Monday, November 22, 2010

Stephen Schork: Data Bullish for Economy, But Concerning for Nymex Futures

The last time we discussed the domestic producer price index (PPI) and consumer price index (CPI) we stated that “Consumers aren’t feeling the pain… yet.” The CPI for September was flat, whereas analysts were looking for a 0.1% increase and we were specifically concerned that the CPI of food rose just 0.32%, stating “we do not expect this to last.”

In this vein, the latest data (October) saw the CPI for food rise by 0.70%, more than double the previous month’s rate. Before we drill down further, it is worth pulling back to get the big picture. The total PPI rose by 0.4%, below analyst expectations of a 0.8% increase. At the same time, total CPI rose by 0.2%, slightly below the 0.3% gain expected by analysts. We do not believe it a coincidence that these figures were released on exactly the same day that the dollar peaked at the €0.7413 mark.

Despite the indices coming in below expectations, were traders still concerned about inflation? As written in today’s issue of The Schork Report, we don’t believe so. Rather, the drop in the dollar is likely due to money switching towards the equities markets, consider that the dollar hit a local peak on November 16th and has fallen 1.36% since. In comparison, the S&P 500 Index hit a local bottom on November 16th and has risen 1.67% over the same time......Read the entire article.

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