US stocks tumbled sharp in late trading overnight, as traders turned into defense mode ahead of today’s consumer inflation report. Headline CPI is expected to tick down from 8.3% yoy to 8.2% yoy in May. Core CPI is also expected to slow from 6.2% to 5.9% yoy.
Headline CPI appeared to have peaked at 8.5% yoy and core CPI at 6.5% yoy in March. Markets will look for validation that these levels were the peak. But the more important question is whether inflation is plateauing, or reversing. That is important for Fed officials to decide whether a pause in tightening is needed in September.
Technically, DOW’s picture is not looking good with the sharp -638pts decline, which suggests rejection by the falling 55 day EMA. If there is no come back to push for a strong rebound in DOW in the next few days, it will likely extend the correction from 36952.65 through 30635.76 low before finally finding a bottom.
