S&P 500 refused to rally over 5,270, and the sectoral overview of rising XLF and XLRE (reflecting rise in Treasuries) and XLU at expense of XLE, hint at much caution before CPI. Let‘s recall what I wrote Sat, and then develop it further based on the price action so far.
(…) Wednesday‘s CPI isn‘t yet to come in on the very hot side (over 0.4% headline and core), but it‘s the market reaction that counts – and yields are again on the move themselves, and it‘s to the upside. Oil and gasoline aren‘t declining, oil stocks aren‘t declining – and that means inflation is going up (I‘ve been saying since late 2023 that sticky inflation will come back to the vocabulary within a few short quarters, and that by year end we‘re going to be looking at 4% if not 4.4% CPI), and also consumer is going to be more squeezed (rising credit card debt isn‘t an issue affecting retail sales still as the economy remains resilient) and corporate earnings likewise, hence valuations (P/E) would also be pressured in 2H 2024.
That‘s certainly the fear, hotter inflation – the other part is risk aversion and going into Treasuries and interest-rate sensitive areas such as IWM, KRE and XLRE. That probably also concerns precious metals fine showing yesterday – all called and how it goes with oil longs, chiefly via your premium gold & oil Telegram.
The fear of already (getting, being) stubborn inflation is justified, and I don‘t think that either oil and gasoline prices (ultimately reflected in goods and services) would be helped much by shelter or car prices, and hence that disinflation would be interpreted as overrated, especially after Thursday‘s PPI.
Let‘s move right into the charts – today‘s full scale article contains 3 more of them, with commentaries.
Tired of seeing those red boxes instead of way more valuable information? Try the premium services based on what and how you trade.
S&P 500 and Nasdaq
Already weak S&P 500 chart is flirting with going at least to the 50-day moving average, but for the immediate future, break below Thursday‘s lows is out of the question before CPI, and the preceding uncertainty would then have to be dispelled in disinflation compliant way. Already Saturday, I hinted at „upcoming CPI not to come in totally pleasantly low“.
All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.
Recommended Content
Editors’ Picks
EUR/USD tests 1.0450 on the road to recovery, PMIs eyed
EUR/USD holds higher ground near 1.0450 in the early European session on Friday, bolstered by renewed US Dollar weakness. The preliminary reading of the HCOB Purchasing Managers Index for January from the Eurozone and Germany now remains in focus.
USD/JPY remains heavy below 155.50 after BoJ's hawkish rate hike
USD/JPY is posting sizeable losses while below 155.50 in early Europe on Friday. The pair remains heavy after the Bank of Japan's rate hike to 0.50%. Higher inflation forecasts by the BoJ signals further rate hikes in the offing, lending support to the Japanese Yen ahead of Governor Ueda's presser.
Gold price bulls retain control near multi-month peak amid Fed rate cut bets
Gold price catches fresh bids on Friday and builds on over a one-month-old uptrend. Worries about a fresh wave of global trade wars underpin the safe-haven commodity. Bets for more Fed rate cuts weigh on the USD and further benefit the XAU/USD pair.
Ripple's XRP faces risk of 20% drawdown as short-term holders show signs of weakness
XRP investors realized over $500 million in profits in the past 48 hours. Short-term holders are responsible for most of the selling activity following CME's clarification on XRP futures.
Federal Reserve set for an extended pause
After 100bp of rate cuts the Fed has signalled it needs evidence of economic weakness and more subdued inflation prints to justify further policy loosening. President Trump’s low tax, light-touch regulation policies should be good news for growth.
Trusted Broker Reviews for Smarter Trading
VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.