Hi everyone,
August PPI came in mixed but energy-heavy, and markets sold off on the combination of that print plus another big oil spike tied to the Iran conflict.
The Producer Price Index (PPI) for final demand rose 0.4% month-over-month (seasonally adjusted), matching the consensus forecast. Year-over-year it was +5.4%.
Goods jumped 1.1%, almost entirely from energy (+4.2%). Diesel surged 24.1%.
Services were muted at +0.1%.
Core PPI (ex-food and energy) rose 0.2%, a bit softer than the 0.3% expected.
A broader “core” measure excluding food, energy, and trade services rose 0.3%.
The headline number was as-expected, but the energy surge (driven by Middle East supply fears) kept inflation pressures visible heading into Friday’s CPI and next week’s Fed meeting. July’s reading was revised slightly higher.
This resulted in the market breaking down toward our strong 7,600 support level and even trading below it. We are now in bearish momentum. To get back into the range and remove this pressure, we need a breakout above the cluster of resistance up to at least 7,610. If support at 7,570 and 7,528 gives way, there is little to stop a move lower toward longer-term support at 7,290.
Heavy put-call skew in both zero-day and CPI-expiry options already leans toward a modest relief bounce as Friday’s most likely path. Even so, dealers are treating the CPI print as the week’s main event: the implied one-day move is about 59 points, roughly a third larger than what was priced into PPI.
Friday Trading Levels:
Resistance: 7,591 / 7,610
Support: 7,570 / 7,528
