Can't AI Fix Inflation?

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Market News and Short-Term Predictions

The Consumer Price Index (CPI) report for April 2023 showed that inflation rose 0.4%, seasonally adjusted, and rose 4.9% over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.4% in April (SA); up 5.5 percent over the year (NSA).

The largest contributors to the monthly all items increase were shelter, used cars and trucks, and gasoline. The increase in the gasoline index more than offset declines in other energy component indexes, and the energy index rose 0.6 percent in April.

I don't think that should be a surprise based on the price action of Crude over the past month.

The shelter index rose 0.5 percent in April, the largest monthly increase since February 1987. The increase was driven by rising rents and home prices.

The used cars and trucks index rose 1.2 percent in April, the largest monthly increase since December 1974. The increase was driven by strong demand and a limited supply of used cars and trucks.

The gasoline index rose 4.1 percent in April, the largest monthly increase since November 2005. The increase was driven by rising crude oil prices.

The core CPI index, which excludes food and energy prices, rose 0.3 percent in April and rose 5.5 percent over the last 12 months.

Has the fed tried asking ChatGPT for a solution yet?

With all that said, inflation is clearly still an issue and the Fed will be watching it closely going forward to make rate decisions. I still don't think the Fed starts moving rates lower unless something breaks (even though the market is predicting rate cuts later this year already). I think Jerome keeps rates steady for longer which may cause some volatility in Q3-Q4 this year.

In regards to short-term market movement, the chart is a bit perplexing for $SPY. Just look at that chop we have seen the past couple of weeks. Up, down, up, flat, crash, v-shaped recovery, flat. Because of this capitulation, the moving averages are stacking. On top of that RSI is close to 50 which means the market isn't overbought/oversold.

In this situation, I want am leaning a little short but am not all into the downside as I am not seeing clear momentum and the VIX is at 17 which means it has room to drop lower. With mega-cap tech holding up the markets, it looks like the market is coiling in this $410 (SPY) area.

Options Trading Portfolio

Closing Trades

I closed out a few trades this week. I got out of a reverse iron condor that didn't work out as we have traded flat for about a month now (-$142). I ended up closing an iron condor for a 45% win ($79) and then ended up taking a $50 loss on a credit call spread in order to adjust my short deltas a little lower.

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