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It has been a very eventful four days. We have had regional banks fail and “bailed out”, we have had complete chaos across other banks and financial systems with rising rates to blame for some part.
We once again have printed another CPI print lower than the previous month's report. Inflation continues to fall as the previous 6.4% increase was succeeded by a 6.0% increase in the seasonally adjusted year-over-year release. This trend continues to be bullish, as it indicates that the measures being put in place by the Federal Reserve are working.
Renting and homebuying are typically working in a negative correlation to each other. As renting gains demand, homebuying is falling off and vice versa. However, in recent months, we have seen demand for renting becoming more prevalent because of the increasing unaffordability in housing.
Bonds retraced after the release of February’s CPI print showed persistent core inflation, although coming in mostly at consensus, sparking repositioning across the bond market following the white-knuckling SVB saga that transpired over the weekend.
Our thesis of the market having more structural risks to the upside over time remains intact: Chinese reopening demand, world renormalization while stocks remain low, refinery rationalization during COVID, OPEC+ put, and macro tailwinds ultimately emerging. However, after this last week we are more concerned about a bearish flush, especially as the bullish narrative, especially around 2H crude being a very consensus trade. As technical levels were broken through, stops were triggered, and macro fears were triggered, it is clear the one-sided nature of the crude market.
SPY retraced a bit to retest the demand zone we mentioned at $380. We had been talking about testing this zone for a few weeks before we dropped. Notice how SPY has bounced from both demand zones – this can indicate a local bottom. Reclaiming $400 is bullish and is a major level to watch. The consolidation between $380 and $400 is what should be your main focus. Break above $400-420 or below the $380 zone will likely confirm mid term trend direction.
7-week volume – Top 5
1. MAYC
2. BAYC
3. Moonbirds
4. Otherdeed For Otherside
5. Owls
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It’s the eighth consecutive month that the annual rate has declined and marks the lowest level since September 2021. This is definitely great and as long as the trend continues and takes Wage inflation down with it, we are on a clear path for risk assets to trend up and rates to drop. I don't believe we are breaking enough for the Fed to cut or stop hiking altogether, but giving the market short-term relief is very good.
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