Inflation Rates

I spent hours and hours to understand the relationship to the CPI Index, Inflation and Fed Funds rates. I wasn’t thrilled with my findings as I saw a cozy and deeply close relationship so I ran M2 money supplies and money velocities. No changes, A deep relationship.

The key is Inflation is a price paid for consumer goods. Consumer goods skyrocketed therefore Inflation rates must follow. Inflation rates is not a monetary phenomenon nor derived as result to central banks, money, interest rates or the CPI Index. Pretty simple.

The problem is located in the economy somewhere as prices just skyrocketed everywhere. Why and where did this derive to see 8.5 Inflation is the real question.

Here’s the latest 12 month Prices paid index.

All items 8.5%

Food 8.8%

Food at home 10.0%

Cereals and bakery products 9.4%

Meats, poultry, fish, and eggs 13.7%

Dairy and related products 7.0%

Fruits and vegetables 8.5%

Nonalcoholic beverages and beverage materials 8.0%

Other food at home 10.3%

Food away from home 6.9%

Full service meals and snacks 8.0%

Limited service meals and snacks 7.2%

Energy 32.0%

Energy commodities 48.3%

Fuel oil 70.1%

Gasoline (all types) 48.0%

Energy services 13.5%

Electricity 11.1%

Natural gas (piped) 21.6%

All items less food and energy 6.5%

Commodities less food and energy commodities 11.7%

Apparel 6.8%

New vehicles 12.5%

Used cars and trucks 35.3%

Medical care commodities 2.7%

Alcoholic beverages 3.7%

Tobacco and smoking products 6.9%

Services less energy services 4.7%

Shelter 5.0%

Rent of primary residence 4.4%

Owners’ equivalent rent of residences 4.5%

Medical care services 2.9%

Physicians’ services 0.7%

Hospital services 3.3%

Transportation services 7.7%

Motor vehicle maintenance and repair 4.9%

Motor vehicle insurance 4.2%

Airline fare 23.6%

Brian Twomey

Market Prices off Kilter, AUD/USD, ISM

Currency markets over the past few weeks are off by about 100 pips. The vital word is off and this concept is seen predominately in weekly trades. Off is defined as non normal prices to weekly trades. Off maybe seen in many combinations.

An entry and target might be off by 50 pips each. An entry maybe off by 100 pips. A target may trade higher by 100 pips. An entry maybe off by 50 and target trades 50 pips higher. Recall 2 of 18 weekly USD/JPY trade entries were off by 80 and 90 pips but targets achieved destinations.

The steering mechanism as the moving average to the entry and target propulsion overall is off. To take the 100 pips out of the weekly trade setup, what’s off is the entry side but never the target.

For the vast majority of weeks over many years, currency prices trade normal and correctly which means weekly trades operate and function exactly as expected to entries and targets.

In rare instances, markets decide to go off kilter and off kilter is usually defined within this 100 pip space. The off kilter to prices are fleeting instances and never last.

Normally over years, off kilter price durations last as long as 6 weeks to borrow from the GBP/USD 1.2900 to 1.1900 example. Markets and weekly trades then resume normal price functions for at least the next year.

The weekly trade 100 pips was a transfer to daily trades as daily 100 pip days became the norm over last weeks. Markets return to normal again when 100 pip days subsides and the 100 pips transfers back to the normal weekly trade. The number of allowable trade pips are fixed and never expand.

The main key to the 100 pips and weekly trade scenario off kilter is recognition as awareness requires a fast trade adjustment to entries and targets. Miss the acknowledgment to a price problem then losses maybe realized.

AUD/USD served well this week for price adjustment. AUD/USD began the week deeply oversold and contained longs as the only trade.

AUD/USD main break line for higher prices is located at 0.7267. The weekly high point is 0.7155.

The first part of the weekly trade was long to target 0.7094. AUD/USD traded to 0.7099. RBA took AUD above 0.7155 to 0.7179. A break below 0.7155 was required for the short trade to target again 0.7058. AUD traded lows today at 0.7084.

AUD/USD 0.7155 is also seen as today’s day trade top at 0.7151 and 0.7146 and the 24 hour trade top at 0.7094.

ISM Manufacturing.

The average to beat for higher ISM was 57.85. Expected was 55.4 and ISM traded to its expectation. The real story is the distance lower traveled to achieve 55. The average at 57.85 will now adjust lower to reflect the next ISM release. Due to the massive distance traveled and lower averages, the 50 line to declare recession becomes more pronounced today.

Brian Twomey