Option Professor-Stock Market-CPI/ Fed Skip? Has Growth vs Value Peaked? Gold? Oil? Read It.
June 10 2023
IMPORTANT! Register-ONLINE WEBINAR Monday. Including- Short Term Trading-RSI Divergence Signals
We are not hurting for news in the week ahead and there could be big surprises. The Bank of Canada and the Bank of Australia BOTH did surprise hikes so will the Fed follow suit? Yes, we have seen a lot of reports of a manufacturing recession in ISM #’s and a weakening of ISM services but CORE CPI is still ABOVE 5%. The surprise some are looking for is 2 WEAKER CPI prints ahead due to easy comparisons from last year.
ESTIMATES CPI nominal drop from 4.9% to 4.1% and CORE 5.5% to 5.2%. Surprise coming and Fed skip?
The consensus seems to be a skip in June and a hike in July. The Fed doesn’t meet after that one until late September so maybe a hike in July to 5.25% or about equal to CORE CPI would make sense. Events ahead include Q2 EARNINGS come out in July, the Treasury issuing tons of Treasury Bills to refill coffers, and whether the Saudi oil cut will send prices toward 80 or above. POSITIONING to some say that tons of money on the sideline will succumb to FOMO ABOVE S&P 4400 (of course we still need to get there).
OUR CONCERNS- The complacency out there is palpable (VIX 13 handle has round tripped to pre Covid). The frenzy of AI may have hit an inflection point as the frenzy about GM F TSLA in the electric car space. If the Fed has major concerns about the banks liquidity and want to divert attention, they may be happy with a big market rally. Of course. this may also prevent a reduction in consumer activity and inflation. No question we have had a great run since the lows of October and most moving averages are UNDER markets now. BUT we did see a TOP in the Growth to Value Index Ratio in May so maybe it is time for a tech sell off? We need to see QQQ outpace SPX by the end of June or we will make a call to SWITCH out. The Russell has jumped due to realignment, regional banks and the fact that their valuations are lower. Since the realignment is done in a few weeks and regional bank euphoria could be temporary, we may need prints ABOVE 190 and the month of July to declare victory. Also, XRT XLY XLI XLC XLK XTB still s go?
Finally, there is a POTENTIAL for a BIG turn in the Goldman Sachs Commodity Index ahead based on a number of factors including the fact that it dropped from almost 850 to almost 500 since last year! Also; we see a DIVERGENCE in RSI on our 1 and 5 year charts in May. Supply & Demand-two fickle customers. Half the index is energy related-then grain-metals so what is that potentially telling us? Time will tell:):)
Remember! FREE ONLINE WEBINAR Monday; if unable to attend call the office at 702-873-8038 for info.
Thanks
The Option Professor
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