Stocks miraculously finished the week higher, reiterating the belief that the bull market isn’t going anywhere. The S&P 500 added 1.5% this week, despite a hotter-than-expected inflation report and worries about reciprocal tariffs. The broad-based index is up 4% this year.
“The stock market has had many opportunities to sell-off, but it has been resilient,” Fundstrat Head of Research Tom Lee said.
On Wednesday, the Bureau of Labor Statistics reported that consumer prices rose 0.5% from a month ago on a seasonally adjusted basis. That marked the largest increase in the reading since August 2023. On an annual basis, headline CPI rose above 3% for the first time since June.
And just like that, investors were back to worrying about the progress on inflation stalling. The S&P 500 fell 0.3% on Wednesday. Bond yields jumped above 4.6%.
Lee, however, isn’t panicked by the jittery inflationary report, pointing out that Federal Reserve Chair Jerome Powell acknowledged the CPI print during his Congressional testimony, but did not suggest that the progress on inflation had stalled. “This implies the Fed still sees inflation cooling over time,” Lee added.
The market calmed down some Thursday after the producer-price index painted a better picture. That report could imply a softer personal-consumption expenditures report—the Fed’s preferred inflation gauge—as the components that feed into it from PPI were soft in January.
But for now, the market continues to be choppy.
“It’s a big chop-fest, where we haven’t seen a lot of satisfying movement,” Head of Technical Strategy Mark Newton said.
Chart of the Week
Core prices—which don’t include the volatile food and energy components—added 0.45% from December, the largest increase in nearly two years. Core inflation was up 3.3% from a year ago. However, it’s not nearly as bad upon a closer look. Head of Research Tom Lee said that’s because core CPI’s top five contributors—used cards and trucks, leased cars and trucks, auto insurance, shelter and motor vehicle fees—make up 0.37% of the 0.45% increase. In his view, inflation in those categories is not accelerating, nor is their rise in January sustainable.
My technical thoughts are that this breakout should be led by Big-Cap Technology and QQQ 0.46% looks to the leader over SPY N/A% as well as RSP -0.10% . Furthermore, SPY N/A% looks to lead RSP -0.10% in relative strength until potentially mid-year, based on my interpretation of possible exhaustion counts setting up on these ratios. Thus, while many fret about valuation, or the degree of consecutive days of rally in stocks like META 1.25% , it should be right to favor the leaders, and expect that QQQ can continue to lead the US stock market, with Technology which powers QQQ showing better relative strength than many of the other sectors or indices
TSLA recovery wasn’t that unusual for those that study time and price, as the 55 Fibonacci-based calendar day advance from 10/23/24 to 12/17/24 was exactly mirrored by a pullback of that same duration of 55 days into 2/11/25, this past Tuesday, before this bottomed. Thus, the time on the advance was exactly equal to the decline which normally can cause a reaction. Moreover, TSLA had retraced nearly an exact 61.8% Fibonacci-based retracement of this prior 10/23-12/17 advance as well as 38.2% of the larger advance from early January 2023 before bottoming this week. While many argue that 61.8% wasn’t an exact hit, and they’re right, the decline from 12/18 into 1/2/25 was exactly the same distance as the subsequent decline from 1/17 into this past Tuesday, bottoming just above $325. While there are questions as to whether this was just “A low” vs. “The Low”, this won’t be known until TSLA gets back over prior lows which were breached in January which lie near $373. However, my cycle composite does show a bottom around 2/20-2/25 in TSLA before this rallies into April. For now, momentum remains quite negatively sloped and the most recent decline from 1/17 would benefit from a “final” decline down to $314, or the actual 50% retracement of the rally from last April 2024 low. I’ll be discussing TSLA in detail with Herbert Ong again live on 2/24 on his YouTube channel “Brighter with Herbert”
Early Market fireworks given much hotter than expected CPI of +0.4% vs. +0.3% Ex Food/Energy and +0.5% MoM vs. +0.3% – S&P and NASDAQ futures lower by more than 1%, while Bond yields and US Dollar spiking. This has taken S&P to levels near where they opened on Sunday evening in the overnight session. Powell set to speak in round 2 this morning in about an hour. Bottom line, this early weakness is not expected to lead to a break of February lows, but should prove short-lived as part of the final stretch of an ABC pattern that will likely reverse and allow for a move back to new highs. Overall, no technical damage to index futures, and 2-Year has made a brief spike up to just below mid-January peaks. I anticipate that any retest of 6000 for S&P would make this very attractive and do not expect a break of S&P Fut-5935 or SPX-5920
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