Cooling Inflation Rally
The Nasdaq Composite had a powerful week, with a gain of just over 3% as positive data on CPI and PPI was reported, indicating that inflation is beginning to cool down, and the Federal Reserve's interest rates decisions are proving effective.
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We entered the week range bound, however, on Wednesday, following the release of CPI data, the market really started to move, pushing above recent highs.
A noteworthy event on Friday was an "oops reversal" to the downside. This term refers to a situation when price opens above the high of the previous day but then reverses back into the previous candle. This happened today, and a similar occurrence took place back on June 16th. Typically, these situations tend to be followed by a downward continuation.
Given the '“oops reversal” and the stretched nature of the Nasdaq as pointed out by my Pullback Warning Indicator, I will be watching for a normal and healthy pullback, somewhere in the 3% to 5% range. This is not a guaranteed to happen, but if it did, it would place us somewhere between the gap fill and the psychological level of 13,500.
The Market Navigator remains in a Power Trend as the Nasdaq remains above the key 21 and 50 day moving averages.
The exposure count is at it’s highest possible level, 7.
The distribution day count fell by 2 this week to 3.
To learn how distribution day’s become irrelevant, more on the “oops reversal” and my Pullback Warning indicator please watch the video below.
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