Already Back to Pre-CPI Levels

The VIX got jumpy, going over 28 on Wednesday.  The put/call ratios hit levels that was last seen at the end of February, when the market was worried about rising bond yields.  This time, the market is worried about inflation after the big CPI number.  And this uptrend is so strong, that even with the VIX spike and the inflation fears, the SPX wasn't able to touch the 50 day moving average which is rising fast. 

Yesterday, we saw the indices go up over 1%, and the CBOE equity put/call ratio was exactly the same as it was on Wednesday, when the SPX went down over 2%.  That is not common.  Usually you get a significant move down in equity put volume after a rally day like yesterday.  

There is still a lingering fear of the "pullback", the one that master armchair QB Tony Dwyer has been harping on for months.  I keep hearing all this talk about the market being overextended, needing a pullback.   Even from myself! That tells you how deeply ingrained it is into the psyche of investors these days.  And fear of inflation that is NOT transitory is the current excuse for the weakness.  

Watching the price action, the market is quite resilient considering the buzz around inflation.  I put on a long SPX position yesterday morning, I was initially thinking of a price target of SPX 4140 but we're almost there just 1 day after my entry.  I am not selling yet.  I want to give this trade more time to play out and see how far the bounce off the pullback goes.  I've seen so many V bottoms that its much more common for dip buyers to sell too early, not too late. 

With the strong bounce back in Treasuries yesterday and this morning, now to pre CPI levels for both stocks and bonds, in less than 48 hours, yet with the lingering inflation fears still with us, it feels like stocks want to go higher.  

I made the mistake of sticking strictly to my price target when I bought the SPX dip in late January and I sold way too early.  It might not be as good of a setup, but I don't want to make the same mistake again.  Sticking with the long side and letting it play out for a few more days.