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Five Things You Need to Know: Surprise; Surprise Part Two; Surprise Part Three; Daily Housing Stabilizing in Terms of Plummeting Update; Super Spike!


What you need to know (and what it means!)


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. Surprise

The core Consumer Price Index increased 0.3% in January, ahead of the 0.2% increase most expected.

  • The CPI came in ahead of expectations, the core rising 0.3% instead of the 0.2% most expected.
  • Headline-making datapoints included the "surge in the cost of medical care," up 0.8% in January, the most in 15 years.
  • On an annualized basis, core CPI is increasing at a 2.7% pace (the Fed's comfort zone is reportedly around 2%).
  • The annualized core CPI peaked in September, 2006 at 2.9%, its highest level since October 1994 but outside the deflationary scare in 2002 core CPI is still historically low (as the chart below courtesy of shows).

2. Surprise Part Two

One other CPI surprise note. What about the historic jump in medical care prices? Are you looking for a month-to-month hair-trigger response, or something more sober?

  • Because the chart below certainly looks far more sober than the headline, "Medical Care Jumps Most in 15 Years!"

3. Surprise Part Three

In another mild surprise, the Bank of Japan decided to move ahead with a 25 basis point rate hike, taking the overnight rate in Japan to 0.5%.

  • We talked about this yesterday and noted we felt the Bank of Japan had enough wiggle room to stand pat for another meeting. So much for wiggle room.
  • Although economists in Japan were pretty much evenly split on whether the BoJ would go ahead and raise rates, the vote was 8 to 1 in favor of a hike, compared to 6 to 3 at the last meeting.
  • The one dissenter was deputy governor Kazumasa Iwata, according to XFN-Asia News.
  • Interestingly, it was the first time in the bank's history that the governor and his deputy have cast opposing votes on a policy decision.
  • Central bank governor Toshihiko Fukui said that the 0.5% level is accommodative enough if the economy is "to maintain a growth pace of 2% going forward."
  • Eh. Big deal. (That's what the Yen is saying. See chart below.)
  • When you're at 0.5% on your overnight rate while the U.S. is at 5.25% and the European Central Bank is at 3.5%, well, big deal.
  • Moreover, the average rate set by the central banks that make up the Group of Seven countries is 3.75%.
  • Other key central bank rates?
    Country Central Bank Rate
    US 5.25%
    ECB 3.50%
    Bank of Eng 5.25%
    China 6.12%
    RBA 6.25%
    India 6.00%
    Bank of Japan 0.50%

  • Bottom Line: Carry On.
    Japanese Yen, still going down: Carry On.

4. Daily Housing Stabilizing in Terms of Plummeting Update

You didn't think we were going to go longer than 24 hours without a housing stabilizing in terms of plummeting update, did you?

  • According to a piece in today's USA Today (is that redundant?), in Sacramento a stunning one in every five existing homes on the market is a so-called "short sale."
  • You'll recall that back in August we looked at housing short sales, where homeowners basically sell their home for anything they can get and hopefully persuade bankers to accept less than what is owed.
  • So in Sacramento a full 20% of homes on the market are apparently short sales.
  • What does that do to the remaining 80% of homes on the market?
  • It forces them to cut prices to compete, which is deflationary of course.
  • And deflationary in a market that has already seen median prices fall 4.3% year-on-year, as of December data.
  • Oh yeah, and nationally, mortgage applications dropped more than 5% last week, hitting their lowest level so far this year.
  • And the drop occurred despite a decline in interest rates.

5. Super Spike!

Do you know what this is?

  • First, it's a point and figure chart courtesy showing the S&P 500 on a 10x3 scale.
  • Second, it's - so far - a column of 22 consecutive Xs.
  • Third, it's a column that contains all index price activity over the past seven months, meaning all price action on the SPX per this scale has occurred without pause; meaning, without a column reversal.
  • Finally, and perhaps most interestingly, it's the largest column of Xs (meaning this column contains the most Xs) of any on the chart since 1998.
  • Between October and November of 1998 the SPX moved 26 consecutive boxes, from 930 to 1190.
  • The SPX would have to hit 1430 before 1470 in order to reverse down and conclude this column of Xs, according to the rules of point and figure charting.
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