Inflation Craters

Headline CPI fell 0.8% MoM – the biggest drop since 2008…

…thanks primarily to plunging energy prices.

Core CPI fell 0.4% MoM, the biggest drop since it began being tracked in 1961.

The details show strong upticks in food and medical care but weakness almost everywhere else.Like almost all economic data lately, the algos have chosen to ignore inflation, as VIX dropped another 7.7% from its overnight highs. For the moment, nothing else seems to matter much.

VIX has fallen from 47.77 to 26.37, a 45% decline, since ES backtested its 2.24 Fib extension on April 21. SPX has climbed a total of 8% during that time – with the great majority of its gains on overnight ramp jobs driven by plunges in VIX.

Today, the algos are also watching the bond market quite closely, as the Fed is slated to dip its toe into corporate bonds – including junk bonds – for the first time.What could go wrong?

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