Risk Assets Rally on Soft Inflation Data

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Chris Chavez, Market Strategist

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Good afternoon traders. It’s Chris Chavez with Blue Line Futures and it’s your daily midday market minute. We’re seeing a broad based risk asset rally here today as inflation data comes in softer than expectations. But before we get to it, if you’re watching this video like it, subscribe if you’re on our website, there is also a link to direct you to YouTube and you can subscribe that way.

We would love for you to follow us. We would love for you to help us build our following. That’s when we’re looking at the inflation data we got this morning. CPI showed no increase for the month of October and estimates for want were four 1/10 of an increase month over month. So you didn’t see any inflation in the month of October.

Really, when you look at the CPI basket, right. We can look at energy prices which showed, you know, a pretty sharp decline here as of late, which was reflected in the CPI report. You know, crude prices, natural gas prices came off of their highs and energy prices as a whole came lower, which certainly helped out. You know, the CPI report also looking at the shelter component, you know, over owners equivalent rent, you know, rent in general came in at a slower pace versus the previous month releases.

So, you know, you’re seeing a little bit of slow slowing in housing. You’ve seen energy prices come in lower. And this is a great report for the market, something that they’re really latching on to. You know, when you’re looking at the interest rate expectations prior to the report, you know, the first cut was anticipated for July. Those expectations have now been shifted from July to June.

So you’re seeing a little bit of a repricing in the bond market here today. You know, treasuries are rallying, Yields are coming off of their highs. We’re going to have to continue to pay attention to some of this data moving forward. But you’re continuing to see the trend in inflation. We are indeed moving lower. Are we going to move low fast enough for the Fed to pivot and cut soon in that expectations?

That’s going to be the big question. We’re going to have to continue to pay attention to data here. We’re looking at API that’s going to come out tomorrow. We’re also going to get retail sales tomorrow. Atlanta Fed GDP now and later in the week, we’re going to get more housing data. You know, we’re going to get the Philly Fed manufacturing and jobless claims.

So still a lot to pay attention to. We’re still, you know, amidst a lot of data this week. And, you know, we could see this seasonal rally really start to take off, especially if you continue to see some more weakness in the data here to come. And looking at the S&P, we’re really going to want to see a close above 44, 98 two 4508.

Now we’re above there right now as I’m making this video. So again, we want to maintain a close above there to see more conviction in momentum to the upside to start resistance for the Nasdaq. You’re seeing a huge rally here again today, 15 856. A break in close above that level also is going to continue to show more strength to the upside.

We’re looking at crude oil again, continuing the narrative. OPEC, you know, kind of ramping up demand estimates for the end of the year. And now that you’re seeing this inflation number kind of come in under expectations, maybe that’ll give crude a little bit of breathing room even as a just a risk asset in the environment of commodities and financials, what people might want to own, especially if we’re on the cusp of a narrative shift when looking at the Fed.

So that’s going to be, you know, an important market to watch. 8010 to 8051 is going to be a significant three star resistance level to pay attention to. And gold 1976 to 1980. We break in close above there. I think there’s a little bit more momentum to the upside. Yields have remained a headwind and they’re going to continue to be a headwind for the gold market.

If you have any questions, reach out to our trade desk. We’re here for you. Remember, futures trading involves substantial risk of loss and is not suitable for all investors.

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