Market On Open, Wednesday 12 February

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The F Bomb

by Alex King, CEO, Cestrian Capital Research, Inc

The Fed Bomb is due to drop again today, indirectly anyway, as we get January CPI reported today at 0830 Eastern. For CPI to fall, it likely needs reduced shelter costs. Chairman Powell recently referred directly to the absurdity of the OER (owner equivalent rent) measure used by the Fed, the implication being they will come up with some more sensible measure; but even with that, actual rental data as researched by Yimin Xu indicates that actual rental costs (as opposed to OER imaginary rental costs) may be rising anyway. So there’s a good chance CPI could be the wrong answer today.

As always what matters is not the number itself, but how the market reacts. Typically on big news or event days, of which CPI is certainly one, we see the market react violently on the print - in both directions. This has the effect of taking out stop orders placed by bulls (on the downside) and bears (on the upside), before the market then settles on a direction and heads off that way. A good argument for actual or provisional hedging orders rather than stops - at least if your hedge is out of the money you can usually wrestle it back into the green given enough time, be it by averaging down on the hedge or over-hedging in the other direction if truly all is lost.

Let’s get to work. Oh, big news coming in our Registered Investment Adviser - Insight Pro service soon - look for that in the next day or so.

Also, if you have a moment, check out my conversation with TrendSpider Founder-CEO Dan Ushman - right here:

Short- And Medium-Term Market Analysis

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