Thursday’s trading session took the S&P 500 on a wild ride, but you wouldn’t know it if all you saw was the day’s modest 0.3% gain.
The extreme volatility kicked off after the monthly Consumer Price Index showed inflation falling for the sixth month in a row. While no one is excited by 6.5% inflation, it sure beats the 9% recorded back in June. And even more impressive, some categories actually saw price declines from November.
While it is premature to claim the inflation beast has been slain, there is enough history to say conclusively inflation is not spiraling out of control. It won’t get resolved nearly as quickly as some are hoping, but we are definitely headed in the right direction.
The most impressive thing about Thursday’s wild swings is how balanced they were. Every bit of down was matched by a bit of up and almost every bit of up was matched by an equally sized bit of down. To the point where within minutes of the close, the index was tracking near breakeven before a minor lift gave us that modest 0.3% gain.
Stocks couldn’t sustain a move on the CPI data because it didn’t change anyone’s mind. Bears were just as bearish as bulls were bullish. Prices don’t move when people don’t change their minds and this morning’s just-right result split the difference.
While it would be easy to call this a tie, in this instance the tie-breaker goes to the prior trend, which is up. In addition, as easily as stocks fall, holding steady is another win for bulls.
It doesn’t look like a lot happened Tuesday, but until something changes, bulls are still in control of this market.
The next big hurdle is the 200dma and 4k resistance. These technical levels proved too much for the market to overcome back in November and December. Will this time be any different? Only time will tell, but until prices actually start falling, we have to keep giving the benefit of the doubt to the rebound.
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Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.