Awaiting December CPI Report: Very Consequential Directional Market Catalyst

Good Morning, MPtraders!  Wednesday, January 11, 2023-- Pre-Market Update: We are about 24 hours from the release of the December CPI Report, which WILL BE a VERY CONSEQUENTIAL DIRECTIONAL MARKET CATALYST. 

Why? Because over the last 24-48 hours, The Street's "whisper number" about the headline Month-Over-Month CPI could be NEGATIVE, down from a peak of +1.3% recorded for the month of June, and the first time a monthly figure is negative since the Pandemic in Q1, 2020!. Wow!  (contd below the graphic)

Well then, if THAT happens (there still IS a chance of a positive monthly figure btw, which would be a bitter disappointment, no doubt), will the financial markets rocket into an extremely bullish frenzy because the Fed has slayed the inflation dragon and therefore MUST pause sooner than later, Or alternatively, will a violent upside reaction to the CPI data be short-lived until the Fed Heads tell the markets they are no longer "tone deaf?" 

Answer: Who knows? But BOTH scenarios certainly are on the table heading into tomorrow's CPI data...

As for the technical setup in the equity indices, my attached 4-Hour ES Chart delineates the up versus down target zones of an acute algorithmic reaction function starting immediately after the CPI headlines hit the tape. 

On the bullish side, a rip above or from above Monday's spike high at 3973.25 projects a challenge of the dominant 12-month down trendline that cuts across the price axis in the vicinity of 4125, and IF THAT MAJOR IMPEDIMENT is hurdled, then ES will make a run at the November CPI Reversal Spike High at 4180 (12/13/22).  

On the bearish side, a disappointing CPI will trigger equally as violent algo sell programs, and should weakness slice beneath 3890, ES will trigger projections to 3820-3800, with an outlier into the 3700 target zone.

At the moment, my pattern bias is Neutral/Positive as long as ES remains above 3891, and below 3973.25. A sustained climb above 3973.25 today-- ahead of tomorrow's CPI-- will shift my bias to outright Positive heading into the data... Last is 3952.75