Inflation Rope-a-Dope

As in the general public, the market is starting to appear fractured. Bond and commodity markets are going one way, while stocks go in another.

Copper reversed its gains from yesterday though:

Crude oil is the final piece of the puzzle. Inflation pressure cannot abate until crude declines.

My sense is the markets are fractured into camps more than before. I have to respsect the chart, but I don't trust stocks anymore. Bonds and commodities are much more important than the recent past and my read is that stocks are ignoring them. As I've put it before, the internal sentiment and positioning within the stock market is like the poker game on the deck of the Titanic. Crude oil, commodities and inflation are an iceberg. The bond market is an iceberg. Federal Reserve and USG policy error are icebergs. That said, there was a rumor of an emergency rate hike yesterday, but if the 3-month treasury yield declines, that risk fades and then stocks will probably rally. To put in in concrete terms, if presssure ease a bit, the "easy money" upside on the Russell 2000 is around 3 percent before resistance starts kicking in. If instead the inflation/rates goes against stocks, the downside risk is more like 15 percent before support starts kicking in.