How are energy investors positioned?
Stocks finished yesterday lower, one day ahead of today's core PCE report. Analysts expect core PCE to rise by 0.3% m/m, and Kalshi is pricing a core PCE of 0.4% m/m. It will be interesting to see if Kalshi can be a reliable source for some of these reports. A 0.4% m/m number would not be a good number.
Speaking of inflation, yesterday we got the KC Fed prices paid data, and that was up sharply, too, in March, following the Empire State and Philly Fed.
1 and 2-year inflation swaps jumped yesterday, breaking out, with both climbing to new cycle highs.
Speaking of breakouts, yesterday, the Simplify High Yield ETF (NYSE:CDX) Index broke out of that bull flag we mentioned last night. If spreads are breaking out here, it won’t be long before we see the S&P 500 break down.
In the end, these spreads just inverse to the S&P 500, and one can see that if the spread is breaking out, that the movement in the SPX are probably not far behind.
If the S&P 500 is going to break lower, today seems like the best chance, given that yesterday was a pause day with that doji candle. The index all closed below its 10-day exponential moving average, suggesting the recent move in the index higher, was a false move. If this bear flag is the real thing, which it looks very real to me, then next leg lower could take us to around 5,000.
