CPI Bid Was Hit By Wave of Sellers
Leaked #???
Ok so we know the highs from earlier were formidable, but we didn’t expect another round tripper day. The illiquidity followed by the volatility and too what is now very obvious, that there is a whole host of sellers waiting to dump into these rallies. Forced??? Possibly.
We don’t know the extent of how far investors can be pushed as we touched upon the drubbing 60/40 type portfolio’s have taken this year and its probably safe to say a lot of astute players would rather fold their hands and wait for a better hand to play.
We don’t disagree and with the FOMC tomorrow, we can’t help but think Powell & Co will be very concerned about being overly hawkish given today’s turn of market events. Econemotions readers have long understood our position and that our base case has always been for December to be the last rate hike of the cycle.
For us its more of a monetary mechanism perspective and less of an inflation issue but they are obviously intertwined, as INFLATION IS ALWAYS CREATED IN DC AND DC ALONE.
We know the central banks can’t keep this pace of rate hikes going and we definitely know they cannot reduce their balance sheets very much. However they did the right thing this year in raising as much and as fast as they did, so let’s give a little consolation for that.
Alright so before we look at the about face the markets pulled, let’s look at some futures trading data pre CPI today, where someone was in there around 7:26am buying equities. In the Nasdaq the pre 7:30 release buying pushed futures up nearly 100 points in the Nasdaq:
In the SP500 futures the sub minute chart shows around 40 points, consistent with spread trade product, but we aren’t sure which one induced which, NQ buying induced SP buying or vice versa or if this was one account in both markets:
All we know is that this move is very curious and since the CME Group no longer gives us direct counterparty attributes like they used to, well we will just leave that up to the regulators to see if anything was a foul…
Alright when we look at the round trip move today in the SP500 its as if the number never even happened, we got a massive upside move that was completely negated but held our bull level of 4048. A break below this area and we risk a move down to the lower channel band down at 3975:
The Nasdaq did end up closing above the critical 11850 level and a push below there tomorrow should see a test down to 11600 area and the bottom of the channel, but above there we can still expect the current trend to remain intact:
The bond market did fall from their highs but the complex held on to some decent gains today with the 2Y leading the way down 17.4 basis points at the 5pm Est. Settlement:
We did see a note from Goldman today that focused on the tax related selling which is what we may have seen hit the markets after CPI. Here is the chart that was posted and we have to say seems pretty significant:
Once again, a theme we believe is part reality of investors and part forced mixed with massive uncertainty in globalization and its prospects for cohesive growth moving forward.
Ok guys keep your heads up and keep researching and refining. Till next time.
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