Stocks Ready to Move Higher

Mortgage bonds are higher this morning, as news of a tame Consumer Price Index (CPI) report filters through investors. Headline CPI increased by 0.1% in the month of September, which was below the 0.2% growth rate anticipated. On a year-over-year basis, the reading dropped from 2.7% down to 2.3%. However, the move lower was widely influenced by energy prices, which fell by 0.5%. The lower level of inflation should be a sign to the Federal Reserve that the continued rise in the Fed Funds rate has so far kept inflation at bay. The concern will be that rate hikes will continue until a forced slow-down in the overall economy occurs. That has President Trump criticizing the continued rate hikes, as he feels the Fed should hold off until we see inflation levels move higher.

After taking deep losses yesterday, the stock market is continuing to slide lower so far this morning. Currently, the S&P 500 is beneath its 200-day moving average. Since it has been years since stocks have been decisively below this level, this move is likely going to be very short lived. As a result, there is a strong likelihood that we will see stocks climb higher as the day wears on. If stocks do happen to close beneath this critical level, which I don’t believe will happen, tomorrow will be a critical day for stocks. If they start to fall from here; watch out. Stocks would be in for an ugly ride if that were to occur.

With stocks set to soar higher, we will maintain a locking bias.