After years of low rates, inflation finally appeared, and it’s hard to believe that it will disappear after just a year of relatively modest price increases. If there are any negative inflation reports in the future, they could cause chaos (aka market crash ) since everyone is already acting on the belief that inflation has peaked.

The market has been in a struggle between the bears and the bulls since early February. The bears have been in charge since a false upside breakout occurred in $SPX. However, the bulls have made optimistic statements and cited oversold conditions, but the Fed and the Treasury have thrown doses of cold water on that optimism. The $SPX chart shows a lower high and lower low since the February top, and the latest rally attempt appears to be just an oversold rally. There is resistance at 4040, but the stronger resistance is between 4080 and 4200, which has already been tested once and held. Meanwhile, the broad support area from 3760 to 3850 is still in place. The $SPX chart is viewed as bearish, and a “core” bear spread is being held. However, there are some buy signals from internal indicators, including the Volatility Band buy signal and equity-only put-call ratios. The signals and indicators surrounding volatility are generally bullish at this time. The term structures have flattened out, but no sell signal has been generated from them. April $VIX futures are now the front month, and if April trades above May, that would be negative for stocks. The CBOE’s short-term, 9-day Volatility Index continues to be elevated. There is concern about inflation, and maintaining a “core” bearish position is being advised as long as the $SPX chart is in its current downtrend. A move above 4080 would alter this position.

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