Nasdaq, S&P, Dow futures rally, but trading could stay choppy into Friday CPI

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Stock index futures point to a solidly higher open Monday after the broader market made it eight losing weeks out of ten with the decline Friday.

Nasdaq 100 futures (NDX:IND) +1.3%, S&P futures (SPX) +0.9% and Dow futures (INDU) +0.7% are higher.

The 10-year Treasury yield is flat at 2.96% and the 2-year is up 1 basis point to 2.68%.

Trading could be a little thinner with most of Europe closed for a holiday.

“US markets are likely to fixate on Friday’s consumer price inflation data,” UBS chief economist Paul Donovan said. “This is not the Federal Reserve’s preferred inflation measure. The monthly change is likely to be boosted by fuel and air fares.”

“Base effects mean that the core yearly change should decline. Slowing wage growth will have less of a direct impact on inflation, because profits and pricing power rather than labor costs have driven post-pandemic prices.”

The S&P has been trading in a range of 4,300 to the upside and 3,800 on the downside since the start of May.

“There are three key indicator levels to break above to favor a continued rally beyond 4114-4160 resistance on the SPX: (1) 3123 on the US top 15 most active advance decline (A-D) line; (2) 46.3-48.7 on percentage of SPX stocks above 10-day MAs; and (3) 1.10-1.11 on the 3-month VIX relative to the VIX,” BofA technical strategist Stephen Suttmeier wrote in a note.

“If these signals fail to materialize, the immediate risk would shift back to the downside with the 3800s key support. The rising 200-week MA near 3500 offers important support for the 2022 cyclical correction (aka bear market), or mean reversion, within a secular bull market.”

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