This week we had much higher than expected CPI and core CPI numbers added to the inflationary worries, but yields hit new multi-month lows leading investors to assume the Fed will continue its easy money policy into the foreseeable future.
The S&P 500, the Dow, and the Nasdaq are still all above their 50-day moving averages and significantly above their 200-day moving averages. The Volatility Index (VIX) hit a new recovery low but tagged its 50-day moving average in a mid-week surge.
Next week will be very busy for economic news. In terms of economic releases, the middle of the week will see major indicators and central bank actions through the Fed statement on Wednesday 2:00 pm EST. Retail Sales, Industrial Production, and the Producer Price Index (PPI) will all be out on Tuesday. Building Permits, Housing Starts, and the Philly Fed Index will be released on Thursday.
We expect a short multi-day consolidation following Wednesday’s Fed meeting into June 21/22 . However, strength should follow into end of quarter ‘window dressing’ courtesy of Fed banks and funds. Our first volatility window begins the last few days of June into July 12. A correction is expected to unfold through July and August with possible extension into early September which has yet to be confirmed. Volatility creates tremendous trading opportunity and we plan to be trading both sides of the market over the next 60 days. We have had exceptional trending trades in energy, metals, and equities the last few months. Energy and equity indexes are expected to pause temporarily after an end-of-month rally with metals continuing to climb into August.
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