Tuesday's market mover is certainly moving stocks around.
The CPI report came in slightly higher than expected. Month over month, it remained at 0.5%, but on a year-over-year basis, it was 6.4% versus expectations of 6.2%. That is the seventh straight drop on an annual basis.
Most interesting is that the disinflation in core goods continued with a rise of just 1.4% year over year, but core services continue to rise and is at 7.2% on an annual basis.
There is nothing particularly dovish about this report. It is not likely to cause the Fed to be less aggressive. In fact, the odds of 0.25% rate hikes at the next three Fed meetings in March, May, and June have increased following the report.
That is not good news, but dip buyers jumped on early weakness and had the indexes fluctuating between red and green. The index that tends to be the most sensitive to inflation worries is the Nasdaq 100 (QQQ) , and that has been up as much as 0.8%, before dipping into the red, as there is some reversal starting to occur as I write.
So what is going on here?
The negative economic narrative is largely being ignored again. As I've discussed quite a bit recently, the bulls are focused on price action, and they are crushing the bears that are focused on economic arguments. Bulls tend to focus on technical action and relative strength, while bears tend to focus more on data and narratives.
Currently, this market does not seem to care about the narrative. It is focused on the price action that is squeezing shorts and sucking in idle cash from the sidelines. There is FOMO at work, and that overrides all the erudite bearish observations about the insanity of the market action.
I recently discussed how to trade an irrational market. We have a classic example again Tuesday. It won't last forever, but it almost always will last longer than you think is reasonable.
As indexes veer to the downside there's something to keep an eye on. An intra-day top and drop below the day lows would be significant, and I will look for index shorts if that starts to develop.
I added to a position in small biotech PDS Biotechnology Corp. (PDSB) Tuesday morning, which has good support at $8, and put on a short position in Palantir (PLTR) , which received very poor responses from analysts following its earnings.
I have a high level of cash, but I'm not in any rush to put it to work. I'm staying selective with buys and am more inclined to buy weakness than strength at this point.
