3.2% CPI provided enough fuel for an opening S&P 500 spike above 4,535, but the tech-led rally fizzled out without reaching 4,565, which would make a good shorting area (if exhausted there). Looking under the inflation report hood provides a mixed picture – airfares and health insurance costs decline – in used cars, OK, and still the oil and oil product costs would keep rising. No way to spin it as disinflation continuing if only a 3-month basis is considered. Add wage pressures as the job market isn‘t understandably cooling down much, inflation expectations rising if only bond market metrics are viewed – and that‘s hardly a recipe for the Fed to pause.

Powell may not wait till Nov, but act already in Sep – that‘s one way to view yesterday‘s Treasuries auction forcing yields sharply up. In spite of the China argument (export prices, CPI this week), PPI may come on the hotter side, rather 0.3% than 0.2% as the US economy isn‘t yet slowing down much.

Rotations in stocks are to be tame today as it‘s interest rates that would drive the overall risk sentiment – and tech stocks would decide the direction in the stock market today together with the yesterday proven notion that spikes don‘t last too long.

The rise in yields be it through Japan or the States, is to be (and is) reflected worldwide, from Gilts to Bunds. The 10y yield does not face any real 4.20% resistance, and as we can‘t talk about risks of deflation, there isn‘t any (geopolitical or other such as recessionary) catalyst to stop yields from rising.

In my comparison of this decade to the 1970s, this does not and would not prevent gold prices from rising (the $1,930 – $1,935 area in Dec contract is well defended, which translates into $1,905 – $1,910 spot gold. Similarly oil wouldn‘t stop rising after consolidating in my $83 area.

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Gold, Silver and Miners

Gold is getting at an interesting level, even if the upswing didn‘t make it through CPI – odds are that major bottom is near (see the article introduction) – $1930 – $1,935 in Dec gold may be still tested, but are likely to hold.

Crude Oil

(Click on image to enlarge)

Crude oil finally had a rare down day, but unless volume picks up, the $82 till $81 area wouldn‘t be broken. Oil is still grinding higher.

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