Hi YXI friends,

Our CPI Preview article yesterday (here) warned that the risk for today’s report was an upward surprise of both the Headline CPI and the Core CPI being hotter than consensus. This was due to factors across energy, wage growth, and shelter.

In today’s article, I breakdown the full details of today’s CPI and its implications, update FOMC’s latest market projections, and assess the price technicals of TLT.

In the second half, I provide detailed price chart updates using Elliott Waves Theory for all of the Magnificent 7 stocks. I will explain exactly where we are at after TSLA’s brutal pullback, how NVDA could reach a new high, the potential for GOOGL and AMZN post earnings, and whether AAPL or META have topped.

Table of Contents

• 1. CPI In January Was Much Hotter Than “Expected”

• 2. FOMC Projection Update

• 3. TLT Price Analysis

• 4. Magnificent 7 Stocks Post CPI

  • Apple (AAPL)

  • Nvidia (NVDA)

  • Tesla (TSLA)

  • Amazon (AMZN)

  • Microsoft (MSFT)

  • Alphabet (GOOGL)

  • Meta (META)

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. CPI In January Was Much Hotter Than “Expected”

It turned out Wall Street economists were indeed complacent going into the data. Both Headline and Core measures came in above consensus.

Headline CPI increased by 0.5% MoM, a rare beat of 0.2% on the consensus, bringing the YoY measure to 3.3%, up from December’s 3.2%.

Core CPI rose by 0.4% MoM, again higher than the forecast’s 0.3%, bringing the YoY to 3.3%

The trend is now pretty uncomfortable for the Fed and the rates market.

The Headline CPI has moved from a low of 2.4% YoY in September to 3% today in just 5 months, coinciding with the beginning of the Fed’s cutting cycle. Core CPI now looks to be forever stuck in the 3.2-3.3% region. In short, CPI is now moving away from the Fed’s target.

Even more troubling is the short-term momentum for CPI. If we take the past 3-months’ data and extrapolate their trends, Headline CPI is rising at 4.9% on an annualised rate, while Core CPI is rising at 3.7% annualised.

CPI MoM Itemised Breakdown

Our full breakdown of the CPI items shows that in fact, the hot readings were broad-based. It spans across Energy, Used cars, Medical care commodities, Shelter (the most important one due to its high weighting), Hospital services, and Motor vehicle insurance.

If we weren’t already in a cutting cycle, the discussion at the Fed should not be a “pause” but “should we hike?”

However, the Fed will dismiss the data as being “seasonal” and “potentially one-off”. Powell has repeatedly emphasised on viewing the totality of data over at least a full quarter before rushing into decision.

2. FOMC Projection Update

We use the Fed Funds Futures Market to examine the pricing for each FOMC meeting in the next year.

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