Hot CPI, cold housing. Tomorrow's Fed meeting meeting. What to do. Will they accelerate the taper, or taper the taper?
Here's how screwed the Fed is: because of QE distortion, the only things that are going up are the things that take disposable income away from consumers. Wages, which are needed to keep pace with rising prices, are down, not just monthly, but over the last year. And now housing is taking a hit during the all-important Spring selling season. Housing starts fell 6.5% in May and new construction permits fell 6.4%.
Talking heads will call the CPI number "inflation" when it is actually deflationary; higher consumer prices sap spending and reinforce retrenchment psychology such as deferred spending and buying "on sale."
Until this chart turns up, there is no inflation, only a trend toward deflation. "Money" is doing nothing, not being lent or borrowed, only held onto with both hands.
The immediate trend in the S&P this morning is down. Futures did not like the one-two punch of Hot CPI/Cold Housing. Does it mean the weak bounce is over? Hard to tell. There are two gaps higher which coincide with Fib levels as well as volume shelves. The gaps -- 1943.89 and 1950.79 -- line up with 61.8% and 78.6% retracement areas. These may or may not act as magnets at this time, but certainly later if the decline remains corrective.
Thus far however, the 1907 area is a 1:1 target from yesterday's close and should be respected.
Meanwhile, the only talking heads to listen to are these Talking Heads: