Inflation Inflation Inflation

The most interesting chart today is ZB and the reversal in treasuries. It has made it back to my initial target level at 121. Above and there's a potential base in place. I've been holding some calls since Monday that were a short-term trade with possibility. The big question going back to the summer for me has been: when/will bonds signal a shift to deflation? Home prices are down on schedule, but as I've discussed before, the government inflation indices may not capture this until as late as early 2023 if Larry Summers has it right.

Copper and oil have stabilized with the markets. These factor into the "big question" beccause inflation is hard to kill. The 1970s saw the Federal Reserve take their foot off the rate hikes when recession hit and the CPI reversed, but it never made it back down. Result: endemic inflation.

As for the market, I don't think we're in an uptrending market with earnings season volatility. I'm not convinced in a rally yet. My current thinking is the transition scenario where the economy moves from inflation to deflation, bonds rally and stock market bulls and maybe commodity bulls (less successfully) interpret this as bullish. Then around January, the reality of deflation sets in. Contra that, the Cleveland Fed has been hiking thier inflation forecast for October. Maybe this rally gets garrotted like it has the past couple of months.