📈Inflation Data Sparks Selling

CPI data came in higher than expected showing that inflation is higher than estimated. CPI year over year came in at 8.3% versus 8.1% estimate. Month over month was supposed to be a loss of -.1% but came in at .1%. While lower than previously in both cases it was higher than expected. The increase came from housing and shelter. Specifically rental income is further behind in CPI than real time as they can only account for current leases. As new leases are signed over time they are added. This can cause a delay of up to 6 months. If you look at the slide below created by the Brooking institute you can see the disparity.

The reason for the increase does not matter as much to the market as the outcome. The bottom line is the number is higher therefore the Fed needs to be more hawkish (be aggressive fighting inflation). The chances of a 100 basis point hike jumped to 40% and the chances of 75 basis points is now at 100%. This is very different than expectations going into the CPI data. We saw the 10 year treasury spike to 3.43% but what stands out is the two years treasury yield at 3.79%. See below.

When the 2 year treasury is higher than the 10 year treasury we have an inverted yield curve. This curve points to the likelihood that rates will be lower in the future due to less than robust growth. Below the shaded areas are a recession. You can see they are preceded by an inverted yield curve shown by crossing the 0% line.

We know the market is a discounting mechanism. The indexes will move before the economy. That said this level of uncertainty is causing major swings of gap ups and gap downs in the markets. The important takeaway is those swings can lead to a change in trend. For now we have Quadruple witching on Friday. This happens with four different types of contracts, including stock index futures, stock index options, stock options, and single stock futures. It happens four times a year. This is usually a very volatile open and close as traders jockey for position. We follow that up with next week’s Fed meeting September 20-21.

Today’s Newsletter was focused on the macro events of the week and an understanding of it. There seems to be some confusion that the market is currently technical driven. While it is usually the case there are times that macro events take precedent. Understanding those events gives us an edge. Please comment on the format.

For today’s newsletter all indexes and stock ideas are in the video and are very short term oriented until the market starts to base. There are several great ideas and key index levels. Also an overview of PPI today and why that was better than expected.

Subscribe and turn on notifications. There is a new daily video after the market Monday through Thursday! It’s called the Top 5 in 5. It consists of the best five ideas for the next day and I condense it into 5 minutes. It’s loaded with actionable ideas. It’s worth your time. It is hyper specific and actionable. Tonight’s includes Longs and Shorts. When you subscribe turn on ALL notifications so you are notified of the daily Premarket live shows ,Top 10 Weekly Buy List and educational videos. Also, Once subscribed you will receive private content on YouTube.

As always all investment decisions need to be made by the individual. We all have different risk profiles. No two people trade the same. Understand the buy points, stop losses, trims are suggestions. You need to develop your own process. I am willing to help. If you have questions email me Arete@Aretetrading.net. For example, to stop losses, I like to see them close. That does not mean that fits everyone’s risk profile.

Subscribe to Twitter! 👈and turn on notifications. There are times my updates are timely.

If you do not see a position and have questions please message me.

Thank you again for all the messages telling me how this Newsletter improved your performance and made you a better trader!

Now you can share the Newsletter!

👇👇👇

Subscribe below!

👇👇👇

Preview the AT Trading Community

👇👇👇

✓Trade To Win! 🔥