Overshooting?

Paid subscriber analysis

The CPI report on Tuesday ignited a powerful rally that basically only lasted one day (SPX ended up 2% higher). Both core and headline inflation came in lower than expected, thus ending a three month period of inflation gradually creeping up higher. Headline is now down to 3.2%. It was one of those quick repricing rallies, with the “soft landing” narrative spiking once again among the talking heads on TV and social media.

Interestingly, the rest of the week saw only narrow range-bound trading, with SPX bouncing around 4,500 for three whole days. Look at that consolidation around 4500:

The bears are smelling weakness as the markets failed to break above their Tuesday highs, and the bulls are still arguing a soft landing is now imminent. Even the ECB is sending signals that this is their central scenario. Weird, to be honest, but ok.

Which is it? Did the market overshoot after CPI this week, or do we see further strength down the line?