Wednesday, 14 February 2018

Temporal inflation hysteria

US equity indexes closed broadly higher, sp +35pts (1.3%) at 2698. The two leaders - Trans/R2K, settled +1.0% and +1.8% respectively. VIX settled -22.9% at 19.26. Near term outlook offers the sp'2710/20s, which is where we'll likely get stuck. A re-test at/near last Friday's low of 2532 is on the menu next week.




In pre-market, the sp' was higher by around 13pts. Then the CPI data was released - m/m +0.5%, the algo-bots freaked out, and swung the market to -35pts or so. By the time the market did open, declines only amounted to -10pts. Once again, there was a distinct turnaround, with the sp' settling significantly higher.

Volatility saw a spike in pre-market to 25.72, but then melted across the day, settling back under the key 20 threshold for the first time since Feb'2nd.

Rate hikes and inflation

The market is currently expecting 2-3 hikes this year. Yours truly is holding to 4 hikes.This morning's pre-market reaction to the notion of higher inflation is a sign the mainstream are still very twitchy. Ironically, this is the same mainstream that have been seeking inflation >2.0% for around a decade.

Ohh, and to be clear, if the Fed don't raise rates this March 21st, that would merit provisional alarm bells. For the moment, I still think they will, but each point lower in the sp'500... will lower the probability.

Extra charts in AH (usually around 7pm EST) @

Goodnight from London
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