While I was correct in my thoughts that the April Producer Price Index (PPI) would come in under the 0.3% estimate, which it did at 0.2%, gasoline prices came in stronger than I anticipated while cratering egg prices pushed the food portion of the index lower. Overall, food prices did rise, so I wasn't entirely off base, but the report shows no one should count their chickens before they hatch. One significant move within the food group can be enough to push the overall number negative.
It's only one month, but the April Consumer Price Index and PPI results should allow the Fed a cause for pause. We still have May's numbers before the next Fed meeting, so a lot could change, but if May inflation is tempered, I view a pause as all but certain. Unfortunately, the May numbers will come only days before the next Federal Open Market Committee (FOMC) meeting, but that should be enough time for the Fed to work it into its outlook statement.
Walt Disney (DIS) soured Thursday's move for the S&P 500 and the Dow Jones Industrials, but technology again took the reins. Alphabet (GOOGL) , Amazon (AMZN) and Netflix (NFLX) led the way with strong breakouts.
It's hard to rationalize owning anything other than tech until this trend breaks. We've marched higher consistently, with the 21-day exponential moving average (EMA) acting as picture-perfect support. More conservative traders may use back-to-back closes under the 10-day EMA as a stop rather than consecutive closes under the 21-day EMA.
The Carvana (CVNA) breakout from a few days ago may be done here. Shares popped once they broke the $11 level, rising a bit above $13.50. Earlier, I wrote that I saw $13 as the first level of resistance, so that wasn't a bad trade for those who grabbed it and took some profits around the first resistance marker.
Today is likely where the rubber meets the road. If we're going to see the $15 to $16 range, then bulls can't give up $11.50. I expect the 5-day EMA will be around that level by the end of today. For a squeeze to play out, short-term momentum needs to stay hot. Losing the 5-day EMA would not be considered hot.
Should the bulls lose the 5-day EMA, stepping aside from a position is prudent. This isn't a name I want to short with the huge short interest already in play, but Carvana shares easily could fall back into the $9s if momentum traders exit. Owning short squeeze plays are always short-term rentals and nothing more. More often than not, there's a fundamental shortcoming in the underlying business that spurns such a huge short interest. Carvana is no different. This one should be nothing more than a rental if you took it out for a drive.
