To The Moon

On Thursday, there is a 90% chance that CPI will undershoot expectations, with the market expecting a significant drop of 6.5% on average and other analysts expecting even lower figures. A lower number could help open the upside for the day, but I'm inclined to call it a short burst as earnings season faces a real earnings decline next week.

Bloomberg Forecast:

Headline CPI -0.2% m/m (vs. 0.1% last) and -6.3% y/y (vs. 7.1% last).

The core CPI rose 0.2 percent month-on-month, unchanged from November, and 5.6 percent year on year, compared with 6.0 percent in the previous reading.

• A headline CPI decline of 0.2% month on month (vs 0.1% prior), corresponding to a 6.3% year-on-year gain (vs. 7.1% prior).
• Core CPI to increase 0.2% month on month, same as November, and 5.6% from a year earlier, compared to 6.0% prior.
• Lower energy prices likely took 0.5 percentage point off the monthly headline on a seasonally adjusted basis. Lower demand from China contributed to much of the 9.8% seasonally adjusted drop in gasoline prices. An unusually warm winter also led to declines in household utility prices.
• Disinflation continues to build in core goods sectors. Several goods sectors have excess inventories — such as furniture, apparel, toys and recreational goods — as consumers rein in demand.
• New and used cars both likely saw price declines in December. Improvements in supply and production have helped boost auto inventories. Demand has cooled as loans rates have climbed.
• We expect firms to have completed destocking excess inventory to a level more in balance with lower demand by the end of 1H 2023, after which goods categories will become less of a driver for disinflation.
• Shelter inflation likely has peaked on a monthly basis. We see year-over-year growth for both primary resident rents and owner-equivalent rents rising until late spring.
• Core services ex-shelter – a category that Fed Chair Jerome Powell has singled out as the one to watch for signs of durable disinflation – likely is sliding sideways. Still, the latest ISM services report showed that forward-looking components of services demand fell sharply in December, so it’s plausible that this category might moderate in the next few months.
• Bottom line: December’s CPI report should bring a third month of good inflation news. With another deflationary report likely for January, more FOMC members may soon come over to the view that there’s enough “compelling” evidence of easing price pressures to start talking about pausing rate hikes.

Recession is not good; It would be good if the Fed stopped raising rates because of the recession. It is fair to say that the Fed's attitude determines the market's direction in two ways.

Turkey's stock market has been thundering in recent days, following the central bank's decision in late December to suspend interest rate cuts.

Yes, in a year when the world was trying to bring down inflation by raising interest rates and other means, Turkey made the bold decision in August to start cutting interest rates. As a result, the Turkey Index became the best performing index in 2022, with the Turkey etf up 99%.$iShares MSCI Turkey ETF(TUR)$

But it became clear that Turkey's foreign exchange reserves could not support such a cut - and the Turkish stock market crashed after the cuts were suspended.

​​$TUR 20230519 25.0 PUT$ $TUR 20230519 25.0 PUT$  I'm not surprised at this put price. Turkey's rally is likely to go back where it came from.$American Airlines(AAL)$ and $United Continental(UAL)$ report next week, but in the options action I found two put options with ugly strike prices:

• ​​$AAL 20230616 7.0 PUT$ $AAL 20230616 7.0 PUT$ ​
• ​​$UAL 20250117 20.0 PUT$ 

If it is Netflix this growth stock I think it is worth a bet, but the travel plate this price has no reason, mark for the time being.