Hey There Income Hunter,
After a third straight drop in the consumer price index, it was surprising that the S&P 500 couldn’t take out the key 4,000 strike yesterday – or even close above the 200-day moving average.
Recall, the CPI report in November lifted SPX nearly 3.5%, and the December report elevated SPX to a high of +2.75%.
Yesterday, the market topped out at just +.70% and only closed up .34%.
Why is such good news for the Fed not bringing in more buying?
I’ll share the reasons below …
FOMO Is Running Rampant
Investors are obsessed with the idea of a Fed pivot from raising rates and draining $90 billion each month out of the markets to printing money to re-liquify the markets.
Listen to me when I tell you … it doesn’t work that way.
Investors have been brainwashed to believe the Fed will bail them (and the banks) out by printing money anytime the market hits the skids.
However, when you have to deal with the beast that is inflation — the risk you can absolutely not take is reawaken that beast. You must make sure it is dead and buried before going back to increasing your money supply.
What It Will Take for a Fed Pivot
It will take a crisis that risks a collapse of the financial system – and we are nowhere near that happening right now.
In fact, after the recent rally, the No. 1 red flag, which is corporate credit spreads, is signaling less risk in the system. As you can see below, BBB credit spreads are back down to the lowest levels over the past 6-months.
Bring It Home
Members of my Power Income Trader program can rest easy in the knowledge they’ll know when the markets are close to capitulation.
Why? Because I monitor the signposts that will give us lead time to prepare for it.
In the meantime, they also receive trades that take advantage of the normal volatility that we see week in and week out. Trades like the first five of 2023 …
Up next: I see a turn in trend coming in the days and weeks ahead – join me now to ride that wave.
Live and Trade With Passion My Friend,
Griff