Outlook 07/12

Context: Janet Yellen is taking questions at her semiannual congressional testimony. The FOMC, she says, is "well aware" that inflation has been running below its 2% target for years, and the dangers inherent in that. Labor markets continue to strengthen, though, and that should put upward pressure on prices. It would be "premature" to conclude that we're not on the path to 2%.

As to whether the Fed might consider lifting its 2% inflation target, that's not under discussion, says Yellen. Balance-sheet normalization: "Should begin this year ... relatively soon." In addition to the "uncertainty" over higher inflation, traders are focusing on another opening statement line in which Yellen said the Fed Funds rate doesn't have much farther to go before reaching a neutral policy stance.

Plan: We are moving above LVN 2437 and volume profile shows bullish imbalance towards BT 2445, so we've 2 options:

A) If market holds LVN-VWAP-VAL 2437-2436, then try to be a buyer towards upper edge BT 2445. If 2445 holds, stay long towards ATH 2451.50 and GBT 2457.

B) If market fails at LVN 2437-2436, then try to become a seller leaning on edge 2436 towards half gap 2430. If 2430 fails, stay short towards YVAH-GAP 2425.50-2424.75.

Tips: In order to take a low risk entry, try to lean as close as possible to a LVN or volume range edge.

Value references /ES: VAH 2425.50 POC 2424 VAL 2419

Today's Economic Calendar

01:00 PM 10-Year Note Auction
02:00 PM Fed's Beige Book
02:15 PM Fed's George speech

Disclaimer: All information on this outlook is for educational purposes only and is not intended to provide financial advice.

Subscribe now to receive early outlook and updates by email