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U.S. Inflation Report May Shock Markets

By Michael KramerStock MarketsAug 10, 2022 03:42AM ET
www.investing.com/analysis/us-inflation-report-may-shock-markets-200628292
U.S. Inflation Report May Shock Markets
By Michael Kramer   |  Aug 10, 2022 03:42AM ET
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The S&P 500 finished lower yesterday by around 40 bps, with the index finding support multiple times around the 4,110 to 4,115 levels. The index also managed to close below the lower end of the rising wedge pattern, and it looks like the 2b reversal pattern may also be playing out. If the two patterns play out as I expect, we could see 3,950 in the near term.

S&P 500 Index Daily Chart
S&P 500 Index Daily Chart

Financial Conditions

The IEF/LQD ratio moved higher today and for the first time since July beyond the downtrend. It could be the start of something, and we will need to see a further move higher today. Financial conditions have eased significantly over the past month, which has acted as a tailwind for stocks. Should conditions begin to tighten, they will serve as a headwind.

IEF/LQD Daily Chart
IEF/LQD Daily Chart

CPI

Today's CPI report will have a big say on whether financial conditions tighten further or not. The estimates are for 8.7% y/y, while the Cleveland Fed estimates that July inflation rose by 8.8%. However, the actual CPI report on a y/y basis has come in hotter than the Cleveland Fed estimates every time since the fall of 2021. A hotter than expected CPI would come as a shock to the market, which has bet on peak and inflation and a dovish Fed pivot. But a higher than expected number could trigger higher rates and tighter financial conditions.

CPI
CPI

HYG

The HYG may be sending a very subtle message on the matter, as it sits at a support level of around $77.50. Additionally, the RSI has fallen below the uptrend and is starting to trend lower. A break of support at $77.50 probably pushes the HYG to $75.75.

HYG Daily Chart
HYG Daily Chart

Roblox

Roblox (NYSE:RBLX) reported weaker than expected results, and the stock is down sharply. The conference call is today, so it will be essential to see what the company says. It reported solid booking for July, with a return to growth, which is a positive. The $37.75 level is a region of solid support that needs to hold.

Roblox Corp, Daily Chart
Roblox Corp, Daily Chart

Semis

The SMH ETF fell below the 10-day exponential moving average yesterday, and in the past, when that has happened, it has not been a good sign and tended to result in the start of a new leg lower.

SMH Daily Chart
SMH Daily Chart

Bitcoin

Finally, Bitcoin is very close to a big break lower and out of a bear flag, with a chance to revisit $17,000.

BTC/USD Daily Chart
BTC/USD Daily Chart

Original Post

U.S. Inflation Report May Shock Markets
 

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U.S. Inflation Report May Shock Markets

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Comments (14)
Kris Jay
Kris Jay Aug 12, 2022 1:18PM ET
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looks like stocks will continue to go up until some "event" occurs.  so should be back to pre-Fed hike levels in a week or so.  Rising interest rates just dont matter any more.
Mario tragik
Mario tragik Aug 10, 2022 5:48PM ET
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I just came to say hi to Kramer and his followers..... oh my god, you got destroyed if you blindly followed him
Mohd Izhar Muslim
Mohd Izhar Muslim Aug 10, 2022 2:32PM ET
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Thank you for sharing the article 💯
Michael Song
Michael Song Aug 10, 2022 11:47AM ET
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thnx for the article..
Syed Irfan
Syed Irfan Aug 10, 2022 11:39AM ET
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You shound write for comedy central
Mario tragik
Mario tragik Aug 10, 2022 9:21AM ET
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It shocked them alright, to the upside 🤣🤣 omg Kramer just stop.
King Agamemnon
King_Agamemnon Aug 10, 2022 9:20AM ET
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166013754341542.jpg
I told you to be careful. This is a strong uptrend both with MA's and a bull channel. Next stop is the 200 DMA. Better cover your shorts before you get completely BTFO on this breakout.
Mario tragik
Mario tragik Aug 10, 2022 8:51AM ET
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This did not age well. omg kramer you were dead wrong like always.
Elmahdi Oummih
Elmahdi Oummih Aug 10, 2022 7:22AM ET
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All in for big, short today, may end up getting crushed, but the numbers say what they say.
Kris Jay
Kris Jay Aug 10, 2022 6:17AM ET
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given China, Germany and Italy ticked just a 1/10 of a percent lower, I think US will come in hotter than Cleveland's estimate,  8.9% if they are not fudging the numbers for political reasons.   Lowest 8.7%.   In any event, this small lowering may be enough for crazies to buy up the stock market.   That is foolish.  As we get a rate hike of 75bps, maybe even 100bps in September.   the only way the FED pivots is if inflation comes in at 2% and its not going to.
Samer Diab
Samer Diab Aug 10, 2022 6:17AM ET
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stocks always go up when everyone is bearish . bottom was June 16th
Kris Jay
Kris Jay Aug 10, 2022 6:17AM ET
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Samer Diab  that doesnt make sense. if everyone is bearish stocks dont go up.  what you're seeing is low volume market where retail investors are misinterpreting Powell's remarks and like you, thinking the bottom is June 16th (because Mad-Money Cramer declared it) when we have persistent inflation and further rate hikes.   To quote "Chicago" its just only beginging, so no reason to be jublient over stocks wiht 30x-40x multiples as sales, earnings will compress.
Paul Kerber
Paul Kerber Aug 10, 2022 6:17AM ET
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Bottom is in market goes up
Mario tragik
Mario tragik Aug 10, 2022 6:17AM ET
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hiiiiii, lol you were dead wrong haha, you should had listen to Samer Diab
 
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