Ceremonial Viciousness

I find it hard to believe in a pure coincidence regarding this afternoon's fade in equities just as the IWM finally--finally--tagged its 200-day moving average from below. 

As you know, the Dow, S&P, and Nasdaq have all tagged and exceeded their respective 200-day moving averages during this rally since April. All that was left was for the small caps in the IWM (ETF for the Russell 2000 Index) to tag their own. And now that that has happened, the market is turning back lower despite a much-ballyhooed cool CPI print this morning. 

Interestingly, crude oil is surging to multi-month highs after improving recently on the back of  US-China trade deal progress and worries about Iran supply. Indeed, the Trump Administration is seemingly in the same boxed-in scenario as The Fed, insofar as apparent victories on these trade deals may mean inflation comes roaring back sooner than later. In fact, my view is that this morning's cool CPI print is the last cool one we will see for 2025. The rallies in various commodities and commodity stocks, with Platinum and Palladium waking up over the last week, should only add to inflationary pressures going forward. 

However, crude is front and center, as usual when it comes to inflation. And just as doves begin celebrating the low CPI with hopes of more imminent rate cuts, oil beginning a multi-month rally would be consistent with what we saw in the 1970s stagflationary era, which means this IWM 200-day test is likely much more of a ceremonial ending than beginning.