Price action
QQQ exhibited wait-and-see price action on Monday and Tuesday, then on Wednesday it broke out to new all time highs on rising volume after CPI came in cooler than expected for the first time this year. QQQ consolidated the move on Thursday and Friday. Buyers stepped in aggressively on the retest of the 449.5 breakout level.
SPY also closed the week at new highs, as did DIA. The Dow Jones printed 40,000, which will cheer the manufacturers of souvenir caps in China.
The Fed
JPowell spoke on Tuesday, but it was a filler speech before the big CPI reading on Wednesday. After recent bumps in the disinflationary road, Wednesday’s CPI release brought an inflation print that was slightly lower than expected. It also provided evidence that inflation is not performing a 1970s-style jack higher.
Fed speakers were happy about the data, but one swallow doesn’t make a summer - higher for longer remains the message:
Williams (Thu): CPI is a positive development, optimistic inflation will continue to retreat, no need for a near term cut or hike.
Mester (Thu): current stance is well positioned, CPI data a sign of cooling inflation, but progress will be gradual.
Bostic (Fri): pleased with inflation progress, but Fed not there yet.
What did we learn about markets?
The US 10yr yield and DXY both dropped after the CPI release, further alleviating headwinds for QQQ. US10y yield appears to have broken this year’s trend higher, though DXY has not.
At the beginning of the week, with the markets quiet ahead of CPI, GME ran up +270% and AMC +290%. This was a sign of exuberant excess, but perhaps we shouldn’t read too much into it - the moves came on Monday and Tuesday when the market was waiting for CPI and there wasn’t much else for traders to go after. The names were quickly forgotten once the market as a whole started to move again on Wednesday.
Elsewhere, the broad breakout in Chinese stocks which we noted a few weeks ago has pressed on. A bullish Golden Cross has appeared in HSCEI.
More commodities appear to be breaking out to the upside. This week silver and uranium moved higher. Both are volatile, so we will wait to see confirmation of their moves, but these apparent breakouts are consistent with other trends unfolding across commodities.
Breadth
Breadth continues to be strong, confirming the bullish price action.
McClellan Summation Index is heading higher:
New highs in the NYSE Composite are being confirmed by new highs in the NYSE cumulative advance decline line:
Sentiment
The NAAIM and AAII surveys didn’t change much this week. Both suggest bullish sentiment. During bullish phases of the market, these tend to maintain elevated bullish readings.
NAAIM
AAII
One cause for vigilance is the put call ratio, which is close to signalling excessive complacency. The 5dma of the PCR is not far away from an extreme low which may precede a pullback or consolidation:
Summary
QQQ broke out to new all time highs after constructive CPI data. The primary trend remains bullish. Other major indices printed new all time highs this week, including SPY and DIA.
Fed speakers welcomed the CPI data, but maintained the higher for longer message.
Breadth continues to confirm bullish price action in QQQ.
Sentiment has returned to bullish levels. The put call ratio is nearing a level of extreme complacency.
We continue to observe bullish price action across global equities and commodities markets.
Key events next week: Wed - NVDA earnings report
PS, an explainer for the weekly slide can be found here: