We have a huge week ahead of us as we get CPI numbers on Tuesday. I say huge because a lot of the Fed’s rate hike decision will rely on this report. If it shows a good decrease, I can see the fed raising it 50bps this month while talking hawkishly. If not, 75bp minimum is on the table. Fed’s next policy meeting is end of the month.
Estimates are at 8%, 0.5% below last month’s reading. The other item to dig into is the month over month change. If the month over month is a decrease, I would expect to see a nice rally in the markets with rates moving favorably, especially after the past few weeks (since Powell’s speech) overwhelmingly amount of negative days.
We have an opportunity to see the month over month decline this Tuesday. It came in at 0% last report and the trend has shown slowing growth over the past few months.
Here is what is coming this week
- NY Fed 3 Year Inflation Expectations
- CPI Data
- Fed Budget
- Producer Price Index Data
- Initial and Continuing Jobless Claims
- Retail Sales Data
- Consumer Sentiment Index
- 5 year Consumer Inflation Expectation
Here is a look at the 2 year chart. When we zoom out we can really see the “retest the bottom” phase we are currently in and that I’ve been talking about. I also wanted to talk about the 200 (blue line) and 50 (black line) daily moving averages. We finally see the 50 starting to bottom out horizontally. It hasn’t started an uptick yet, though, and it can still drop further. But remember, a bullish trend is confirmed if the 50 DMA crosses (from below) above the 200 DMA. This is, however, a lagging indicator.
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