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Hot CPI Print & Market Rebound

Against all odds, the US indices managed to rebound and so far, they are all green, after opening the session sharply lower. Following the inflation data announcement.

All major figures came in with higher readings. The Core CPI YoY posted a new record at 6.6% up from 6.3, while it had been expected to rise to 6.5% only. On the other hand, the YoY CPI eased less than expected to 8.2 vs. 8.3%. As for the MoM, both were higher than expected.

Right after the news announcement, odds for a +75bps rate hike by the Federal Reserve in November started to pick up some steam again. However, it seems that investors are not that worried about these figures.

At the beginning of the session, the option flows showed some significant option covering (puts), which explains the reason behind the current rebound. Will it continue? It’s possible, especially if the major indices close the day over yesterday’s lows.

On Our Radar

In the meantime, I’m watching EURUSD very carefully as it is showing some signs of stabilization, and it could be on its way to a trend change soon. But first I need to see a solid rally over 0.99 next week. If so, I will be interested in a swing trade targeting well over 1.0500.

As for indices, I still believe that worse could be behind us already, even if the upcoming earnings season disappoints. The extreme fear phase that we are noticing is likely to end one way or another. Yet, we are not seeing any kind of panic. The downside pressure is still happening in an orderly fashion, which is not that terrible. We might be at the end of this bear cycle, but we will need some confirmation over the next few weeks.

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