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Full Steam Ahead – New Market High
www.oneoption.com
Oracle provided incredible guidance three years out and the PPI dropped .1%.
PRE-OPEN MARKET COMMENTS WEDNESDAY – Last month PPI came in hot and there was a chance that it could remain elevated. That would have provided a headwind for the Fed, but they’ve stated that any tariff related price increases should be temporary. The PPI dropped to -.1% and that is consistent with that theory. This should pave the way for a rate cut next week and another rate cut this year.
Yesterday the BLS cut 910K jobs from their estimates from April 2024 – March 2025. That is the largest downward revision since the 2009 financial crisis. Employment has been much weaker than reported and we’ve seen big downward revisions this summer. This has the Fed’s attention and job growth is a much greater concern than inflation. Central banks around the globe were ahead of this curve and they have been easing for a year.
The ECB started cutting rates in 2024 and they have cut rates five times this year. They are not expected to cut rates tomorrow.
The FOMC Statement is a week from today. A 25 basis point rate cut is priced into the Fed Fund Futures and there is a small chance that the Fed will cut by 50 basis points. Is a bigger rate cut better? Not necessarily. There have been times when the market views that as an act of desperation and that they waited too long or that conditions are deteriorating rapidly. A 25 basis point rate cut and a lean towards another rate cut this year would be more market friendly in my opinion.
ORCL reported that they see cloud infrastructure revenue climbing from $18 billion dollars now to $144 billion in 4 years. The stock is up 30% overnight and it is very unusual to see mega cap tech stocks make moves of that magnitude. That is sparking a big overnight move higher.
Yesterday the market rallied late in the day ahead of a potential speed bump. That is fairly unusual and we saw the same type of price action last Thursday ahead of the jobs report. That is a sign of aggressive buying and a sense that no matter how bad the number is, the market is heading higher.
The CPI will be released tomorrow and the hot PPI last month could show up in consumer prices. After today’s drop in PPI, any spike in CPI will be viewed as temporary.
Overseas markets were up marginally, but the S&P 500 is well above the all-time high. There’s nothing to stand in the way of this freight train this week. Tech stocks will be very strong today. I don’t chase gaps up to a new all-time high. Given the overnight news, this move could gain traction early. Any compression or dip will be short-lived. I would spend the first 30 minutes looking for RS. Stocks that have not made huge gaps up will be your best bets. They have plenty of upside and they will grind higher. Stocks that stage big early moves will quickly exhaust any remaining upside potential. If you want to trade them, you have to wait for a nice pullback.
I’m not expecting a big gap reversal today. While we watch early in the day we can look for any long red candles. That would be a sign that there is some selling pressure and that we don’t have to rush. Last Friday the market gapped up on a dismal jobs report and it reversed. Today the news is quite good so don’t expect that same reaction. It is critically important to put news into its proper context.
Support is the previous all-time high and resistance is… ?
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