CPI-- Has Most of the Damage Been Done Already (Yesterday)?

Friday, June 10, 2022-- Mptrader.com Out Front: CPI, and the Investor Reaction To It...

Yesterday's last hour plunge in ES from 4112 to 4016 (-2.4%) smelled like the big institutional accounts decided to reduce or hedge exposure to this AM's CPI just in case the Y-o-Y headline figure comes in ABOVE consensus of 8.3%, which more than likely would trigger a confluence of algo, knee-jerk sell programs. 

From a technical perspective, the 100+ point plunged sliced and sustained beneath key pattern support at 4060 to 4073 representing BOTH a week-long support plateau AND the lower boundary of what could have been a developing "Right Shoulder" of an Inverse Head & Shoulders formation in progress since mid-April. 

The plunge well below 4060, to 4016 yesterday, and to 4006.75 in this AM's pre-market certainly obliterated the week-long prospect of a Bull Flag continuation setup, and invalidated the prospect for a big Inverted Head and Shoulders Base formation. 

Instead, the post-May pattern now is searching for a "third significant low" to accompany the 5/12 low at 3857.00 and the 5/20 low at 3809.50. My optimal downside targets for the establishment of a forthcoming "third low" are shown on my attached Hourly Chart at 3970/70, 3950, and close to 3900.

At each of the above-mentioned target levels, I will be looking for signs of momentum non-confirmation, selling exhaustion, followed by a sharp upside reversal that exhibits bullish structure within the initial bounce. 

Why am I looking for a U-Turn from lower levels rather than downside continuation to new post-January corrective lows beneath 3800? Because my bigger picture work argues that the May upmove from 3809.50 (5/20) to 4204.25 (5/30) represents a completed first upleg of a larger-developing counter-trend rally period that is "missing" a secondary rally to complete the counter-trend rally pattern. I am looking for the initiation of the secondary upleg that will propel ES above 4204.25 into the 4300-4400 target zone prior to a resumption of the dominant bear phase... Last in ES ahead of the CPI Report in 22 minutes is 4018, circling unchanged off of an overnight low at 4006.75...

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