 Hi everyone, this is Mike Kramer of Mock Capital with a weekly check-in. So tomorrow, obviously the big day with CPI expected to come in the morning at 8 30 New York time. Estimates are for the month over month increase to be at 0.1% on the headline. That would be down from last month 0.4. X food and energy is expected to rise by 0.4%, which would be in line with last month's reading. Meanwhile, a headline is expected to show a meaningful deceleration down by down to 4.1% versus 4.9% last month. Meanwhile, core is expected to be stickier at 5.2% versus estimates for 5.5% last month. I noticed something when I was looking through this data. If we look at the core CPI and we look at the breakdown of analyst estimates, you can see the median estimate is at 5.2%, but the average is above that at 5.2.4%. And when you start looking through many of the analysts, you can see that some of the higher ranked analysts are seeing something a little bit higher than 5.2%. It's worth noting that there is a little bit potential here for an upside risk to this year over year number. And the core numbers I think probably matter much more at this point than a headline to the Fed. Just because it gives the Fed a pretty good indication of where future inflation is going to be. And this core number, even if it comes in at 5.2%, if you look at where it's been over the past year, I mean, it's just making progress at a very, very slow pace. And even if it comes in at a 5.2% number or so, it's still well above where the Fed wants to be. And it's still a very, very long way from where the Fed ultimately wants to go in the end. And the slower it takes to get down, the more likely it is that rates are going to need to stay elevated for a period of time. When we look at how the inflation swaps market is pricing this, it's important to realize that right now the inflation swap market is pricing in a 4.06% number on the headline. So basically in line with what the estimates are for, when we look at the curve, you can see that market's still looking for the June number to come down to around 3.2%. But then begin to increase again back up to around 3.4%. And this is really the period of time where it's going to become much more challenging, I think, for the Fed and for the market. Because again, if we start getting inflation stuck in around this 3% zone for the next 7, 8, 9, 10 months, what is that going to do to the Fed in terms of what are they going to begin to think about in terms of monetary policy? And ultimately also, if we get stuck in this 3% range for the next 8 to 9 months, what does that mean core CPI is? Is it going to be still in the 4% and 5% range? And if that's the case, does the Fed have more work to do in front of it? And obviously at this point, the market, the S&P 500 at least, isn't really paying attention to that. In fact, most of what it looks like is happening in the options, in the equity market is really just an options market that's leading the charge. There's just a tremendous amount of volume that's going through on a daily basis for some of these contracts. And this is what's really helping to keep the market elevated here and really keep the momentum moving up. Because from a fundamental standpoint, there's not really much happening here. And when we look at the S&P 500, when we look at the S&P 500 for expiration on June 16th, again, you can see there's some sticky gamma levels up at around the 4350 and then the 4400 region. But again, there's a lot of gamma down here around the 4300 level and lower. And you have to wonder as we get closer to option expiration, if we were to get some bad news along the way, is that going to really begin to pull the market back? And that's really the big risk here because also as we mentioned last week, and you can see again that with option expiration for the VIX, not until next Wednesday, so not this Wednesday, but the Wednesday after, you can see that there's a lot of puts, a lot of put gamma out here. And it may not take, and here's a lot of put delta, and it may not take much to get the VIX moving up at this point and starting to crush some of this put delta. You can see that if you just look at it from an open interest standpoint, not a lot of puts, not a lot of open interest at all below 15 with most of it up here in the 15 to 20, 22 to 23 region. And this could really act as a significant accelerant to the VIX moving up next, going into next week, especially if we were to get some sort of negative news event that could cause people to start wanting to unwind these hedges and these puts to start really decaying and losing value, creating a Vanna squeeze in the VIX, which would obviously be a negative for the S&P 500. If we look at the S&P 500, I sort of wanted to just point this out again, because I know everyone is thinking about this being a new bull market. Again, you're still very much off the highs. That's the first major point, I think that's worth noting. The second point is that you're basically at rating around the 61.8 percent retracement area. This is a normal area that if this is going to, this is basically all this has been to this point is really just a typical retracement. And while there may still be further upside at this point, it's very easy to remember as well that this may just kind of be a normal cycle in terms of how the market is playing out. And there may not actually be anything all that different than what we've seen in previous bear markets. We have seen in the past big rallies in the market similar to this, not only that, but this looks like a rising flag and typically rising flags are bearish patterns. Yes, they can serve as continuation patterns sometimes, but typically these are negative. And again, giving where the implied volatility levels are, given the event risks that's coming up on the next day or two. Again, one wants to be really cautious about how they want to position themselves into an event like the CPI, which may affect where the Fed is ultimately going to do. Because again, right now, even with the data we have at hand, markets are still pricing in a 25% chance of a rate hike on Wednesday and an 87% chance of a rate hike. It seems as if the market is pretty much set on another rate hike before this is all said and done. And it is still effectively removing rate cuts from the equation. So this is something that really one needs to be careful of and to think about as we're sort of going through the next day or two. Certainly achieve some meaningful escape velocity away from this 61.8% retracement level. There are certainly room to climb to about 4500 in here because again, you can see this was basically a straight line drop. But given the backdrops of the fundamentals and the way the volatility component of the market is right now, it's a very risky proposition. Here you can see again, VVIX now up three days in a row since putting in this low back on June 2nd. So and here you can see the VIX now with two days up. And again, you can see very much so this is at the very, very, very end of the range, the bottom of the range that is. And when we go over to the NDX, also you can see the NDX is extended now. It's now successfully filled a gap from April 5th, which takes us back to a period in time when the Fed was basically just raising rates. Another reason why you should really be questioning this rally to some degree is that rates are about 500 points higher than where they were at this point. But yet the NASDAQ 100 has a similar valuation to what it did back on April 5th, 2022. Obviously inflation different story. But again, the Fed is unlikely to be cutting rates in 2023 and probably for a good portion of 2024, given the strength of the economy. Again, if you were to get above this zone of resistance, you're talking about an index that could probably trade up to 15,300 or so. The Dow has also broken a downtrend in what looks to be maybe falling wedge. If we were to take a tool to try to measure this extension off of this high to this low, you can see right now the Dow is extended about 50% off this low with the next big level of resistance coming around 34,300 or so. And again, you're going to want to keep an eye on rates as well because you can see the two-year right now has been sort of budding up against this 460 region. You can see something similar also in the December Fed fund future where it's been consolidating around this 510 region. And in fact, you could even go out where you're going out to February 2024 where they're beginning to remove rate cuts from February 2024 as well. So again, bond market is certainly positioned in a way that would make you think that the risk is to the upside in rates. You've also seen the dollar kind of consolidate around this 103.5 region. And again, with the risk being that you can move up to around 105.60. So again, as you sort of look at the market and you look at the risk reward benefits, really at this point, you're left to wonder what's really left and how much further can this market move? Because again, you're pushing the lower bounds and implied volatility. When you look at the makeup of where we are going into OPEX next week, there's certainly a lot of damage that could be created if the VIX were to begin to move higher here. So that said, I could walk tomorrow and we'll hopefully get to talk to you again soon. Bye.