The Market is Bending, But Not Breaking

Even though energy is cooling off, inflation is still rising. [Jeff Clark's Market Minute]( The Market Is Bending, But Not Breaking By Eric Shamilov, analyst, Market Minute This hasn’t been a good week for the market. Going one step further, it hasn’t been a good start for the second half of 2022 either, continuing one of the worst years on record. However, the last three times the market got off to a similar start, the S&P 500 averaged a 33% rebound in the second half of the year. Market optimists are quick to point that out. But even though the market hasn’t been able to replicate that so far… a key support level was tested for the fifth time today… and passed with flying colors. And that’s despite an onslaught of bad economic news this week. Recommended Link [It’s Bitcoin Boomer vs. The Crypto Crowd. Guess who wins.]( [image]( True story. This Florida man walked into a packed crypto conference in sunny Miami… Executed his weird Bitcoin “trick”… And then this amazing thing happened… [Click here to watch!]( -- It started with the VIX flashing a warning sign on [Monday]( Coupled with an overbought Nasdaq on [Tuesday](. You see, the market already dropped 2% going into Tuesday. But all eyes were on Wednesday’s Consumer Price Index (CPI) release, which revealed the market still has some serious and unresolved issues. First, inflation has accelerated… coming in at 9.1% and beating analyst estimates once again. But the CPI reports on economic activity for the previous month. In this case, June saw crude oil fall 5.5%, natural gas 31%, and the CRB Commodity Index 5%. Yet, the CPI hasn’t picked up the fallout in commodity prices (the next release will be on August 10). Since the market is forward-looking, the drop in commodity prices should be a good thing. It means inflation will subside. Except the S&P 500 dropped 2.3% in less than two minutes on the news. That’s because of two things… - With the CPI report, all hope for a rate hike less than 75-basis points in July is gone. In fact, 100-basis points is now in play. - According to the Fed Fund Swaps market, the market thinks the next time the Fed will cut rates will be sometime in the summer of 2023. But more importantly, the contribution to inflation is increasingly becoming more than just commodity prices. Take a look at the chart showing the monthly contribution to inflation from four broad categories – energy, food, goods, and services… [(Click here to expand image)]( I separated energy (black lines) from the other categories (orange lines) to show that while the narrative is dominated by energy right now… the trend is growing elsewhere. For example, the cost of shelter rose at the fastest pace in 30 years, contributing to almost half of the total month-over-month increase in inflation. So, even though energy is cooling off, inflation is still rising. When it comes to inflation… if it’s not one thing, it’s another. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. Any notion that the Fed will bail out the market this year by slowing down the pace of rate hikes – or even cutting rates if the economy gets worse – is becoming moot. The only tool they have to fight inflation is rate hikes, and they’ll use it until prices fall – come what may. Now all this seems very bearish… but the market hasn’t been able to break the S&P 500’s 3750 support level I highlighted in my essay from [June 28](. For reference, here’s that chart again… [(Click here to expand image)]( And that’s with today’s very sobering earnings release from JPMorgan Chase… which served up a lot of red meat to the bears who say analysts have overstated earnings. This is why the market’s price-to-earnings (P/E) multiple looks so attractive. [Florida man leaves crypto crowd speechless…]( If this trend in underperforming earnings continues in other sectors, what seemed like a reasonable P/E multiple for the market will turn out to be just a mirage. But the market is forward-looking… and holding support is evidence that a lot of negativity has already been priced in. Regards, Eric Shamilov Analyst, Market Minute Reader Mailbag What are your thoughts on where inflation will be in next month’s CPI report? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. In Case You Missed It… [Oil Companies Abandoning Their Oil Fields…]( Stanford economists are predicting [what will happen next]( will shake the markets to their core. [Click here to learn more.]( [image]( Get Instant Access Click to read these free reports and automatically sign up for daily research. [The Gold Investor’s Guide]( [How to Earn Free Bitcoin]( [An Insider’s Guide to Making a Fortune from Small Tech Stocks]( [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-752-0820, Mon–Fri, 9am–7pm ET, or email us [here](mailto:contactus@jeffclarktrader.com). © 2022 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](