Opening Game Moves

The overall price action early on smacks of a kind of opening game you would expect in a championship chess match, with both sides trying to jockey for just the right position headed into the CPI this Wednesday, followed by the FOMC the week after. 

Specifically, NVDA and semiconductors are selling off, while TSLA is surging higher to the tune of 8%. Various other tech names like AMZM and some software are doing well even as rates push higher yet amid the New York Fed releasing one-year inflation expectations well above the previous one. 

And while the Dollar comes in today, crude and gasoline are higher. 

So as you can see we have some jockeying for position on both sides of the tape for what figures to be a high stakes couple of weeks coming right up. 

Ultimately, I suspect this week will come down to whether all of the bloviating from everyone from Janet Yellen, to Fed heads, to Nick Timiraos, to various Powell loyalists on the financial news networks and social media, will prove true with regard to the soft landing scenario. If inflation truly has been crushed, but a deep recession will be avoided, then bulls will have procured their vaunted soft landing and thus goldilocks scenario for stocks. Of course, one (namely, yours truly) has to wonder whether that scenario has already been priced into markets anyway, when you gauge some of the moves this year, like NVDA. 

But either way I am certain bulls will celebrate if they get a cool print on Wednesday morning and no horrendous economic data to couple with it anytime soon thereafter. 

Alternatively, the oil, gasoline, cocoa, rice, orange juice rallies this summer, not to mention the uptick in rates, could easily spark a hot print on Wednesday morning, leading to an aggressive repricing of risk lower in stocks just as everyone is back from their summer breaks and ready to reassess their big money positioning. 

Recall that rates staying higher for longer may very well be an even more bearish scenario for stocks than a standard recession would, given the manner in which stocks have been rallying off the view that rates would eventually go back down. 

But the forty-plus year bull market in Treasuries is over. Finished. Your Central Banking heroes only became "heroes" because they could afford to do QE/ZIRP when the crises hits. However, the great kryptonite of the money printing Central Banker is not a recession. No, it is entrenched inflation with a secular shift in rates (meaning they are done going down barring a bonafide Depression). 

And that applies even when the press, politicians, and the like are doing their level best to talk inflation down with all their might.