Ahead of Wednesdays' release of data on April consumer level inflation by the Bureau of Labor Statistics... just some thoughts.
1) The S&P 500 and Nasdaq Composite both undercut Monday's lows on Tuesday...
This could be seen as confirmation of the now ongoing correction.
2) That said, there is hope ahead of Wednesday's CPI print where the headline year over year number is expected to hit the tape at 8.1%, reinforcing the idea that inflation may have peaked (8.5%) in March. Core inflation is seen printing at 6.0% annual growth in April, off of March's 6.5%. While not falling off of the chart, the CBOE total put/call ratio contracted on Tuesday...
...as the CBOE index only the put/call ratio closed at its lowest level in more than a month...
...all as the VIX appears to have hit resistance below where resistance had been found earlier in the year...
3) The sudden footing in equities and relaxing of fear metrics, finds origin in recent support found at the longer end of the Treasury yield curve.
This has allowed our two key US Treasury yield spreads... the 10 Year/2 Year and 10 Year/3 Month to narrow (flatten) just a tad ahead of this key macroeconomic data-point.
This morning's CPI print will certainly be this week's (month's) catalyst if there is to be a short-term rally in equities. Can you trust any rally? Are the Russians evacuating Ukrainian soil? Has the latest Covid surge receded in Asia? At home? Of course you can't trust any rally. That said, you were born a sentient creature. Trade the environment provided. You wouldn't drive off of a cliff, would you? Identify. Adapt. Overcome. Better to cover up and launch directly aimed strikes from a defensible position than to get caught moving in single file out in the open.
In other words, play the game, but don't get overexposed. Nothing wrong with being a little cashy. If this is, or if there is about to be a change in trend, you will likely miss to some degree... the bottom. If this is a change in trend, that won't matter in short order. You will catch up as you always have. If this is a head fake or if one is coming, you will have protected yourself and those you love.
Economics (All Times Eastern)
08:30 - CPI (Apr): Expecting 8.1% y/y, Last 8.5% y/y.
08:30 - Core CPI (Apr): Expecting 6.0% y/y, Last 6.5% y/y.
10:30 - Oil Inventories (Weekly): Last +1.302M.
10:30 - Gasoline Stocks (Weekly): Last -2.23M.
13:00 - Ten Year Note Auction: $36B.
14:00 - Federal Budget Statement (Apr): Last $-193B.
The Fed (All Times Eastern)
12:00 - Speaker: Atlanta Fed Pres. Raphael Bostic.