Jump to content

Stuck in the Middle With You - Again 4/12/23


Recommended Posts

The bull market peaked at about 4800 in January 2022. The bear market bottomed at about 3500 in October. Half the distance is 4150. And now that the good "news" on "inflation" is out, the ES 24 hour S&P fugutures are driving toward, you guessed it, the middle. 

The rally broke through resistance and is headed for the next resistance convergence of approximately 4155 in the NY opening half hour. Ooops, it almost hit that already in the kneejerk. If that's cleared, the next target would be 4180 today.  I have no cycle projections yet on the basis of 1 day, 2-3 day or 5 day cycles. I can sort of tease one out on a 4 day basis. It looks like 4165.

The conventional measured move implication of the high base breakout above 4140 would be 4205, assuming this breakout sticks through 9 AM. If it doesn't, bears go to bat.

And as I write, they're selling it. Cycle Indicators Tell How to Play This Rally Now

-rceo

Meanwhile, we already knew that "good news" was coming on inflation because we are watching rents in real time, and we know that the rent component of CPI has a built in lag of 6-12 months. That's because of the insane fraud of BLS tactics in measuring housing inflation by using contract rents instead of actual market rent in real time. Such real data is widely available, but the BLS and Fed policy makers are using old methods that were designed to suppress CPI.That worked on the upside very well, with CPI understating real inflation by about 4-6% points as house prices and rents inflated at a rapid rate. 

They are now hoist on their own petard of using a deliberately lagged and suppressed measure. I warned a couple years ago that when rents started falling CPI would overstate inflation.  That is exactly what has been happening for the last 6 months. House prices are deflating and rents are deflating, and none of that has made it into CPI yet. House prices will never make it because they aren't counted. But rents are, and they are falling, despite how they are counted in CPI. Housing is 40% of core CPI. So CPI now overstates inflation. 

I won't do the math now. 

Given the "good news" the 10 year Treasury yield should be falling. It should have broken support. It hasn't.

Then there's the fact that $120 billion flowed into the Fed's RRP slush fund in the past two days. That implies a similar inflow into money market funds. That implies a similar amount of withdrawals from bank deposits. Can you say Rutro! And why hasn't some of that cash flowed out along the Treasury curve to push yields down on the 10 year. I don't know why, but it sure as hell is not bullish for Treasuries if they don't break down, right here today. They have the excuse and they have the fuel. Here’s How We Know That Doom Has Already Arrived

-rcjv

As this is going on, Gold is showing signs of liftoff from another high base launchpad. Will this be the launch that breaks out of earth's atmosphere? Here’s What’s Next Now That Gold Has Reached Its Limit

-rclo

For moron the markets, see:

If you're serious about the underlying forces of supply and demand that drive the markets, join me!

If  you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam folder. 

Link to comment
Share on other sites

  • Replies 8
  • Created
  • Last Reply

Been kicked in the teeth to many times during this bear market rally to think that the red market numbers now, will hold to the end of the day.  What will be the excuse to rally this market into the close today?  My guess is FOMC meeting minutes, dot plot bingo... "4.5? does anyone have 4.5?.... BINGO"

Link to comment
Share on other sites

2 hours ago, WTF said:

Been kicked in the teeth to many times during this bear market rally.

I talked about not getting hung up on semantics in the interview. It's hard to trade successfully when married to a point of view about what kind of market it is. 

Link to comment
Share on other sites

Archived

This topic is now archived and is closed to further replies.

  • Tell a friend

    Love Stool Pigeons Wire Message Board? Tell a friend!
  • Recently Browsing   0 members

    • No registered users viewing this page.
  • ×
    • Create New...