How the PPI number impacts the dollar and stocks


If you told me last year that I would be eagerly
awaiting signs of inflation in the data to substantiate a long dollar positions
I would have smiled and said “Stagflation.”

The dollar is rallying today after yet another
headline figure showed PPI at the highest level in 31 years. Of course, the core
level is stable. But of course, no one cares about that anymore. $60 oil is the
proverbial cat that is now out of the bag and the Fed officials want to put it
back in. The thing is, real rates (adjusted by TIPS) are the highest since 2000,
while real rates (adjusted for gold) on the 30-year yield are turning up from
all time lows.

So, short term borrowing rates are tight, while
long term lending rates are at all time lows. If the Fed continues to raise
rates it is deflationary, which is good for the dollar – bad for stocks.

As we wrote three weeks ago, “With prices
remaining well above the 38.2% Fib Fan line we remain confident that the next
big move is higher. To see our latest chart and Elliott Wave count of the dollar
index click here. Note on this chart how Friday’s spike low tested this level
which then acted as a launching pad for today’s rally. The market is paying its
respects here and as long as it holds we remain bullish on USD and looking to
add to our positions on a break above the June/July highs.”

We are nearly there, but expect a good deal of
volatility at this level over the coming days.


At noon last Thursday we issued a “Flash Insight”
report saying to expect a rally in the SP500 from 1170 to 1195. That correction
is now on target. Only a move above 1,205 would complicate this outlook and
there is still a lot of room to the downside now that 1,205 has been cleared.”


No change: Three weeks ago we said to watch the
30-year bond as the T-bond was in jeopardy of breaking down with a move in
yields above 4.6%. We now have a monthly breakout giving this move a great deal
of significance considering that data shows import prices rising at a 15 year

10-year yields have also poked their head above
resistance connecting the 2000 and 2004 highs. The last time we did this we
became very bearish on bonds.

As we have said for months, only a move above
4.5% would be bearish for the 10-year note and that looks like it will be


Jes Black

FX Money Trends

613 4th St Suite 505

Hoboken, NJ 07030

Tel: 646.229.5401

Black is the fund manager at Black Flag Capital Partners and Chairman of
the firm’s Investment Committee, which oversees research, investment and
trading strategies. You can find out more about Jes at

to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department, After four
years as a senior currency strategist he went on to found – a research firm catering to professional traders.

Black’s opinions are often featured in the Wall Street Journal, Barrons,
Financial Times and Reuters. He has also written numerous strategy pieces
for Futures magazine and regularly attends industry conferences to speak
about the currency markets.