This column is my opinion and expresses my views and should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities. Those views can change quickly when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page.
As I mentioned last week the CPI report that came out on Thursday is what drove the market. Unfortunately, I was expecting a higher-than-expected CPI, and the report came in much lower. Consequently, you saw rates plummet, the dollar decline, and markets skyrocket. The Nasdaq went up 7% in a single day! The dovish-pivot cheerleaders have been waiting for any good news to load up on the technical growth stocks that did so well the previous 5 years—and they got it. A combination of buyers and short squeezes sent the S&P 500 6.5% higher from the close of Wednesday.
​
Where do we go from here? Is this a sign inflation is finally cooling and the market is ready to skyrocket?
​
I am a believer that inflation is not cooling and the results of the latest CPI report could have bad ramifications for future inflation.
​
One reason for the better-than-expected CPI number is because of a health insurance adjustment that will not be factored in the Core CPI that will be released on December 1st. Without this adjustment, the CPI number would have come in the expected range. Here are two articles that do a good job explaining the health insurance adjustment effects on the CPI:
​
​
​
One problem with the lower CPI print is that rates dropped, and the dollar followed.
As the dollar drops commodities trend higher. The commodity ETF, COMB, is up 3% from Wednesday’s close.
We can see copper is up nearly 8% from Wednesday’s close.
Oil is forming an ascending triangle and if the dollar keeps dropping, there is a strong likelihood it will move higher.
As commodity prices move higher, inflation will move with it which will provide more reason why the Fed will keep raising interest rates…. Not good for the markets. This is the vicious cycle of inflation.
​
Furthermore, the Federal Reserve is planning to raise its cash balance to $700 billion by the end of the year, raising the Treasury General Account. This is important because the market tends to follow the reserve balance. As the TGA goes up, the reserve balance goes down and the market follows, or at least that has been the tendency.
So, considering these factors, the facts show the bear might not be done with the market as of yet. However, could markets continue higher in the coming weeks from the lower CPI report? Yes, they could. As I mentioned earlier there are a lot of dovish-pivot cheerleaders and if they continue to buy we could continue to see a short squeeze in some equities.
This week is option expiration week including the VIX. With the majority of the options between 3,900 and 4,100, I would expect the market will stay in this range this week.
I have been following OXY for a while now and because of the factors previously discussed there is potential that it could move higher than $75.00 this week.
Tuesday morning Fed Vice-Chair Lael Brainard will give her outlook on the economy and inflation. If she comes out extremely strong one way or the other, her words could move the market. We will have to see.
​
Good luck this week.
Disclosures: I own OXY.
This page contains independent commentary to be used for informational and educational purposes only. Joshua Pilgreen is President and an investment adviser representative with Arbor Portfolio Management. Mr. Pilgreen is not affiliated with any company and does not serve on the board of any related company that was mentioned in the commentary. All opinions and analyses presented by Joshua Pilgreen in this analysis or market report are solely Joshua Pilgreen’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Joshua Pilgreen as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Joshua Pilgreen’s analyses are based upon information and independent research that he considers reliable, but neither Joshua Pilgreen nor Arbor Portfolio Management guarantees its completeness or accuracy, and it should not be relied upon as such. Neither Joshua Pilgreen nor Arbor Portfolio Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you.
Address. 2400 Herodian Way SE, #220, Smyrna, GA 30080 Phone: 800-321-3210 Email: info@arborportfoliomanagement.com
Arbor Portfolio Management and its representatives are in compliance with the current filing requirements imposed upon registered investment advisors by those jurisdictions in which Arbor Portfolio Management maintains clients. Arbor Portfolio Management may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Arbor Portfolio Management’s website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment related information, publications, and links. Accordingly, the publication of Arbor Portfolio Management’s website on the Internet should not be construed by any consumer and/or prospective client as Arbor Portfolio Management’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Arbor Portfolio Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Arbor Portfolio Management, please contact the SEC, FINRA or the state securities regulators for those states in which Arbor Portfolio Management maintains a filing.
A copy of Arbor Portfolio Management’s current written disclosure statement discussing Arbor Portfolio Management’s business operations, service, and fees is available from Arbor Portfolio Management upon written request. Arbor Portfolio Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Arbor Portfolio Management’s website or Incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.
Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that future performance of any specific investment or investment strategy (Including the investments and/or investment strategies recommended or undertaken by Arbor Portfolio Management) made reference to directly or indirectly by Arbor Portfolio Management in its website, or indirectly by a link to an unaffiliated third party website, will be profitable or equal the corresponding indicated performance level(s). Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client or prospective client’s investment portfolio.
Certain portions of Arbor Portfolio Management’s website (i.e. newsletters, articles, commentaries, etc.) may contain a discussion of, and/or provide access to, Arbor Portfolio Management’s (and those of other investment and non-investment professionals) positions and/or recommendations of a specific prior date. Due to various factors, including changing market conditions, such discussion may no longer be reflective of current position(s) and/or recommendations(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Arbor Portfolio Management, or form any other investment professional. Arbor Portfolio Management is neither an attorney nor an accountant, and no portion of the website content should be interpreted as legal, accounting or tax advice.
​
Arbor Portfolio Management may provide links from this Site to a non- Arbor Portfolio Management Website or permit a link from a non- Arbor Portfolio Management Website to this Site. Such links are for your convenience only and do not imply any affiliation with, or an endorsement, authorization, sponsorship or promotion of the non- Arbor Portfolio Management website or its owner Arbor Portfolio Management does not control or review any link, and accepts no responsibility for the content, products or services provided at these linked websites. If you decide to access such non- Arbor Portfolio Management Websites, you do so solely at your own risk and you should be aware that non- Arbor Portfolio Management websites are governed by their own terms and conditions and privacy policies. Links to this site may be made only with the permission of Arbor Portfolio Management A link to this Site may be permitted in Arbor Portfolio Management’s discretion, where, without limitation, such link (a) is to this site’s homepage, (b) clearly informs users that the link is to the Arbor Portfolio Management Website, (c) does not imply any affiliation, endorsement, sponsorship or other relationship between the link Arbor Portfolio Management Website or the Website owner and Arbor Portfolio Management, (d) delivers this site’s Content without framing or similar environment, and (e) maintains the integrity of this site’s layout, content and look and feel. Arbor Portfolio Management reserves the right in its sole discretion to refuse permission or to cancel permission to link to this site at any time