CPI miss leads to big breakdowns in Yields and US Dollar

US Equity indices look to have begun some minor consolidation which I expect should prove short-lived in duration and scope before turning back to new highs.  The miss in CPI on Thursday looked to be a specific catalyst for both US Dollar and Yields to have turned down sharply and declines in both look likely in the weeks and months to come.    Equal-weighted SPX has begun to show some strength over the last week, and needs to be watched for evidence of a breakout which would be convincing that a broad-based rally had gotten underway.   At present, it’s difficult to make the call for any sort of meaningful Equity peak as the correlation remains quite strong between Treasuries and Equities and Thursday’s breakdown is meaningful in TNX.   Overall, while a 2-3 day pullback is certainly possible and might be overdue on some accounts, I am skeptical that SPX gets under 5450 while QQQ has strong support near 485 that makes this an attractive risk/reward.

As this chart shows below, QQQ has made a breakdown to multi-day lows on its daily chart, but remains well above its ongoing uptrend.   A minor pullback in NVDA, ARM, LRCX, and AMAT of more than 4% has caused QQQ to dramatically underperform SPX.

However, I don’t suspect that 480 will be broken right away on QQQ before prices stabilize and turn back higher.  As discussed yesterday, the area at 505-510 looks quite reachable, and expect this could be a more important area to consider in the weeks to come.

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