Market Alert - Pre-Market

Futures vs FV: SP -18.79; DJ -159.45; NASDAQ -47.86

SP futures were +13 ahead of the CPI and Retail sales for January, and after were down over 25 points in the initial wake of the economic data. Some rebounding after the algorithms sold the market on the headlines, but thus far there is no 'ah, a buying opportunity' rush back upside. As such, futures are off the lows but not much.

CPI, Jan: 0.5% vs 0.4% exp vs 0.2 prior (from 0.1). Yr/yr: 2.1% vs 1.9

Core: 0.3 vs 0.2 exp vs 0.1 prior (from 0.3%). Yr/yr: 1.8%.
Note the core for December fell dramatically. Thus the overreaction reaction to the CPI is an . . . overreaction.


Retail Sales, Jan: -0.3% vs 0.2% exp vs 0.0 prior (from 0.4%)

Ex-Autos: 0.0 vs 0.4 exp vs 0.1 prior (from 0.4%)

Big revisions down on the December numbers. Big. This is at least as disturbing as the CPI numbers. Indeed, the CPI revisions to core were significantly lower.


Okay, so you have higher consumer prices and flat to lower retail sales. What is the immediate conclusion on the 'world ends sometime soon but we have been making that call for 10 years and have not got it quite right yet' websites? Stagflation. Just passed pro-growth tax reform and ready to panic. Ah, but that is what happens when you have an all-powerful central bank controlling your wealth. You get these kind of reactions because the history of the Fed is acting too late and overreacting when it does act. It is so ironic is it not? You hear every day about how you cannot time markets. You are beat to death with it, yet those very people advocating that put their full faith in basically one person, who believes in the Phillips Curve, to be able to time markets. Einstein would label that insane. Thus, the reactions we have.


OTHER MARKETS
Bonds: 2.864% vs 2.8333% 10 year. Bonds sell some, rates rise again.

EUR/USD: 1.2302 vs 1.2361. Dollar rises on the news, anticipating rate hikes.

USD/JPY: 107.19 vs 107.76. Dollar is weaker despite a really weak Japan GDP print

Oil: 58.41, -0.78

Gold; 1333.40, +3.00. Turned from -4 to +3.


Futures are off their lows ever since the economic data, but again, it is no surge higher. Definitely a session where you see how the market closes. This was the bad case scenario for the data, and many are now saying the volatility has returned and the market must test the prior lows, etc. If it does test off this news, the 'bottom' is not reliable. You want to see the relief move hang in, claw back up after this setback, and put in another week or so of advance. It may be slow a la Tuesday, but that does the work needed for the market.

Thus, watch how the bids return after a weak morning, watch how the late afternoon trade unfolds. Today very well ends lower, but not a new huge selloff. If that is the case, that is, while frustrating, not bad action for the relief move and the ultimate process previously outlined.


Jon Johnson, Chief Market Strategist
InvestmentHouse.com
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