CPI Day

Apr 10

*Market Tide below is 45 min after market open

*post below was sent 30 minutes before market open

CPI report dropped and the market sold off because it came in 0.1% hotter than expected due to energy prices. Link: https://www.bls.gov/news.release/cpi.nr0.htm

Transportation services, shelter, and energy contributed the most to the hotter number.

CPI is now trending up if you look at Jan-Mar 2024

This could take away the rate cut narrative and cause a market correction. It will boil down to if Small Caps IWM is able to defend and hold 200. If not, then expect this to become a correction instead of a pullback that we just resume the bullish trend from.

Whatever dip that is coming up, will be just another opportunity to buy the dip, I will be looking at flows and support levels before I decide to add—keep in mind that my GEX strikes, see below:

The bigger picture is that jobs and unemployment is doing well in this restrictive territory, so I’ll need to read into the market narrative and flows because it can go 1 of 2 ways

Fed cannot cut rates this year; however, as we see from jobs, CPI, and unemployment, the rates have helped pulled down inflation while we saw healthy economic growth. If the Fed stays at these rates, it’s not the end of the world at all. Powell has telegraphed that he will cut rates later this year and the Fed goes off PCE and not the CPI. We should see PCE have a much better inflation print. The next PCE report is April 26, 2024—so there is a possibility we see a pullback until we get to this date. IT IS OK IF THE FED DOESN’T CUT RATES SOON ENOUGH.
Fed has to raise rates into further restrictive territory: this will lead to full blown correction if this narrative ever gets out or if the Fed telegraphs this (I think this is very unlikely that the Fed will flip hawkish this quickly, they will want to see 3 or so more months of inflation data).

My forecast

This will be a dip that will get eaten up towards SPX 5400

Take a look at TSM’s earnings to many earnings of various sectors… Delta had record earnings and the banks are coming up next. The Fed Rate Cuts is not as important as how well the economy and jobs are doing—that is what is driving growth and corporate earnings.

However, here are key levels and GEX Below:

If IWM loses and gets a close below 200, it will lead to more selling down to 195-190 where we should bounce. At 195 to 190, it is overly concentrated into negative gamma.