From The Desk Of Laura Wheeler

http://www.youtube.com/watch?v=PTUY16CkS-k&feature=youtube_gdata_player

CPI, inflation at the consumer level, hit the tape up .2% (up 1.2% year on year). The core index (ex- food and energy) print was unchanged, the lowest reading in the history of core index tracking. That part of the index dates back to 1957 (one of my favorite cars). Energy prices were the bulk of the modest increase, rising 2.6% with gasoline up 4.6%. Food prices were clearly declining as fruits, vegetables, cereals, and bakery products were all on the slide. Dairy prices however were 1.1%. Sounds like all of the inflationary pressures within the index came from cows driving fast cars. Housing Starts and Building permits were also released. Housing Starts hit an 18 year low, down 11.7%. Building permits were up a meager .5%. No joy in Mudville here. Market reaction has provided follow through buying on the heels of yesterday’s reversal. Reasons behind the late yesterday, early today price action are due to good support levels holding, oversold market conditions, and Irish eyes crying as the banking crisis across the pond which does not look good, most likely needing a bailout. QE2 has also gotten a reprieve as the inflation data, both yesterday and today’s gives the Fed a little cover on its view to stem deflation. As much as I’ve tried to explain QE2 and its relationship to interest rates, I’m afraid I haven’t done a very good job. Courtesy of Rene Marguilies, I have provide a 5 minute video that explains quantitative easing. Click on the link above. It is perfect! Technically, the bounce over the past two sessions in nearing the 38% retracement level (off the bottom looking for a target of 2.78%, currently 2.82%). The reaction to that level will be key, giving us either confirmation or denial of the rally. What I mean by that is we will see if this is just a correction in a new bear market or the formation of a bottom and a return to at least the middle of the range. Bears still have the advantage so best to stay defensive with your pipeline, taking advantage of the rally until the technical skies clear.