Dear Members.

Data from the past two days shows inflation persists with bond yields continuing to rise but traders have decided to take advantage of lower prices with all major indexes higher as we get ready to close out another trading week.

The 10 year treasury bond yield, closing in on 5%, has not been this high since 2007. With the PPI and CPI readings there is now a 90% chance the Fed will raise rates when they meet next week. One might think this would be a reason to worry but the $VIX is down sharply today, showing traders have been expecting this for some time now.

In fact, the S&P looked like it was getting ready to break through its 50 day moving average to the downside yesterday but held and in fact is trying to close back above its 20 day, currently at 7668 which should be considered bullish. And its worth noting that the S&P is less than 2% from its all time high in spite of increased rates, climbing oil prices and persistent inflation. In other words, traders remain bullish on stocks.

Of course things could look different when the Fed meets next week and reveals its interest rate decision but again, the market is already bracing for an increase. We should also remember that overall corporate earnings remain strong and as long as that continues traders will mostly ignore what otherwise might be considered negative news.

Bottom line: the bears have failed to make a case that stock prices should be lower. And as long as the S&P holds above its 50 day, currently at 7607, we have to give the bulls the nod.

Tom will be back with his Weekly Market Report on Monday.

At your service,

John Hopkins