If a weak CPI can't save this market...
I’m going to rattle off some quick thoughts on the CPI and FOMC, and communicate my trading stance in equities, fixed income, currencies, crypto, and commodities.
CPI and FOMC
The weak CPI last night should have been good for risk assets, good for Treasuries, and bad for USD. However, the Fed dots and Powell were more hawkish than expected, negating some of the good vibes from the CPI. In the case of precious metals, FX, and crypto, the post CPI moves have unwound completely. We are back to watching data for the rest of the summer, which means that we potentially get a choppy, mean-reverting, environment that will test the patience and capital of traders. It’s time to reduce risk, tighten stops, and start being very selective in what setups you trade.
Equities
S&P 500 and the Nasdaq have been the best performing risky asset this week. Apple has broken out of a 1 year range after its new AI capabilities announced at WWDC helped the market regain confidence in iPhone demand in the next upgrade cycle. Fund managers are underweight Apple and probably need to chase it higher. It’s interesting how different Mag7 stocks have taken the lead at various points in this AI cycle. This has made the bull market in SPX and Nasdaq simply unstoppable. My trading stance is to buy dips in SPX.
Fixed Income
My long SOFR Sept 2025 position is now over 30 bp in the money, and has managed to hold on to some of the gains after the weak CPI. I still think the data will continue to track on the weak side, but it won’t be a straight line. I expect a choppy upward drift for this position.
Currencies
A lot of currencies are coiling for a big move. It’s hard to see what will help them break out this month or the next, but I’ll be watching those charts closely. Sorry if I committed any chart crimes below…I’m just trying to illustrate how volatility is compressing in a lot of FX pairs against USD. If I had to guess which way USD will break out, it would be to the downside.
Crypto
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