Tame CPI Unleashes Wild Moves

  • January 17, 2001
  • Marc Dupee

Stock index and T-bond futures are in rally mode on
optimism that the Fed is free to aggressively cut interest rates at its
end-of-month meeting on monetary policy. 

The Consumer Price Index (CPI) came in as expected while
the less volatile core rate (minus food and energy) actually fell a notch. The
report implied that the Fed would not be fettered by concerns about excessive
inflationary pressures and could cut rates by as much as 50-basis points. 

Interest rate futures are rallying with T-bonds
(
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up 21/32 to 103 27/32, outperforming the shorter-term

10-year notes
(
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inflation report sets the tone for milder inflation in 2001, thereby permitting
the Fed to promote growth rather than price-growth containment. 

Stock index futures showed they could make a
larger-than-expected move by registering on the 6/100 Low Volatility
List. Nasdaq 100 futures
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PowerRating) lapped open 110.00 points or 4.3%
higher and are sustaining gains just below a critical area defined by Carolyn
Boroden in her Futures
Perspectives last night in the 2657 through 2688 area. This range is a
cluster with four Fibonacci levels. Carolyn also provides intraday
analysis on financial futures (Spooz, NDH1 and T-bond future) that
TradingMarkets will soon be offering through our new TradingSubscriptions.com.
Carolyn’s intraday analysis of the NDH1 on a 15-minute basis today identifies an
additional four intraday Fib levels coinciding with the 2857 area, but
expands the cluster through 2719, heightening the importance of this range. If
the NDH blows through this tough resistance area–in essence, if the clusters
fail–we are likely to see a more substantial (upside) rally. Meanwhile,
short-term traders trading this technique would be looking to enter short
against the above clustering area. 

S&P futures
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and are up 17.50 at 1353.00.

Energy
prices are down sharply after OPEC oil ministers said production cuts would
amount to 1.5 million barrels a day. Many in the market had feared cuts of 1.7
to 2 million barrels a day. February crude oil
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heating oil
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From the Momentum-5
List, cocoa
(
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positions. Dry weather in Western Africa, the world’s primary growing region as
well as political instability in the Ivory Coast are acting to power a rally
that has taken cocoa off a 30-year low. 

March dollar index futures
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initiating a momentum impulse by registering on the
New 10-Day Highs List. Fanning this perception,

Swiss francs
(
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British pounds 
(
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New 10-Day Highs List. Both currencies against the dollar are trading lower
while the DXH is up .98 at 111.020.