Daily Plan 5/11/23
Folks -
US CPI was released at 730 AM today which showed the US inflation rise year over year again at a pace of 4.9%. Though the inflation came down from the prior month, the rate of decrease was the slowest in many months - showing that the inflation may become sticky.
The market thought this was some sort a blessing from the heavens, and rallied instantaneously from my overnight level to the resistance level within minutes.,
The joyous celebrations however soon gave way to mourning by those bulls who bought the high of the day 4180, and at the time of this post, we have significantly sold off from the highs. In fact, had this not been for the tech stocks, the rout could have been much greater. This has been the theme for over 40 days now! Every single attempt to take out my levels fails miserably.
As far as levels go, my plan from last night again called the top of the day at 4170-4180 before a large sell-off at the time of this blog with S&P500 Emini trading at 4130 at the time of this post.
When you exclude food and energy costs, the core inflation actually rose 0.4% month over month, much higher than expected. Services inflation remained high, though some categories like shelter and airfares dropped a minuscule amount.
If these current trends of inflation deacceleration continue, the US will not enter a 2% CPI era until the end of next year. The market is thinking we will be there this year, Aint gonna happen. So something else has to happen for the FED to pivot. What is it? I think I know, keep reading to find out what it is.
As far as my thesis is concerned, at this stage, it is not based on inflation (or deflation). I am forward looking and I am expecting a recession this year which will lead to drastic rate cuts by this FED in my view. Below I have shared some levels where I will become bullish.
Keeping up with higher inflation again this month, I will increase the price of this service by 5% effective ASAP tomorrow. Today is the last day to subscribe at lower prices. These prices will mirror the US CPI and if it remains high, the substack prices will also remain high.