Yields seem to be capped now that we are looking for that September rate cut to happen. Lower CPI is a good indication that today's FOMC will lean dovish as higher rate fears are subsiding. Despite a slowing job market, a cooler inflation number is what investors are looking for. In other words, as long as CPI is coming down with labor, it's a good sign. Stagflation is not a concern right now. -Frank

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The Fed's latest dot plot suggests lower interest rates by next year. However, we are expecting to be at 5.1% this first year. The problem still lies with the Fed's lack of confidence towards their inflation goal to justify three rate cuts. When comparing the Fed's initial projections in March, we have seen a shift to higher interest rates for longer based on this image. We are still expecting one cut this year, but that's far different from the three we thought was going to happen. So, the question remains as to whether the Fed will actually cut this year, or will it get re-forecasted to no cuts this year. https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20240612.pdf
https://finance.yahoo.com/news/fed-dot-plot-suggests-central-bank-will-cut-interest-rates-one-time-in-2024-down-from-three-cuts-in-march-180721564.html

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One reason that CPI did not really give us a clear indication of decline is because we are pretty much at the same spot we were in last year in June. Inflation has remained elevated above 3% for a year. This should be enough to tell us that cuts are not necessary and could actually cause more damage if we see one this year.

Gold is still bullish despite a steady jobs market. Keeping rates higher for longer is not a good sign for gold either, but the metal may be a hedge against the market and the dollar. The good news is the Fed will have to cut at some point, and either way, the dollar will weaken. Which is why gold remains strong.

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Stocks may run out of steam...
I have reason to believe that the Fed will not cut at all this year due to our sticky inflationary environment. Rates should remain elevated until CPI can dip under 3% and we see a promising trend lower to 2%. If they continue to stay above 3%, rates should stay above 5%.

This will continue to put pressure on earnings, jobs, mortgage rates, spending, etc. And eventually, something will crack. The US is in the middle of a race to see which cracks first: inflation or the economy. Large pools of money are already exiting the market while the US indices remain at all time highs. I don't think this is sustainable, and that the price of stocks should not be this high. The market may continue to run for now, but higher rates are going to catch up to us. And you don't want to be on the top floor when the building collapses. -Frank

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Regardless, the NAS is still a bullish signal on the EdgeFinder. This is because higher NFP and lower CPI are bullish scores. But we have to keep in mind that the unemployment rate is still on the rise, at 4%. JOLTS has been on a steady decline for a year. If the trend of our labor market continues to decline and interest rates won't budge, it's only going to hurt the bulls more when the market corrects.

I'm not certain of the magnitude of this looming correction, but I know the market is due to give back some of its gains thus far. Earnings season is done in the US, the hype is over with, and we are left with only one expected rate cut this year. The projected rates were revised from 3 cuts to 1. So who's to say that it won't be revised again to zero cuts this year?

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For once, retail might actually have it right. Not being bullish on stocks at all time highs is generally a good rule of thumb as they are probably waiting for a pullback. However, they could be too early in the trade, and stocks could continue to defy gravity.

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Smart money is also decreasing its long stake in the S&P 500 as with retail. This mass exiting of the stock market could signify lower volume in the summer months, but it could also suggest that we are running out of buyers.

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Last June was 3% inflation. Since then, we've been up and down elevated above 3. If you look at this chart, you can see that we really haven't moved anywhere or seen any progression to lower CPI. People want to see the Fed cut so bad, but they don't realize the damage that could cause to what's already looking like a problem in the US economy.

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Staying long! SPX500

The S&P500 has broken new highs recently, with the cool inflation data this week.

While I remain cautious about how much upside I think there is left, I continue to hold my long position.

I have also sold covered calls against my position to capture a bit of extra premium, and hedge a bit in case the market pulls back.

SPX500 position was shared inside of our VIP room. - Nick

P&L for June 2024 so far.

A little rocky, but still in the green slightly

- Nick

Silver almost looks too good...

- Nick

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Stocks are a little stuck today post FOMC as investors aren't giving a directional bias. It appears that we are seeing some low volume trading in the summer months, so it's possible that the market drifts one way or the other. We are still in a strong uptrend, however, and price action still favors the upside. The choppiness could be caused by uncertainty in the Fed's decision to cut rates this year. As long as investor sentiment leans towards one this year (September for now), we may continue to see a slow chug higher.
- Frank