 Hey everyone, this is Mike Fraemer with a weekly check-in. Today is July 11th It's 5 p.m. New York time and we'll be taking a look at the incoming CPI data for Tomorrow June 12th that will be released at 8 30 New York time. So tomorrow we're looking for a 0.3% increase on CPI month over month That's would be higher than the 0.1 last month core is expected to rise at 0.3 versus 0.4 CPI year over you're looking for 3.1 versus 4.0 X food and energy we're looking for 5.0 versus 5.3 So, I mean looking at this data if you kind of look to drill in at the analyst estimates that look at them a little bit more closely What you see here is that the average estimate is pretty much in line with the actual median estimate And you can see that most of the estimates for the top 10 or so Analysts on the street are around this 5% mark Oscar Munoz who's been one of the first ranked analysts now for some time is slightly below the street at 4.9 percent It's always worth knowing You know where some of these individuals stand Again, when we look at the headline CPI year over year And we take a look at the survey data again. You can see median estimate 3.1 average 3.09 The first ranked annulus Ryan Wong looking for a 3.0 Oscar Munoz Second ranked analyst here 3.1 percent. So it doesn't look like you're seeing big dispersions in the in the data It looks like most people are pretty set on these views when we look at the Inflation swap data for the month of June Again market pretty much looking for a 3.0 percent number Cleveland Fed is looking for three point two two Cleveland Fed is a regression model. It's been running Last year it was a very good model and attended to predict very well The actual CPI number this year It's been sort of overstating the actual CPI numbers meaning that if the model is predicting a three point two The actual number tends to come in below that reading and it has to do I think with the lag effects of the model But generally speaking it gives us a good sense of direction in the trend of inflation And the reason why I mention that is because if we look at Cleveland Fed and we look at it for next month in July The estimates are actually for it to increase to three point six percent And so that's worth noting that we could be looking at the low print for some time in the CPI numbers Based on how the models are working when you look at the curve you'll see that Basically the market is even looking for inflation to rise again In July and August and then maybe start cooling back down into October before rising again into November and December and what's interesting is if you take this number and you look six months ago This would be June at one point. We were looking for six months ago for inflation to be a two percent by the time we got to June that obviously has changed We're now looking at three percent and what you notice here is that inflation data points for August were around 2.4 percent now they're 3.3 percent so about 90 to 100 basis points higher than what was expected six months ago And this is also important to be aware of is that you know the market's view on where inflation is going to be has changed and so For the market's current view to continue to be intact you need to get a number tomorrow That's going to be basically in line with estimates and so any variation in this could sort of change things around For the market when we look at the NDX at least you can see that the NDX is you know It's kind of stalled out right now around this 15,300 level and call it 14,700 region we're trading right now right in the middle of the range You know when you look at the the makeup of the pattern you could certainly argue that you know there is There is a trend line here We do have you know potential for a triangle like pattern forming here Again the problem here is trying to figure out obviously which way it breaks And I have a feeling the way it breaks is largely going to be dependent upon the data that we get tomorrow And then of course we're going to get the The initial jobless claims on Thursday, which have also been something that's been important and been focused on But you can clearly see that there's been a loss of momentum here in the actual Nasdaq RSI the Nasdaq 100 so Again when you take a look at this and you can see that we're consolidating here We're going to get a break one way or the other tomorrow Clearly if we were to break higher, you know your next level of resistance comes somewhere around the 15,300 region and then obviously you can start looking for higher levels after that resistance level is cleared if we break lower You have support probably down around 14,700 or so the combination of the pattern Which if you were to connect, you know these two lines and bring them together Clearly looks like a consolidation Distribution type of pattern which would suggest that we get some sort of move lower The other interesting thing is when you look at the Dow the Dow is another index We've been following closely and you can see that the Dow is Made a decent move higher the last couple of days But again, it hasn't really been able to clear any of these previous highs And when we take a look more closely again, you can see momentum has been sort of consolidating here It's not really giving us any clear sense of direction And and so this is really sort of telling us that this is a market That's just undecided at this point what it wants to do Especially considering that this has been a major sticking point for the Dow Really going back almost a year now and hasn't really been able to decide whether or not it wants to make a meaningful move higher Or not, I mean certainly you can look at this pattern and make a case that maybe there's an inverse head and shoulders forming here Which would indicate obviously that you'd get a much higher push and maybe one that challenges the all-time highs The Dow clearly hasn't seen The same level of the client in steepness that you've seen in other Indices and so this is something worth being aware of that this is a very big level I mean if you were to see the Dow break above 34,600 I think it would probably mean that you're going to see much higher prices to come Likewise if we were to break this 33,600 region You're going to see probably a retest of this 32,600 area and maybe even lower than that The one thing that is interesting is when we look at the ratio of the SPYG to SPYV You can see that the ratio has really broken down over the last three days And this is important to some degree because it's giving us a little bit of a sense of where the leadership is and This market has largely been driven by leadership in growth stocks, not value stocks, and so Clearly this would suggest that the NASDAQ would likely underperform Relative to let's say the Dow and if we take if you take a look at the ratio actually of the QQQ to the DIA You can see that there's also been what looks maybe like an ending diagonal triangle that's formed here and Clearly today we broke that uptrend Clearly there's also a negative divergence forming on the RSI with the RSI moving lower and the ratio moving higher So again what this tells us to some degree is that one would expect to see the Dow outperform the NDX Over the next couple of days and weeks especially if we start seeing that shift from growth to value The question of course is which way does it go right because again it takes you back to yes The QQQs can underperform But that may mean that if the that the Dow rises at a faster pace than the Qs Or it could mean that the Dow rises and the Qs falls it could mean that they both fall together It's just that the Dow falls, you know less than the Qs But what's interesting though and what I what I kind of found the interesting when I'm looking at this a little bit further Is if you actually take the Qs and you overlay it with the ratio of the QQQ to the DIA You can see that generally speaking the Qs tend to follow the direction of the actual ratio So this would tell us that if you begin to actually see this ratio Materially begin to break down again that you're actually probably going to see the Qs begin to decline and Actually begin to actually just drop Which is what this would suggest and when we take the same ratio and then apply the SVYG to the SVY SVYG to SPYV you can also see that it's a similar Relationship where the the Qs were the the the NASDAQ 100 actually follows a direction of the Ratio and you can clearly see at this point. There is a very stark divergence Taking place between the two indexes at this point Between the ratio and the index at this point. So this is this is also telling us trends continue to persist One would expect that the next major move in the Qs in the NASDAQ 100 would be lower Based on this now if we do the same thing and we do it for the Dow and We overlay the Dow chart in here what you're going to see also is that there's a similar Tendency for the relationship between the Dow and the SPYG the SPYG to SPYV ratio also can Be an indicator as well in this case It's not as strong as a relationship as in the QQQ Relationship but again this tends to suggest that if we begin to see a real Deterioration in growth names that it's likely going to lead to a deterioration in the Dow as well So you want to continue to watch these relationships You want to continue to monitor and try to assess which way things are going to be heading by using These different trends again, you can see here that over time generally speaking When this ratio of the Qs to the Dow has broken down Generally speaking the market tends to move in the same direction as the ratio Of course, this would be one period of time where the the the Dow just stalled out for some time before It kind of got itself back on track again. So I hope this helps you Anyway, have a great rest of your week. Take care. Bye