Futures ripped higher on the news that July CPI came in 0.2% lower than expected on both the monthly and annual headline figures: 0.0% and 8.5%.  Core rose 0.3% and 5.9% – still well above the Fed’s so-called 2% target.

Much has been made of the price drop seen in oil and gas since mid-June. But, it’s important to note that we’ve seen this happen several times before. The July YoY increase of 44.1% has been about the average low ever since Apr 2021, with several highs in the 60% range.

Prices would need to continue to decline in order for the YoY change in August to come in below 40%. And, our charts aren’t that all that convincing that oil/gas prices will continue to decline.  Maybe if we had another COVID lockdown or a nice little recession…

continued for members…

Stocks are now within 7 sessions of next Friday’s OPEX – normally a strong bullish draw. Though, ES and SPX have both reached the top of their rising channels. It’s hardly the kind of strong signal bears would like, but it’s worth paying attention to. The reason I parked those upside targets where they are is because we’ve seen these kind of ramps so often in the past.  It would shock no one if it happened again.

COMP also stands to push above its neckline on the open, with the channel top and .618 only slightly higher at 13,089, we have to wonder if TPTB will go for the grand breakout or will be satisfied with postponing another leg down. Note that even DJI is running into potential resistance here.

Our favorite signal, VIX, seems intent on creating a breakout. This morning’s dip to the red TL……has grown to what looks like a breakdown.

And, this morning’s VX test of the .886…

…is definitely looking more like a possibility of a lower low. The only thing that could reverse this signal would be a stong intraday reversal.

If investors believe that the Fed will be less aggressive in hiking rates, it would make sense for rates to fall now and for the dollar to pull back. But, does anyone really expect the euro to hold up better than the USD at this point?

EURUSD hasn’t been able to push through its SMA50 since February. And, whatever slowdown in rate hikes the Fed might be contemplating, I promise you the ECB will be more dovish. Remember, the best tool the Fed has for combating inflation is a high USD. CL stands a very good chance or drawing the line here, having reached the .618 of the rise between Dec 2021’s lows and the Mar 4 highs. And, RB is making a bid to break out beyond its SMA200 – with the SMA20 just above. If it fails, it would really help rein in CPI… …not to mention interest rates.