Fortune Research readers know that I love to tell you why the financial media is wrong. And if you watched the mainstream financial media Monday, you’ve probably noticed coverage is pivoting to bearish headlines.
Articles from both CNBC’s Jim Cramer and economist Mohamed El-Erian are showing negative sentiment. And sectors featured by the anchors are shifting to the defensive — primarily Consumer Staples and Health Care.
Coverage has also been rather negative on the tech sector, which is odd since it was flat through the middle of the day and closed just 0.07% in the negative.
But if you’ve been reading along, then you know this week’s volatility isn’t being driven by some impending market crash. It’s being driven by Friday’s upcoming options expiration.
But it’s also being driven by supply-demand imbalances in commodities that are causing absolute rips across the whole sector.
These price spikes are particularly acute in two commodities I’ve covered my entire career — natural gas and coal — and they aren’t likely to abate any time soon.
I’ll go into more detail on that subject in a “deep dive” on Thursday, but suffice it to say that commodity price increases are a primary driver of inflation.
My hunch is that’s another core reason why media sentiment is flipping negative.
And, like always, there’s a simple reason why the financial media is wrong: They just haven’t quite put two and two together yet…
Proof of Why the Financial Media Is Wrong
It just so happens this week that we also get some incredibly important data on that subject.
The all-important Consumer Price Index comes out Tuesday, and if that year-on-year number surprises to the upside — my models have it pegged at 6.3% versus 5.3% estimates — we could see additional volatility show up in stock prices.
And with import prices coming out on Wednesday, retail sales on Thursday and consumer sentiment on Friday, that’s a potential 1-2-3-4 punch that could rock markets.
If that happens, just remember my three-step method.
First, check volume…
So far, it’s down.
Then check volatility…
And finally, check the volatility of volatility…
Oh, what’s that?
So, yes, the financial media is wrong as usual. When markets crash, those three things go up, not down.
And that means this continues to look like a dip to buy rather than vice versa.
With that said, I’m putting together an updated watchlist for Tuesday.
So keep an eye on your inboxes, everyone… This one might get interesting.
All the best,