We might be done with inflation, but judging by the oil/gas markets, it’s not done with us. Both CL and RB have now broken out of channels dating back to early 2022 – with CL pushing above its 200-day moving average this morning.
The Fed has its work cut out for it this week – and for the next several months.
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Just saw that the great Tony Bennett passed early this morning. It was always a thrill to see him perform. He was one of the last great ones, and will be missed.
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Futures are leaking higher on this OPEX Friday following SPX’s bounce off its .786 Fib.
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Bulls powered through a key Fibonacci level yesterday, suggesting another 2.5% in upside and putting the bearish case at risk.
While the move was aided by the usual algo factors – another breakdown for VIX – it toppled near-term resistance all the same.
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EURUSD tagged our 1.1273 target overnight. It came a little earlier than expected, but it’s a significant development given the pair’s correlation with stocks.
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Futures are off slightly on low volume on a slow news day.
Some significant Fibonacci levels have been reached, however, setting up potential large moves in equities.
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Futures are up modestly after reaching the .786 Fib retracement and 1.272 extension yesterday. SPX is lagging slightly.
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PPI was expected to come in at 0.4%. Is the 0.1% print a sign of waning inflation, or could it be confirmation of the coming recession?
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June CPI came in slightly lower than expected: +0.2% MoM versus +0.3% expected and 2.97% YoY, the lowest since March 2021. Core CPI fell to 4.8%.
Futures had already popped overnight, but the soft CPI further boosted the gains with the .785 Fib level top of mind.
As we discussed last month, the benefit from YoY price declines in oil/gas has maxed out unless prices continue to fall. The chart below shows the effects if gas prices were to stabilize at current levels.
In other words, central bankers might need to drive oil/gas prices even lower.
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With CPI due out tomorrow, we should see confirmation of how behind the curve the FOMC continues to be. Whether or not the data comes in above estimates, it will still be well above the Fed’s professed target of 2% – meaning the pause was yet another mistake served up in the interest of propping up equity markets.
Just a reminder: with CPI around 4% and GDP below 2%, we’ve got stagflation. And, the Fed has no answer for that.
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