A brutal CPI is a bit of an 'hourly' fear for Tuesday, as inflation may take at least a year or two to come down 'significantly', because it's not Fed policy for now that really matters, but 'bumpier' things, like 'war(s)' or climate issues. In a sense there's no short-term way to really bring down agricultural prices.

Freepik

But if the Fed merely fades the pace of hikes and realizes they've belatedly of course done almost all they can 'really' do, the market should digest that well.

Meanwhile few hearts & flowers for the Valentine's Day traders, as unrequited love is more likely for those passionate enough to expect any excitement.

Some of this is what people call 'late-cycle' activity, but these are typically all the money managers that missed the 'buy' of Fall 2022 and are delusional in a different way than those expecting low inflation. Rather they are focused on 'performance' and the need to have stocks decline so they can buy, not sell.

Just a view, notice that even the biggest Street bears are talking about price action not reflecting deteriorating fundamentals. Well a bull could answer (we do) that if the market 'ignores bad news', that's basically or historically bullish.

In-sum: 

There are various scenarios regarding the reaction to CPI tomorrow. We aren't fighting the Fed, we are open to further shakeouts, while somewhat consider the market has already digested and adjusted to the higher rates.

So we're in the 'neutral' camp for the moment, not believing the S&P upside is delusional, mostly just on hold with some stocks (Oil and Apple) holding S&P a bit higher than might otherwise occur. I'm not expecting any catastrophe or big dominoes toppling dramatically, other than hourly volatility.

NATO Sec'y. General believes Russia is scaling-up it's 'early' Spring push to gain ground in Ukraine before additional Western weapons arrive to defend a beleaguered country against Putin's mercenary-led forces (increasingly acting as the very Nazi's they falsely claimed to be pursuing). NATO has revealed a shortage of sufficient artillery shells (being fired faster than they can make 'em and Russia is firing about 3x as many shells at Ukraine every day (average).

The lift of the last 6 weeks 'is' legitimate, cash flows matter, and M&A interest might even start to appear a bit over the weeks and months ahead, possibly in an area that's calmed-down from hype, which is Artificial Intelligence.

For now there's no change in our view about this oscillating market ahead of a significant Expiration for 'some' stocks, after which we expect both rallies and declines (bifurcated), although not necessarily much for the already-up S&P.

Palantir (PLTR) surged after posting first quarterly profit ever, which might also argue well for 'also ran' BigBear.ai in the near future. (The two are in an Ai 'team' as noted before, hard to say how that relates going forward. They are together in a project but also competitive for new contracts from the Defense Dept...plus am I really writing about UFO's.. well yes, and no I've never believed all of the alien threats are 'earthbound' such as North Koreans.. or North Martians :-). )

Note that the NORAD systems did not pick up the original 'balloon' until 2 just civilian observers spotted it flying overhead.. much less 'cylindrical objects' for now defying explanation (Government says not aliens, but actually don't know 'for sure'). A 'Meeting' later this week with the Chinese is a good development, to sort things out. In any case, proper battle-management both of space & air debris would allow software to track data in more modern ways (BBAI).

Bottom-line: 

CPI is next-up, followed by Expiration later in the week. Hard to estimate market reactions overall to either, but probably less dramatic than all the speculation. Maybe even relief that CPI will be out of the way, and if lower then you'll get an unsustainable rally, because some prices went up after that last data stream was assembled.

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Market Briefing For Monday, Feb. 13
Market Briefing For Tuesday, Feb. 7
Market Briefing For Monday, Feb. 6