Daily Brief - Wednesday, 8/12/25
Hot CPI Fuels Rate Cut Hope Rally. 24k Now Within Striking Distance
Disclaimer
This publication and its authors are not licensed investment professionals. Nothing posted on The Shmuts blog should be construed as investment advice. Do your own research.
News Docket
Thursday - 8/14/25
8:30am EST - US PPI YoY (Expected: 2.5%)
8:30am EST - US PPI MoM (Expected: 0.2%)
8:30am EST - US Core PPI YoY (Expected: 2.9%)
8:30am EST - US Core PPI MoM (Expected: 0.2%)
8:30am EST - US Initial Jobless Claims (Expected: 225k)
Friday - 8/15/25
8:30am EST - US Retail Sales MoM (Expected: 0.5%)
9:15am EST - US Industrial Production MoM (Expected: 0%)
10:00am EST - University Michigan Sentiment Prelim (Expected: 62)
Prior Session Analysis - Tuesday, 8/11/25
Session Stats
Open: 23,733.00
High: 23,950.00
Low: 23,622.00
Close: 23,934.50
Settlement: 23,938.00
Range: 328.00 points / 1,312 ticks
Volume: 489,756
Open Interest Change: +12,459 (NQU5)
Value Area (Market Profile)
Value Area High (VAH): 23,950.00
Point of Control (POC): 23,905.00
Value Area Low (VAL): 23,761.00
Prior Session Breakdown - Market Profile and NY Session
Wow. Let's get to it, shall we? Tuesday was one of those days that perfectly illustrates how the market can make fools of us all while teaching expensive lessons about assumptions. First, CPI came in hot at 8:30 AM, and instead of the market selling off on inflation concerns, it rallied hard on expectations that higher inflation actually solidifies the chances of a Fed rate cut in September. Yesterday I said I wasn't sure which way the market would go if CPI came in hot, that we might be in a "bad news is good news" situation—and that's exactly what we got.
Off the open, buyers tested higher prices right away but got rejected around Monday's high area. Then, right around the time of that rejection, Trump decided to add some spice to the mix by posting on social media about a lawsuit against Jerome Powell over Fed building construction. Mostly noise, but the markets reacted anyway, with the S&P, NASDAQ, and dollar all dropping right off that post.
By 10:00 AM though, the market seemed to relapse into amnesia about the Trump post. Buyers stepped in around Monday's low area, and from there it was an absolute freight train to higher prices. From 10:00 AM all the way to the close, buyers were in complete control, pushing price higher with relentless momentum and setting a new all-time high of 23,950.00.
What was most impressive about yesterday's move was the consistent speed and urgency behind it. Price didn't linger for long in any area until it broke above 23,890, which gave the profile a very flat shape for most of the session. There was urgency to this move—everyone wanted in, and they wanted in immediately. This showed up not just in the momentum behind the price action but also in the very large increase of over 12,000 contracts in new business. I’ve seen bigger (that’s what she said) but that’s a very healthy increase in OI for NQ.
The value area exploded higher, settling between 23,761 and 23,950 with the POC at 23,905. The VAH sitting right at the session high tells you everything about how this day developed—pure trending behavior with acceptance at every level along the way up.
The flat profile shape reflects the imbalanced nature of the session, with price spending minimal time at any given level as it rocketed higher. This is classic institutional accumulation behavior when there's urgency to get positioned.
Volume & Participation
Total Volume: 489,756 – moderately higher than recent sessions, showing increased engagement
Open Interest: +12,459 contracts (NQU5) – a large increase showing serious institutional positioning after CPI
Price Range: 328.00 points / 1,312 ticks – big trending range reflecting the day's momentum
The open interest increase of over 12,000 contracts is the real story here. When you see that kind of institutional commitment alongside trending price action, it usually signals the beginning of a more sustained move rather than just a one-day wonder.
Final Thoughts
Tuesday was validation that sometimes the market's logic is completely backwards from what seems rational. Hot CPI leading to a massive rally because it increases rate cut odds? Sure, why not. The market reminded everyone that it's not our job to figure out why it's doing what it's doing—our job is to understand the emotions and sentiment of other participants and trade accordingly.
The urgency and institutional commitment behind yesterday's move suggests this isn't just momentum trading but genuine repositioning for a different market environment. Sometimes you just have to accept that the market wants to go higher and not fight it.
Today’s Analysis – Wednesday, 8/12/25
Market Context
The party appears to be continuing this morning, with the NQ trading at 23,998.50, about 60 points above yesterday's settlement. The overnight range between 24,016.50 and 23,921.75 has us flirting with the 24,000 level—hard to believe that after being down in the 21,000s in May, we're now knocking on the door of 24K.
The VIX has dropped significantly since CPI came out, now down to 14.55, which confirms that yesterday's move wasn't just a one-off reaction but part of a broader shift in market sentiment. We remain firmly in positive gamma territory with dealers buying dips, and overnight inventory is modestly long without being overextended.
This situation reminds me a lot of the post-COVID 2021 environment when the market kept going up and lots of traders blew themselves up trying to short it because they were convinced it had to crash at some point. It never did, even though the economic outlook at the time was pretty bleak.
Bias & Mindset
Longer Term Bias: Bullish
Today’s Bias: Bullish
I'm leaning bullish with medium confidence, and here's my reasoning: after yesterday's reaction to CPI data, with the China tariff deadline pushed back another 90 days, the only macro headwind on the horizon right now is the summit in Alaska between Trump and Putin. I don't see that as a major risk factor for the market today.
This market has serious structural strength, overnight inventory is constructively positioned, and the institutional commitment we saw yesterday suggests this move has legs. While I don't rule out a sideways or pullback day today, it wouldn't surprise me to see this market keep grinding higher.
The key lesson from recent sessions is that fighting this trend has been expensive. We've learned that one hard truth about trading: the market is not the economy. The market is a forward-looking instrument based entirely on perception sprinkled with some economic reality.
Key Levels I’m Watching Today
Upside:
Above 24,016.50 — We're in completely uncharted territory here, so traditional levels don't apply
24,016.50 — Overnight high and the next psychological milestone
Downside:
23,950 — Yesterday's high and VAH, break below could indicate fair value back to yesterday's levels
23,921.75 — Overnight low, first meaningful support
23,761 — Yesterday's VAL, more substantial support if needed
Final Thoughts on Today
It's worth remembering something important: we don't see the market the way it is, we see it as we are. We have to be very self-aware that we aren't trying to push our opinions on the market. It doesn't even know we exist, much less care what our opinions are.
You have three choices: trade it as it is, trade it as you want it to be (and lose money), or choose not to participate. Right now, the market is telling a pretty clear story about where it wants to go.
PPI data comes out tomorrow, but after yesterday's CPI reaction, I don't think it's going to be much of a factor in slowing down this freight train, even if it comes in bearish. Beyond that, we have retail sales, industrial production, and University of Michigan sentiment on Friday, but I don't think any of these will stop the current momentum.
Sometimes markets just decide they want to go in a direction, and the best strategy is to stop overthinking it and go along for the ride. We're clearly in one of those periods right now.
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