📈 CPI Rips the Market
This is a turning point.
Stock Market Rips on CPI
The stock market gapped up yesterday morning after CPI released and showed that prices are right where we want them to be - not crashing in a way that would make us wary of an oncoming recession, but also not rising at a rate that would renew inflationary fears.
This is just what the market needed to see and we traded up all day as a result.
S&P Futures are still within a trading channel as you can see in the chart above, but nonetheless yesterday was an overwhelmingly positive sign for the market.
Look for follow-through tomorrow for us to break out of the trading channel.
Equity Risk Premium
As we have talked about in the past few newsletters, the 10-year treasury is absolutely critical to watch right now.
Today’s action in TNX tells us exactly why the market ripped higher yesterday.
Yield dropped significantly yesterday, shifting the equity risk premium back towards equities.
As a reminder, equity risk premium tells us whether stocks or bonds are the better investment from a risk/reward standpoint. When bond yields are very high, big players such as pension funds are incentivized to purchase bonds instead of investing in equities.
Yesterday’s movement is a step in the right direction of bringing the equity risk premium back in the favor of equities, which is exactly what we want to see.
Sectors and Stocsk to Watch
There are a number of sectors that are setting up for trades right now.
One sector in particular that has caught my eye is Financials, which is now above all key moving averages for the first time in a long time.
I run through specific stocks I am targeting as well as other sectors to watch in this video: