Leaders Index 11-10-22

The CPI report came in lower than expected and it triggered a powerful rally. The major averages gapped higher at the open and moved up the rest of the session. All the major averages finished near their intraday trading highs. The gains were very large with the COMPQ and the NDX gaining 7.35% and 7.49% respectively. The SPX rallied 5.54%. Volume was quite a bit higher across the board, showing that large institutional players were buying stocks today. Leading stocks did well also but not as well as the overall market. The leaders index rallied 3.52% on the day and closed high in its trading range. Volume was higher and well above average. The index has been consolidating near its highs for over a week so it should be watched to see if it break to new highs, which would be good for the rally. The market reacted very strongly to a lower than expected inflation report. It revived hopes that the Fed would moderate rate increases and market participants jumped in with both feet. Today’s action improves the case for the market to move higher in a bear market rally. Internals were strong and there was accumulation under the surface. It should be kept in mind that virtually all large up moves like this one have occurred in bear markets. We will likely have some sort of an up move from here, but it is not the end of the bear. The weekly Coppock is curling with this move and it may turn up next week. If it does the odds of a tradable rally increase a lot. Today’s report may give the Fed some reason to go fifty basis points instead of seventy-five. There was talk at Powell’s last press conference that a terminal rate for Fed increases of about 5% might be in the cards. If they do 50 basis points in December and another 50 in February they will be there. They might then pause and see what happens, but anyone expecting rate cuts soon will likely be disappointed. That pause could be a bit of a catalyst. If the market doesn’t take a big dive from here the monthly Coppock could be in a position to signal in the February, March, April time from. That might coincide with a Fed pause. This is all conjecture and we will have to see how it plays out, but we could see some positive action in the short term. Jerry