Core PPI unchanged, Stochastics Down, MACD down --> $530 profits
5 min Emini Nasaq 100
Hi,
The March Core PPI index was released at 8:30 am and apparently, it was lower than expected.. This is good news? But according to Briefing.com (below), this is not really enough of a good news for us to believe that infaltion is in control and that the FED is going to cut rates anytime soon. Price plugned from the opening bell and stochastic, short term MACD made a strong downturn... I shorted 1 contract at 1826 an another 2 contracts at 1825 when there was a slight pullback..
After that, it was simply a case of waiting... price plunged through the moving averages ... But at the same time, it was getting more volatile, this can be observed through the increasing length of the shadows of the candlesticks... I exited at 1816.5 when a doji candlestick appeared at 1816.5 with profits of $530... Notice that after I exited, stochastics and MACD turned up (orange circles).
From Briefing.com"
The March core PPI was unchanged. A 0.2% gain had been expected. This good news is not enough to greatly alter the inflation outlook. It follows a 0.2% increase in January and a 0.4% gain in February. The soft March number may prove temporary as an offset to the strong February number. The 2.3% annual rate of increase in the first quarter is also above the year-over-year level of 1.7%. This one month number will not ease inflation concerns at the Fed.
The food component deserves mention. It was up 1.4% for the fourth straight month of an increase above 1%. Food prices are often ignored because they are volatile on a monthly basis and haven't trended higher for a long time. However, if food prices start rising steadily in line with other commodities, they merit attention. People have to pay for food as well as "core" items.
The stock market continues to hang tough despite worsening fundamentals.
A survey by The Wall Street Journal yesterday showed that over the past month Wall Street forecasts for GDP have been lowered including a cut to just a 2% rate for the first quarter; inflation forecasts have been raised; interest rate forecasts have been raised to take into account a lower probability of the Fed easing; and home price forecasts have been lowered to -1.3% for 2007. The average forecast for oil prices for 2007 went up, and the probability of a recession was raised to 26%.
Expectations for every key fundamental factor have moved in a bearish direction. This has occurred over the past month even while the stock market has recovered. April has been the best month for the stock market over the past 50 years, and perhaps seasonal trends are giving a boost now. Over time, however, the difficult fundamental outlook limits the up-side potential.