An impetuous four-day rally off the lows of last Wednesday ran into a solid brick wall yesterday when the Consumer Price Index foiled any ideas of a downside surprise with an upside surprise instead. Talk about bait and switch. Core CPI came in at 0.6% vs. expectations of 0.3%, while non-core CPI, which includes gas prices, came in flat vs. expectations of a -0.1% decline.
If nothing else, the four-day rally helped to show why I threw out that old three-day rule from the first book I wrote on short-selling titled, How to Make Money Selling Stocks Short (John Wiley & Sons, 2004). As I noted in my last report, bear market reaction rallies can last any number of days, the duration of which is ultimately determined by market context, underlying conditions, and even news flow, as it was yesterday.