Last week we covered the enigma behind the flat core Consumer Price Inflation (CPI), the number that left CNBC's economist Steve Liesman scratching his head. We pointed out the likely revision ahead in March inflation and this morning’s Producer Price Inflation (PPI) adds credence to this scenario. With the Fed on board at 2:15PM ET, we hope Bernanke finally stands up!
The Labor Department reported that wholesale prices, NOT counting food and energy mind you, shot up 0.5%, the biggest one month rise in 15 months. This is very troubling data in face of a weakening U.S. Dollar and economists like Robert DiClementi from CitiGroup calling for a full point interest rate cut from the real Fed Chairman (see our piece "Will the Real Slim Shady Fed Chairman Plz Stnd Up" directly below).
The paradox in this morning’s PPI data lies in food and energy again. Please take a seat before you ingest this nugget; although the PPI rose at the biggest clip in 15 months, food and energy prices were reported to fall. Moreover, the Labor Dept. actually blamed the rise in PPI (with food and energy excluded), on the rise in food and energy spreading to other manufactured goods. Essentially the Dept states one data set in one paragraph and then contradicts it in another. Are we taking the rise in the price of food and energy into account or are we not? Confused? Don't be, just fast forward this video forward to the 2 minute 15 mark;
http://www.youtube.com/watch?v=zSA22rVJg6g&feature=related
Ironically it’s at the same time, 2:15 PM ET that we'll discover who is the real Fed Chairman.
We suggest that you continue to sell the rallies and use volatility (VIX) to enter and exit trades. Bear market rallies provide opportunities to book long profits and enter extended positions on the short side. Happy Trading All.
Thanks for your Tuesday attention to the Psychology of this Call.
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