CPI Crushes Bonds. Stocks Remain Above Support - for Now.

I

I had a bad feeling about the CPI report and some exciting news.

Over the last few weeks, I’ve been writing about the markets reflecting the confluence of events comprised of a once in a lifetime planetary alignment and the rising tenor of geopolitics along with the Washington drama. All along the way, I pointed to the shrinking of the Bollinger Bands around prices (an iconic measure of a market’s trading pattern and whether its “normal” or “abnormal”), as suggesting that a big move was coming. I’ve been hoping that the triggering event was positive. Yet, this morning’s CPI came in well above expectations and bonds and stocks have responded, shall we say, poorly.

Although, I’ve been hopeful, I did note, back on January 17, that I had some concerns about the January CPI, based on a trip to Costco during the period of the California wildfires and what I saw in the prices of the stuff I bought.

Here’s what I wrote: “ there are signs that these fires may already be affecting other areas of consumer prices, which could well show up in the January producer and consumer price data. This week, I went to Costco and here’s what I saw:

• Avocados - $9.99 for 6 ($5.99 in July 2024)

• Ribeye steaks – four large ones - $80 ($56.52 in July 2024 - $70 just last week)

• Organic Eggs – Two Dozen - $7.49 ($6.99 in July 2024)

• Organic Blackberry – single pack - $7.69 ($5.69 in July 2024).

Those four items cost $75.89 in July 2024. In January 2025, they cost $105.17. That’s a 38.58% price increase. Let that sink in for a while as you factor in the potential price increases that will likely work their way through the supply chain, especially when you try to eat at a restaurant.”

That trip may have indeed been prescient. As a result of what happened at Costco, I bought a Sam’s Club membership, for comparison, and what I’ve seen is that prices are not that different - some are lower (meat prices surprisingly), while some are higher (packaged goods). However, I’ve gone to Sam’s twice in the last couple of weeks and I’m starting to see some price creep there as well, especially in eggs, avocados, and yes, those pesky blackberries. Factor in all that’s gone on since those California wildfires and it’s not hard to see that the stopper on the inflation genie’s bottle is increasingly loose and may be ready to pop.

Portfolio Update

This morning, we took profits on CFLT and we were stopped out of Zillow after its earnings miss. Moreover, in my 2/11/25 ESP post, I warned subscribers to take profits on Zillow ahead of the earnings as we were up nicely on the trade. Here’s what I wrote:

“Zillow Group (Z). Earnings Due 2/11/25 after the close. Take Some Profits - I recommended purchasing shares in online realtor Zillow Group (Z) above $77.50. The stock is up nicely since we purchased it. Earnings are due out after the close today. Expectations range from $0.29 to $0.34 per share. Zillow has a knack for beating expectations. Thus, I wouldn’t be surprised to see a positive surprise. Still, we’re up over $1000 on the trade so it wouldn’t hurt to take a bit off the top here.”

Zillow’s problem is that even though its business is holding up and growing, their expenses are too high. Thus revenue and EBIDTA are rising, they continue to lose money as they prop up the business. Even worse is the fact that their balance sheet cash has dropped below $2 billion, which means it’s burning fast. We were lucky to get out nearly even. Here are the results:

• SOLD - Confluent (CFLT) Above $30. Bought 1/27/25: $30.05. 2/12/25 intraday price: $35.15. Return for this trade: $510/100 shares (14.5%).

• SOLD Zillow Group (Z) Above $77.50. Bought 1/17/25: $77.55. SOLD 2/12/25: $76.26. Return for this trade: -$129/100 shares (-1.67%).

I also have some exciting news!! I’ll be appearing on the AAO Research Podcast on 2/14/24 at 10 A.M. Central Time (11 A.M. EST). Jason’s known for his contrarian view points and his patient investing approach which focuses on looking for diamonds in the rough, especially in the futures markets. It promises to be a very informative and entertaining chat, especially in lieu of what’s happening in the markets. See you there!

You can view the conversation live at:

In this issue I am updating both the Momentum and ESP portfolios.

Market Update

The bad CPI news has spread throughout the markets. The New York Stock Exchange Advance Decline line (NYAD) is down this morning, but remains above its 50-day moving average. This is a positive for now. However, given the potential for negative surprises – geopolitical and in Washington – a move below this support level would likely signal that at least a test of the 200-day moving average is coming.

Meanwhile, the bond market is most unhappy. The U.S. Ten Year Note yield (TNX) is well above 4.6% and is building enough momentum to where a breach of 4.7% is within the realm of possibilities. It could come as early as tomorrow if the PPI number is worse than expected.

Thanks to everyone for your ongoing support. I really appreciate it.

Thanks also to all the current Buy Me a Coffee members and supporters. Special shout out to new members who now have access to the Sector Selector ETF Service, included, at no extra charge with your Buy Me a Coffee membership. Two new trades were posted yesterday.

For active trading, short term trading strategies, check out the Smart Money Passport.

For large potential profits with longer term holding periods in stocks check out the Smart Money Passport Weekender Portfolio.

If you’re thinking about day trading, my new book – Day Trading 101

– will get you started along the right path.

Trading is stressful and can drag you down. You can feel better if you take the right supplements. Check out our health page.