Gary Tanashian | Nov 11, 2022 04:07AM ET
It was bound to happen sooner or later. October finally showed an easing comp in CPI and markets that were ripe to rally for other reasons used the report as the trigger.
We have been on alert for a potentially positive Q4, 2022 to Q1, 2023 seasonal play since first uncovering the post mid-term election cycle’s positive implications over a month ago.
Here are the averages of all pre and post mid-term elections since 1962. Sure, nothing is ever guaranteed in the markets, including historical facts, averages, comps and analogs. But as we have noted it is considered a tailwind. Pre-election is consistently weak compared to non-election years and post-election is consistently strong compared to those same non-election years.
Some prime elements for such a play (and this is all it is indicated to be as those celebrating a fade in inflation will not be too happy down the road when inflation signals fall uncomfortably low) we’ve been tracking have been as follows:
This was a pure expression of ‘equal and opposite’ dynamics to the Q1, 2020 deflationary fear fest. How poetic for inflationary hysteria to follow deflationary terror as represented by such a beautiful picture. A picture of excessive momentum in the opposite direction to 2020’s excessive momo.
Think about these elements:
Bottom Line
Realize that the odds were in favor of a relief phase in Q4-Q1, and bear market relief can be strong. But also realize that there are upside technical parameters well north of here that would need to be taken out before TA can call a new bull market. Realize also that celebrations about a fade in ‘inflation’ * will likely become tomorrow’s (or Q1, 2023’s) swing toward an uncomfortable drop in inflation expectations. These are the volatile considerations that your heroes at the market micromanaging Federal Reserve have created.
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