Getting High on the CPI

A slightly cooler CPI, but still a whopping 8.5%, is seeing Wall Street fervently cheer via higher stock prices this morning. In fact, the S&P 500 Index is lingering just below the widely-watched 4200 level, clearly a spot worth watching the rest of summer as we close in on a declining 200-day simple moving average on that index and virtually all indices as well. 

While bulls are cheering, I remain hedged with several longs on. However, I am clearly skeptical of the rally and still maintain with high conviction that we are in an ongoing bear market with risk of breaking much lower on the indices in the coming quarters.

That said, as we have been noting with Members it is only when we get out towards the middle/latter part of August, we will call it OpEx Friday (a week from this Friday) that we run into more bearish seasonality, especially for midterm election years of first term Democrat Presidents. 

Hence, the rally off CPI should not be totally surprising despite how absurd it seems once you put in a modicum of effort to dig below the surface of the report. And when we do, you will find that shelter (rents) and grocery costs continue to be highly inflationary. 

In other words, even with Powell and this Fed I do not believe a pivot to a more dovish stance is in the cards yet. 

Also note energy just flipped green, and soft commodities are turning in an impressive morning via the DBA ETF. If rates turn back higher, and TLT just flipped red (below, daily chart), that serves as evidence that equities are misreading the situation as some kind of disinflationary CPI report when, in fact, it is anything but that.