CPI: Fed-obsessed Kabuki Dance cools

CPI comes in cooler, market cheers…

So CPI is cool enough to settle the nerves of Fed-obsessed casino patrons and machines alike.

Consumer prices post smaller than expected increase in August

“Federal Reserve officials have been watching inflation closely but have largely said they believe this year’s burst will be temporary and due to factors that will soon fade. They cite supply chain bottlenecks, shortages of critical products like semiconductors and heightened pandemic-related demand for goods as major contributors that at some point will drift back to normal levels.”

Of course they have. Or were, back in the spring when Fed jawboning hawks (with Yellen in a side car) started routinely coming out to warn against inflation. Then sure enough the Continuum began to oblige by putting in a right side decline that would – if there is to be a phase 2 of the inflationary operation – put in a roughly matching right side shoulder to the left side. Then… it’s the limiters (monthly EMA 100 & 120) or bust.

Something seems unfinished here with respect to inflation. The expected summer cool down has manifested in an easing of the inflation trades (on balance) and a re-doveing (or at least de-hawking) of Fed officials (with Yellen in a side car).

Meanwhile, on the other side of indicator board the 2 riders that would liquidate this mess for a strong and healthy correction at least, are still in the game by daily charts. Gold/Silver ratio is still in base breakout mode…

…and the relatively lame looking USD (DXY) has not yet broken down. No matter how they pretend to be inflation fighters, the various Fed talking heads (with Yellen in a side car) do not want to see this currency firm up. Nor does the government. It’s currency depreciation or bust. Short of any Goldilocks phase that may crop up, that’s our vaunted system.

Switching to a daily chart of the Continuum (30yr Treasury yield) we dial in the not yet activated status of the would-be right side shoulder on the first chart above.

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