📰 Set Your Alarm, They Said. 8:30 AM, They Said.
Last night's post ended with: "Set your alarm for 8:30 AM. This one matters." The March CPI report dropped this morning, and the monster under the bed turned out to be wearing a gasoline costume with nothing underneath.
Headline CPI: 3.3% year-over-year. That's the highest since May 2024. A full 90 basis points above February's 2.4%. Sounds terrifying, right? The energy index surged 10.9% in a single month — the biggest jump since September 2005. Gasoline alone spiked 21.2%, the steepest monthly increase since the BLS started tracking it in 1967. Fuel oil jumped 30.7%. This was an energy massacre.
But here's the number that actually matters: Core CPI — 2.6% year-over-year, 0.2% month-over-month. Strip out the oil war, and inflation barely moved. The Iran energy shock hasn't bled into the broader economy. Not into housing, not into services, not into goods. Three-quarters of the entire CPI gain came from one line item: gasoline. The monster was real, but it was wearing a very specific, very removable outfit.
📊 Score: 5.02. Didn't Flinch.
The CPI report dropped at 8:30 AM. At 8:49 AM ET, the score ticked from 5.03 to 5.02. That's it. A 0.01 move on the biggest inflation print in two years. The model yawned.
Why? Because the score already knew. The oil price surge that drove March CPI has been flowing through the model's price levels for weeks. The score didn't need to wait for the BLS to confirm what $100+ oil was already telling it. It positioned at High Risk (50% SQQQ / 50% Cash) on Wednesday at 2:50 PM when the 5.05 gateway fired. The CPI just confirmed the thesis. No new information, no new position.
Ref: 5.02 (Apr 9, 2:50 PM). Next up: 5.09 — that's ref + 0.07 into Cautious, requires the 0.07 rule. Next down: 4.95 — gateway into Extreme Risk-Off (100% SQQQ), fires on contact.
The score is 0.07 from easing its stance and 0.07 from going all-in short. A coin flip from here. What breaks the tie? Whether the market decides core 2.6% matters more than headline 3.3%.
🏭 The "Transitory" Word Is Back — And This Time It Might Be Right
I know, I know. Last time someone said "transitory," it became a meme and then a disaster. But hear me out.
The March CPI surge is mechanically different from 2021-2022 inflation. Back then, everything was rising — rent, services, goods, food, energy, all at once. That's broad-based, sticky, structural. Today? Core CPI is at 2.6%. That's basically at the Fed's target. The only thing screaming is energy, and energy is screaming because of a specific geopolitical event — the Iran war and the Strait of Hormuz blockade.
If the ceasefire holds (big if), oil normalizes, and this entire CPI spike reverses within two months. If it doesn't hold, we've got a different problem — but it's still a supply shock, not a demand-driven inflation spiral. The underlying economy isn't overheating. People aren't splurging. Companies aren't hiking prices across the board. It's oil. Just oil.
The market is clearly reading it that way. Nasdaq opened up 0.5% this morning despite a headline number that should have caused panic. Traders see core 2.6% and think: "The war premium washes out. The real economy is fine." I think they're right — for now. The risk is if this drags on long enough for energy costs to seep into transportation, shipping, food production. Second-round effects. We're not there yet, but every week the Strait stays closed brings us closer.
🛡️ EMA Override: Eight Days Strong
QQQ closed yesterday at $610.19. EMA 70 at $601.42. That's an $8.77 cushion, and with the market opening higher this morning, it's likely even wider now.
The raw signal says 50% SQQQ / 50% Cash. The EMA override says 100% QQQ. The override has been active since QQQ reclaimed the EMA on April 7's ceasefire gap — and every single day since then, QQQ has closed higher. Seven straight gains. The trend filter is doing exactly what backtesting says it should: keeping you long in an uptrend and ignoring the noise below.
Final recommendation: 100% QQQ (EMA override active). QQQ would need to drop below $601.42 to kill the override. That's a 1.4% decline from yesterday's close — possible but not a single-headline move.
🎯 My Take: The Market Is Right About CPI and Wrong About Rate Cuts
Here's where I diverge from the consensus celebration. The market is correct that this CPI print isn't a structural inflation problem — it's an oil shock. Core is fine. The economy is fine. Relief rally justified.
But the market is also pricing in rate cuts pushed to late 2027. That's not nothing. In January, traders expected multiple cuts this year. Now they're looking at 18+ months of 3.6% rates because the Fed can't cut into 3.3% headline inflation, even if it's energy-driven. Some Fed officials are openly talking about hiking if core doesn't stay cool. That's a complete 180 from the start of the year.
QQQ at $610+ with rate cuts dead for a year and a half? With a war still on? With the Strait of Hormuz still effectively blockaded? The market is treating today's data like the all-clear signal, and I think that's premature. Core is great. But the environment around core is ugly — and that environment has a way of eventually contaminating the good numbers.
The score at 5.02 isn't wrong. The EMA override just has the louder voice right now. And as long as QQQ holds above $601.42, the override wins. That's the trade: trust the trend, but understand the fundamentals are cracking beneath it.
💡 What to Watch From Here
Three things matter more than the CPI print itself:
- Strait of Hormuz status. The ceasefire is technically alive but Iran is still restricting shipping. If the strait opens for real, oil drops to $80 and this entire inflation spike vanishes from the next CPI. If it stays closed, April and May CPI will be just as ugly.
- Score direction. At 5.02, we're equidistant from easing (5.09) and maximum defense (4.95). Price action today will decide. If QQQ keeps rallying, the score will subtract more points — pushing toward 4.95 and Extreme Risk-Off. If QQQ pulls back, the score adds points and moves toward 5.09. Counterintuitive, but that's the price-level engine at work.
- Fed speakers next week. Multiple Fed officials are scheduled. After today's data, listen for the word "patient" (bullish) vs "vigilant" (bearish). If they focus on core 2.6%, we're fine. If they focus on headline 3.3%, the rate path gets uglier.
The CPI monster didn't bite today. But it's still in the room. And it's hungry.