Recap
❌ I thought the market would recover back into Neutral; however, due to Employment Cost Index (ECI) coming in hotter than expected, we continue to be in fear.
✅ SPX 5100 and IWM 200 was tested and lost—these are key levels and my line in the sand. The market is trying to get above it but we continue to see more fearful macro news (Iran/Israel conflict to slightly hotter ECI).
New 52-Week Highs vs New 52-Week Lows
NYSE New 52-Week Highs: 64 vs New 52-Week Lows: 34
Nasdaq New 52-Week Highs: 56 vs New 52-Week Lows: 124
McClellan Oscillator
New Highs - New Lows
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Today
CPI, PPI PCE and ECI all point to reaccelerating/sticky inflation and we simply aren’t going to get to 2% anytime soon at all. As long as the Fed does not HIKE, this dip will be a dip and the market will recover by June (or maybe earlier depending on the FOMC meeting and jobs report).
ECI is not accelerating significantly to the upside the bigger picture is that it is gradually trending down, the recent report just came in slightly hotter.
However, we shouldn’t ignore the technicals and below is an interesting technical chart
The technicals don’t look good
Mark Minervini is a multiple-time investing champion and distribution is “right on schedule.”
The narrative around rate hikes is coming back and of the FOMC mentions “we’re thinking about thinking about raising rates” the market is going to risk off. So all eyes are on FOMC.
This looks like the housing market is heating up and and that’s not good news for Shelter Inflation which is a big part of the inflation report.
Why this dip will be a buying opportunity—corporate earnings have been quite strong and yes inflation is slightly hotter but inflation is good for earnings and corporate profits.
This is a positive news—big picture is as long as inflation doesn’t get back towards 6% but stays around 3% or so, it is ok and we’ll see healthy expansion (especially if wage and income growth continues to outpace inflation with improving productivity).
Amazon AMZN 0.00%↑ reported a solid earnings however, their guidance was weaker than expected.
Forecast
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