A Tesla service tech let me in on a little secret recently.
It’s a long story how I got there, but he offered to sell me a set of tires at cost. Normally they charge $500, and he’d give them to me for $250.
So I asked him the obvious question. Why do you charge everybody else $500? He goes, “Because everybody else charges $500.”
Have You Been Out There Lately?
I don’t buy the official inflation numbers. You get ripped off for everything, and it’s a hell of a lot more than a few tenths of a percent a month.
I’m convinced half of it has nothing to do with real pressures. Everybody keeps saying inflation, so everybody raises their prices.
On Tuesday morning, the October Consumer Price Index (the government’s main inflation gauge) came in a little hot. Prices rose 0.4% for the month against 0.3% expected.
And I don’t care one bit.
Bonds Are Not Done
What I care about is what the market does with the number. The hot report sent stocks lower, and it got the bond market rocked.
Bonds weren’t done after the first hit, either. They kept getting smacked right in the face all morning.
Now look at 7,560 on the S&P futures. That level has been the central point of trade for the last six months.
You’re not high and you’re not low. You’re stuck in a volatility box, and 7,560 sits right in the middle of it. The market has pinged around that number for weeks, and on Monday a 150-point rally ran straight into it and died within the first hour and a half.
By midmorning Tuesday, the market had come right back to the final resting place of 7,560. It didn’t stay there long.
By late Tuesday morning, the S&P 500 had slipped to about 7,487, under the other number I’ve been watching. I said Tuesday morning that if we break through 7,500, all hell will break loose.
So you can spend your morning arguing about whether 0.4% is real. Or you can mark the levels the market keeps respecting and trade the reaction instead of the report.
If It’s Not On Your Chart, Put It There
Pull up the S&P and draw two lines, one at 7,560 and one at 7,500. Then watch whether the market can get back above 7,500 this week. Until it does, don’t get comfortable.
To your success,
Don Kaufman
P.S. Every time the market drops on a report like Tuesday’s, somebody tells you to buy the dip. My guest this Thursday doesn’t.
She spent 14 years on a J.P. Morgan trading desk, rising to vice president, and she waits for what she calls the dunk.
She’ll show you her real GM trade where buying the dip lost $510, and the trade six weeks later where waiting for the dunk made $747.
It’s a free live training on Thursday, November 12 at 2 p.m. ET. Save your spot here.
