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Bullet Proof Market
www.oneoption.com
No matter what bad news is thrown at the market it keeps moving higher.
PRE-OPEN MARKET COMMENTS FRIDAY – The market has had to weather many poor economic readings and buyers don’t seem to care that conditions are deteriorating. With each release I keep wondering if “this is the one”.
Yesterday’s PPI came in at a very hot .9%. That’s the highest level since 2022 and it was completely unexpected. I ripped the number apart to find out if one component was responsible for the spike and there were many areas where prices increased. Even the core came in at .9%.
It normally takes 1-2 months for producers to pass on higher costs to consumers so make a mental note of this when next month’s CPI comes out.
Fed Fund futures are pricing in a 100% chance that there will be a September rate cut. Does this reading put them on hold? Next week we will get the FOMC Minutes (Wed) and that could provide some insight on a rate cut. Powell speaks a week from today just after the open in Jackson Hole and that will be the next big news event. Any hint that the Fed is still concerned about inflation will NOT be well-received by the market. Stocks are priced for perfection and they are counting on easing. If he gives the “green light” for a rate cut the market will continue to float higher.
This morning Retail Sales increased .5% and that was slightly lower than expectations (.6%) and it was lower than last months reading (.9%). The market did not react to the number. Next week’s releases include Flash PMIs, but they have not had a material market impact.
As I mentioned earlier, nothing has had a material market impact. A weak jobs report, a weak ISM Services number and a hot PPI reading did not deter buyers. At this stage it is going to take something substantial (like no rate cut in September) to rattle buyers.
Trump and Putin are meeting today. I’m pretty confident that the rhetoric will be positive. It’s been hard to get Putin to the bargaining table and there won’t be peace without face-to-face meetings. This is a process and Trump wants to keep it moving. As long as there is progress, he will postpone new sanctions. There will be timelines and if he senses that Putin is just stringing him along he will impose new tariffs. Russia’s economy and banking system are teetering on disaster.
How does all of this impact our trading? It doesn’t. We are going to keep our trade duration short term. We are not going to chase gaps up, we are going to wait for a dip and support. If the market gaps down we are going to buy on support. At an all-time high stocks are tired. When they gap up, most of the potential upside for the day has been realized. You are better off finding a stock that was hot a few days ago and that has pulled back. Once it regains its relative strength it has plenty of room to run and the price action will be much more consistent and the upward movement has a chance to gain momentum. Set alerts!
It doesn’t matter how we feel about the market or the fundamental backdrop. The market broke out this week and it tested the breakout. It bounced right off of it after bad news and that is bullish.
Overseas markets were mixed so there is no tailwind. The S&P 500 is relatively flat so it might take time this morning to get a sense of direction. Wait for pullbacks and don’t chase.
Support is at the low from Thursday and we are testing the all-time high pre-open.
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