The Inger Letter Forecast

Selling into a benign CPI rally. . . was the call for early Wednesday, if that was the way the CPI number came in, and it did; though there's no doubt we view price levels higher than "massaged" data being officially reported today. Here we got the overall CPI coming-in at 0.3%, on target with general consensus estimates. The CPI measure of inflation is presumed to be one of the primary elements the Federal Reserve will be weighing, when considering whether to raise interest rates, or most interesting, shift back again to a tightening bias at its upcoming Oct. 5th FOMC meeting.

Besides the fear of an October rate hike still a bit present, just based on yesterday's retail sales data for instance, you've got an interesting S&P pattern that's continued to develop, which we do have to view negatively, Expiration notwithstanding; simply because rallies are being sold into.

Daily action . . . (portions reserved) got short per intraday Wednesday 900.933.GENE guidelines at the December S&P 1364 level on a double-pump right after the opening activity. (As we were rather specific about control points, there's a good chance traders exited at 1350, without going to the long side, and then got short again at 1348, which would have been retained overnight into Thursday, where the guideline was closed approximately in the lower 1320's; another homerun effort. The closing was tied-in to the sporadic early closing of various markets in New York City, as a result of Hurricane Floyd, which is also why this week's postings have been abbreviated as a result of a couple of our staff caught-up ahead of the storm both in Florida earlier this week and now in New York City, where part of our web-posting staff resides. We are pleased the efforts to provide our resource ideas have been particularly effective this week, given the dislocations, and that we decided midday Thursday to respect the coming Triple Witching and get out of the way.)

Widening the stops as Wednesday morning developed, we responded primarily to the weakness in the Dollar and Nasdaq 100 (NDX), which in a sense was a good early indicator that the broad S&P and Dow Jones Industrial Averages weren't going to hold up.

It is our expectation that full hotline coverage and normal DB posting will return tomorrow, and of course are always subject to preempting in the event of emergency, or if hurricane Gert should follow in Floyd's wake, which we forecast will not be the case. Meanwhile, our good wishes to all who are still dealing with Floyd, as it threatens to rake much of the Eastern Seaboard this week.

Noting we're nevertheless open-minded to some new upside coming up fairly soon, particularly so if we get a sharp downswing after Wednesday action; regardless of the CPI. This is primarily an allowance for Expiration-related action, not bullishness per se at the moment. Market friendly news is being accompanied by an expansion of new lows and very mediocre breadth; on top of pressure in some of the Street's most recently favored sectors, like chip fabricators that have been upgraded (by some brokerage analysts) essentially at what looks like potentially just simple accelerated parabolic topping patterns, which are often the hallmark of upside trend completions, and precede beginnings of downside activity not so far out; rather than the opposite.

Overall expectation remains (successful) breakdown; just that probability of extension's greater next week, once we've completely exhausted any short-term excuses for upside buying, or for that matter expiration unwindings. At that point, or shortly thereafter, we'd be looking for a new break of the (low after the rising bottoms came out). Bond and Nasdaq action both of course are supporting the idea that the rallying efforts will fade and fail, which is also the case as a result of most rallies being sold into, almost regardless of the news or fundamental backdrop being seen. That's indicative of a distributatitve market, wherein managers are using rallies for the purpose of selling, and aren't even confident enough to just stand back holding heavily long.

Technically. . . Bits & Bytes. . . Economic News & Releases: (reserved for subscribers)

In Summary. . there's very little surprise that the market rallies failed, or that the Dollar weakened as time wore on this (Wed.) morning. Later pressures in the bonds are a risk, given the proximity of the old lows, and all of this is in harmony with the general expectations, which also allow for a couple further rally efforts (likely to be unsuccessful for all but the most brief or expiration-related periods), and then failures. We're emphasizing the short-side of the ledger and at last report after a hugely profitable 1364 short-sale covered at 1350, are again on the short side from 1348 in the Dec. S&P, as of 1:15 p.m., with the DJIA off move than 30 points. This S&P trade has a fixed stop (did get hit, so we closed into weakness Thursday), which becomes a breakeven risk if we weaken just slightly as a struggling Wednesday continues, and as I leave to catch a flight rather hurriedly just now. We've resumed everything on normal schedules effective tomorrow, and are glad we were able to at least provide the majority of our resources and ideas during the largest peacetime coastal alerts in American history. Our best wishes for the health and safety of all, as the market itself becomes "dampened" by Floyd.