The FOMC hawks should gain an edge with Lael Brainard’s departure to NEC, a factor not lost on the markets following yesterday’s MoM CPI beat and this morning’s Retail Sales beat (+3.0% vs +1.9% exp.) The 10Y continues to edge higher after breaking out last week.
Note that SPX’s recent cycle high occurred on the very day its SMA50 topped its SMA200 – a Golden Cross that is supposed to usher in higher prices. The fact that it hasn’t means that this rally is just like so many others: bailing out the market makers who would otherwise be crushed under overly bearish options positioning.
Futures are off about as much…
…as the latest VIX smackdown will allow.
Stay frosty.
continued for members…
The USDJPY is still trying to prevent NKD from rolling over. 
While the EURUSD is still doing a Wily Coyote imitation, trying to keep the DXY from breaking out.
Gold and silver continue to slump as the USD strengthens.
While, BTC is holding its own – though its RSI points to elevated risks of an imminent downdraft.
CL and RB are hanging in there. Rates would obviously get a boost and the relationship between them and rates would revert toward normal if we got a breakout here to backtest the SMA200s.
While we’ve talked often about the growing gulf between gas prices and CPI (as other, stickier, categories of inflation become more impactful) it’s interesting to note that, were gas prices to stabilize at current levels, the YoY delta in gas would plunge sharply.
This raises so many questions for me that I’m going to take a few days to formulate some thoughts regarding the big picture. Questions that are currently top of mind:
As I currently see things, the Fed’s top 4 priorities in order are:
- organically lower interest rates – i.e. which don’t require Fed intervention
- avoid a recession, or at least guide to a mild recession
- keep unemployment to a reasonable level
- return the consumer economy to some semblance of affordability
There are obviously many other issues with which to be concerned. But, these four heavily interwoven issues must be dealt with one way or the other in order to avoid financial calamity on the scale of 2000-2003 or 2007-2009.
stay tuned…