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Want to Know Where Inflation Is Going Next? Follow These Commodities

Published 05/16/2024, 01:02 AM

Stocks finished higher yesterday, no surprise, given that implied volatility levels fell sharply from yesterday’s closing once the CPI report was released. The CPI report itself seemed pretty much as expected, and the inflation trends we have talked about remained unchanged. If there was a slowing in the overall trend, it wasn’t something I could easily find.

Core CPI has been running at a nice annualized growth rate of 4.0% over the past 19 months, and today’s data did very little to change the trend. If the trend doesn’t change soon, though, the core CPI y/y rate of change will start increasing again in June, and the core could be back to around 4% by August.US CPI Data

I guess the biggest thing going forward for inflation is copper and what is happening there, which has to be up there with one of the craziest moves I have ever seen. If the gains actually hold or take a long time to revert, it will not help bring inflation down at all.

Copper Futures-Daily Chart

Oil also saw a big intraday reversal due to a bigger-than-expected draw in inventories. This will need to be watched over the coming days.Crude Oil-Daily Chart

But the unwinding of the hedging flows dominated the market today as noted by the crush in implied volatility from the VIX1D to the VIX Index, with them all falling. The VIX index’s OPEX comes next Wednesday, which is obviously after this May OPEX on Friday. I’m not all that sure that there is much to be gained from the VIX going lower than 12, though, and I would say, at least based on next week’s OPEX, we could be nearing a floor.VIX Index

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In the meantime, that is it. There may be no write-up tomorrow afternoon. I’m a bit tired from all the excitement.

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Latest comments

Jeff PageMay 16, 2024, 17:54
As always, thank you for your work. RSI & MFI are in overbought conditions on the SPY. It is probably a good time to buy protection.
Electrix007May 16, 2024, 11:53
The greatest NASDAQ Block Trade (Dark Pool) flushed cash into the market at the rate of 87,704 (compared to the average of 37,830 per day) on May 14, That's a whopping 168.71% from previous day of 32,639! I suspect another major increase yesterday pushed the NASDAQ to highest high to be reported today. The major Buyback flood gate continues trending higher pushing price appreciation up the roof. the sideway trading for the past few days in NASDAQ broke to the upside on CPI report. There are still some legs left for the NASDAQ as market breadth continues winding up. Eyes should be on the strong SVXY to determine VIX volatility ahead for a brief pause. I have a Normal Distribution (Median) that a drop in percentage change from yesterday's NASDAQ clocks in at 92.79% that it will be lower, while LogNormal shows a 52.44% performance shift lower and standard deviation slightly above 1 (1.37% vs 1.40%).
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