Monday, August 15, 2016

S&P 500 Weekly: When Doves Fly

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*CPI and FOMC minutes could appear dovish.
*Options expire Friday.
*This could set up an important dovish speech by Fed Chair Yellen next week, August 26.

We see a few key events this week that are important to markets (NYSEARCA:SPY). One is the options expiration at the end of the week. Another is the FOMC minutes and next is CPI. This week is not the climax however. Fed Chair Janet Yellen speaks next Friday, August 26th and will resolve the mystery of a silent Fed following two very strong non-farm payrolls numbers.
Let's go in date order.
CPI reports Tuesday morning
CPI has been steady at 0.2% over the last few months. That is stronger than it had been. Estimates are for another 0.2%.
Here's the recent trends.
CPI Topline0.1-0.10-

While the core number has been steady at 0.2%, the top-line number has now also been solid at 0.2%. 0.2% monthly implies an annual rate above the 2% Fed mandate for inflation (0.2x12 months = 2.4%).
The topline number includes food and energy while core excludes it.
Let's look at oil (USOOILUWTI) which can bias the number. Here's a chart for oil comparing June to July. CPI will report July this month.
We put a vertical line at July 1st. You can see that oil was higher in June versus July. That could bias the topline CPI number lower on Tuesday.
A weak CPI would mean the Fed is on hold which removes a rate hike risk to markets.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS