February 15, 2024

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Trendsters, the charts are buzzing, and the numbers don't lie. Inflation's latest surprise just turned up the heat, sending markets on a spin. Were those rate cut dreams just a mirage? The fallout from this report is still unfolding, and the market's next move hangs in the balance.

Get ready! Today, we're analyzing the ripple effects, dissecting the data, and hunting for opportunities amidst the chaos. Plus, the Chart of the Day has our eyes on Costco – will its stellar run finally falter? We've also got Market Moving News lined up and maybe even a bit of trivia to test your trader instincts.

Get ready Trendsters, this newsletter's about to get interesting!

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Today's Market Mood: EXTREMELY BULLISH!

The Bear-Bull Meter

Markets staged a partial recovery after Tuesday's inflation-fueled rout.  Investors are caught in a tug-of-war, weighing whether the hot CPI report was a fluke or if prices are set for a stubborn resurgence. This uncertainty sparked volatile swings, highlighting the market's sensitivity to any data pointing toward the Fed's future rate decisions.

The S&P 500 notched its first gain in three days, with ride-hailing stocks Lyft and Uber adding fuel to the recovery. Notably, Lyft posted a surprise earnings beat while Uber announced a massive share buyback, boosting investor optimism.

Looking ahead, today's retail sales and Friday's PPI may offer deeper insights into inflation's grip on the economy and how aggressive the Fed may need to be to control it.

Here's the closing scorecard:

S&P 500: +1.0% (5,000.62)

Dow Jones Industrial Average: +0.4% (38,424.27)

Nasdaq Composite: +1.3% (15,859.15)

10-year Treasury note yield: -5 basis points (4.269%)

VIX: -1.47 (14.38)

Strategies:

• Focus on sector rotation: Consider favoring companies with pricing power in this inflationary environment.
• Watch for interest rate sensitivity: High-growth tech may face pressure if rates remain elevated.
• Don't panic sell: Market corrections are natural; avoid rash decisions based on short-term gyrations.

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Did the latest CPI numbers have you seeing red? You're not alone! Here's something to lighten the mood:

Why was the stock market accountant so disappointed with the inflation report?

...The rising prices really didn't add up. *ba dum tss*

Alright, it's cheesy – but you have to admit, persistently high inflation does make any good financial plan a bit harder to balance.  Think of those increased daily costs (like your morning coffee getting pricier!) as market volatility's sneaky cousin.

On the trivia side, did you know that during the hyperinflation crisis in Germany in the 1920s, prices were doubling every few HOURS? Now that's a recipe for investment heartburn!

Costco's Crazy Climb: Is it Time to Cash Out?

Okay, Costco fans, we need to talk. This retail giant has been on a wild ride since the pandemic, defying gravity and wallets alike. But even the best runs don't last forever, and my chart senses are tingling on this one.

I'm seeing a classic bearish harmonic pattern taking shape . Now, don't get me wrong, I'm not predicting a sudden crash. We're talking about potential headwinds here, not a nosedive.

Think of it this way: even mountain climbers need breaks. After that 130% ascent, some profit-taking makes sense. This pattern zone? That's where smart traders might lighten up before Costco starts the next leg of its journey.

Long-term Costco holders, don't panic. This might be just a healthy correction, a breather before the climb continues. But keeping an eye on those technical charts is smart right now. Remember, nobody ever went broke taking some profits off the table!

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The recent hotter-than-expected inflation data triggered a market roller coaster, and today the big question is: Did investors overreact, or is this a sign of things to come? That all hinges on whether rising prices are becoming entrenched in the system.

Let's break down what's changed.  The rosy "immaculate disinflation" dream of falling prices in a thriving economy? That's fading fast. The new reality is that inflation now seems stubbornly linked to economic strength. Here's the catch-22: If growth stays robust, rising prices will too.

This has investors scratching their heads. The Atlanta Fed's GDPNow model suggests strong first-quarter economic growth, even with sky-high borrowing costs that typically slow things down. This defies normal economic patterns and adds layers of confusion.

The Fed finds itself in a truly uncomfortable predicament. While rate cuts could theoretically soothe inflation, they risk sparking a spending surge that fuels another pricing firestorm if the economy remains hot.  Cutting rates into a recession also spells trouble. Think of them as stuck between a rock and a hard place.

What this means for your portfolio:

• Expect Volatility: Markets may swing until a clearer inflation trajectory emerges.
• Inflation-Resistant Sectors: Consider companies within industries that can easily pass on increasing costs to consumers.
• Patience Pays: This isn't an environment for panicked selling. Take a long-term view and rebalance if needed.

As for those hoping for a 1990s-style stock rally? Maybe...if that era's higher rates don't come back to haunt overextended parts of the economy. Right now, investors are balancing economic strength against the persistent threat of inflation and the looming shadow of Fed actions.

Yesterday was a roller coaster for individual stocks driven by a barrage of earnings reports and analyst actions. 

Let's break down the highlights:

Travel: Mixed Feelings Airbnb (ABNB) stumbled despite beating revenue expectations – investors want even more from a post-pandemic travel rebound.

Tech Troubles: Akamai (AKAM) and GoDaddy (GDDY) dropped on missed revenue targets or weak future outlooks, reflecting a tougher environment for these sectors.

Food Falls Flat: Kraft Heinz (KHC) disappointed with a revenue miss, signaling consumers might be cutting back even on staples.

Not All Bad: Topgolf Callaway (MODG) surged on stronger-than-expected results, suggesting the golf boom keeps swinging. Zillow (Z) showed its rebound is more than a fad, with earnings beats cheering investors.

Chips On the Rise: Applied Materials (AMAT) is set to report today, riding high on AI-fueled optimism for the entire chip industry. Watch this one closely!

Inflation Throws a Curveball

Remember that rosy path to Fed rate cuts investors envisioned? Tuesday's CPI report tossed it into the weeds. It isn't just strong jobs – core inflation remains stubbornly sticky almost double the Fed's target.

Policy Pushback: Don't get your hopes up for March cuts now. Rate hikes might stretch longer than expected as the Fed prioritizes crushing inflation.

Get Ready for More Jolts: This heightened volatility isn't going away soon. Brace for markets to react sharply to fresh data.

Retail on Deck: We'll get a fresh read on consumer health (and their resilience against inflation) when January retail sales numbers drop today. This is crucial after 2023's spending sprees – any slowdown spells trouble for sectors relying on customer wallets.

Random Musings

Markets love a good mystery, but hate a lasting one.   Inflation's recent data dump? Case in point. We crave clear narratives, not economic thrillers with unsatisfying endings.

Can stock resilience survive in a world of stubbornly elevated interest rates? It's like asking a runner to win with a weight strapped to their ankle – possible, but definitely less pleasant.

"Immaculate disinflation" has gone the way of the dodo. Investors banking on an unblemished return to low inflation – time to mourn the loss of that lovely (but naive) myth.

If the economy is a stubborn bull, is the Fed the matador in this scenario? We might be about to find out how long an enraged bull can last before tiring out.

Ever had a moment where you feel like you're reading someone else's investment strategy?  That's how many must feel watching their 2023 optimism get body-slammed by 2024 realities.

On this day in history, February 15

February 15, 1898:  The USS Maine explodes in Havana harbor, prompting the Spanish-American War. A reminder that sudden geopolitical shocks can sometimes send ripples through the market.

February 15, 1933:  An assassination attempt on US President-elect Franklin D. Roosevelt sparks widespread uncertainty . Markets thrive on stability – major unexpected events can create temporary turbulence.

February 15, 1971: The UK adopts decimal currency, replacing the 1200-year-old system of pounds, shillings, and pence. Sometimes the biggest upheavals bring needed economic modernization.

February 15,  2003: Millions worldwide protest the impending Iraq War.  Global conflict can be a major disruptor and create heightened market volatility.

February 15, 2013: A meteor explodes over Chelyabinsk, Russia , serving as a dramatic reminder that unexpected "black swan" events can impact market sentiment.

"Those who have knowledge, don't predict. Those who predict, don't have knowledge." – Lao Tzu

Remember that immaculate disinflation thesis folks were so bullish on a few weeks ago? Yeah, about that... Today's lesson – in investing, even the best analysis only buys you a seat at the table. What the markets deal you? That's pure chance, with a heavy side of unpredictable economic forces.

This isn't defeatism, it's realism. Agility, not absolute certainty, is your superpower right now. That means watching data, adjusting portfolios, and maybe finding a stress ball while those headlines fly. Because as Lao Tzu reminds us, the wise know just how little they truly control in this wild game.

Well Trendsters , that’s all for today’s edition of Traders on Trend. We hope you enjoyed reading our newsletter and learned something new and useful. And we hope you will join us again for the next issue of Traders on Trend. Until then, stay trendy. Happy trading! 

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