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Cooler Inflation Data
Please click here for an enlarged chart of SPDR S&P 500 ETF Trust (ARCA:SPY) which represents the benchmark stock market index S&P 500 (SPX).
Note the following:
The chart shows that the stock market is breaking out above the resistance zone.
The chart shows a highly unusual occurrence – RSI is at 100. This is the most extreme overbought level. The extreme overbought level indicates that either the stock market is ready for another strong up leg, or the breakout is going to fail.
Sentiment is extremely positive. At extremes, sentiment is a contrary indicator. In plain English, extreme positive sentiment is a sell signal. However, it is important to remember that sentiment is not a precise timing indicator.
In The Arora report analysis, based on the other macro and fundamental data, there is about a 40% probability that the breakout will fail even though technicals are very strong.
Consumer Price Index (CPI) came slightly cooler than expected. Here are the details:
Headline CPI came at 0.3% vs. 0.4% consensus.
Core CPI came at 0.3% vs. 0.3% consensus.
As most investors are elated over the CPI number, prudent investors need to remember that on an annualized basis, core CPI is still 3.6%. The Fed’s target is 2%. Further, prudent investors need to remember that goods inflation is coming down due to over production in China, but services inflation is still sticky.
The U.S. economy is 70% consumer based. For this reason, prudent investors pay attention to retail sales. Here is the latest retail sales data.
Headline retail sales came at 0.0% vs. 0.4% consensus.
Retail sales ex-auto came at 0.2% vs. 0.2% consensus.
Retail sales data shows that the consumer is finally pulling back. This will negatively impact earnings. In the long run, the single best determinant of the stock market is earnings. However, at least for today, elated investors are not thinking far ahead about earnings.
It is said that copper has a Ph.D. in economics. That is why it is called Dr. Copper. When the economy is booming, demand for copper goes up. In recessions, demand for copper drops. Copper futures in New York just hit a new high. Copper is also heavily used in electric vehicles and solar panels. Heavy demand for electricity by artificial intelligence data centers will also increase copper demand.
In The Arora Report analysis, the new high in copper is ...Full story available on Benzinga.com
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