Value Area contains roughly 1 standard deviation of the volume & price of the 2021 year. That is significant because it is a good representation of where the majority of buyers and sellers met up last year. So, price needs to retake $297.74 for confirmation of a significant turn in the QQQ.
In conclusion, it is important to have an action plan after all the economic data we are getting this week and the plan for me is a long position if QQQ climbs into that Value Area end of week , > 297.74 . My first target would be $317 (POC - point of control) in the trade and second would be $341(VPOC on Daily chart, not pictured). If QQQ sells off from here, then simply, no trade and be patient.
Using this approach, I know where the trade will fail if price falls back below the bottom of the Value Area $297.74 that would be my stop price.
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