GAME PLAN REVEALED: PPI Data Analysis & Critical Market Cycle Signals

In this morning's GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, delivered crucial insights into market behavior that every trader and investor needs to understand. While Producer Price Index (PPI) data came in better than expected, the market's inability to sustain gains reveals a deeper story about institutional positioning and potential cycle inflection points ahead.

The PPI Data: Surface-Level Good News with Deeper Implications

This morning's economic data appeared encouraging on the surface. The Producer Price Index came in at just 0.1% versus the expected 0.2%, following yesterday's similarly benign Consumer Price Index reading. As Gareth explained:

"PPI data coming in better than expected. Now remember PPI stands for producer price index. Yesterday we got CPI data which is consumer price index. Essentially consumer price index is the inflation that we're seeing on our side versus producer price is on the producer side."

The significance of both readings coming in below expectations cannot be overstated. Producer prices represent the inflation pressures companies face when manufacturing goods, while consumer prices reflect what end users actually pay. When both remain subdued, it typically signals that inflationary pressures are not building throughout the economic system.

However, Gareth offered an important caveat that sophisticated investors should consider: "Now listen, is there hidden inflation in there? Probably. I think we can all see that in certain things like car insurance, homeowners insurance, things like that. But at least the way they calculate it, you're not seeing that inflation bubbling up yet, even in spite of tariffs."

This observation highlights a critical disconnect between official inflation measurements and the real-world experience of consumers. While the headline numbers suggest benign inflation, specific sectors continue experiencing significant price pressures that may not be fully captured in the broader indices.

Gareth's thesis for why tariff-related inflation hasn't yet materialized deserves particular attention: "Could it be that so many companies bought so much inventory ahead of the tariffs that they're still working through that? That's my thesis. My thesis is we will see an uptick in the coming months, but so far, we have not."

This forward-looking perspective suggests that current benign inflation readings may be temporary, as companies work through pre-tariff inventory stockpiles. This inventory buffer effect could mask inflationary pressures that eventually surface in coming months as businesses are forced to purchase new inventory at higher tariff-inclusive prices.

The Market's Troubling Response: Good News Ignored

While positive economic data would typically drive sustained market rallies, both yesterday's CPI release and today's PPI announcement failed to generate lasting upward momentum. This pattern reveals something far more significant than a simple lack of buying interest.

As Gareth observed: "Yesterday we had a pop on the CPI data right here, right? Big pop. I talked about this yesterday in the game plan. Beautiful move to the upside, right? But what's interesting here is that it didn't hold."

The inability to sustain gains following positive fundamental catalysts represents a classic warning signal that institutional investors may be using rallies as selling opportunities. This behavior typically emerges when sophisticated market participants believe current valuations have become stretched relative to underlying economic realities.

Gareth provided crucial context for interpreting this market action: "Once you start seeing the market selling off on the back of good news, that's an indicator that you're seeing institutions selling into retail... retail is going to look at the headline numbers and say, 'Oh, this is good news. Just buy.' Institutions are sitting there saying, 'Okay, at what point are we at levels that are unsustainable? At valuations that are unsustainable?'"

This institutional versus retail dynamic creates a dangerous setup for unsuspecting investors. While headline-focused retail participants interpret positive economic data as a reason to increase equity exposure, institutions may be positioning for potential economic challenges ahead. These could include concerns about tariff impacts, unsustainable debt levels, or simply overextended valuations after a prolonged bull market.

Historical market analysis shows that periods where good news fails to drive sustained rallies often precede significant corrections. During the dot-com bubble peak in 2000 and the housing bubble peak in 2007, similar patterns emerged where positive fundamental developments failed to generate lasting upward momentum as institutions quietly reduced exposure.

The Critical Cycle Date: A Technical Warning System

Perhaps the most intriguing aspect of today's analysis was Gareth's discussion of an upcoming cycle date that his team has calculated at Verified Investing. This cycle analysis represents a sophisticated approach to market timing that goes beyond simple technical patterns.

"I've been talking about this cycle date coming up that again we've calculated here at Verified Investing. And this cycle date, one of the things I said is that we're just on the outskirts of it. It's basically, you know, basically the window would be Thursday, Friday, Monday, Tuesday, Wednesday of next week."

Cycle analysis examines recurring time patterns in market behavior, often based on astronomical, economic, or psychological factors that influence investor behavior. While the specific methodology behind Verified Investing's cycle calculations wasn't detailed in today's show, the framework for interpreting market action around these dates provides valuable insights.

Gareth established clear criteria for confirming the cycle's influence: "If the markets close flat or negative and ignore the good inflation data, that could be essentially a breadcrumb that the cycle date is at hand. Now, yesterday we did close flat to negative on the day."

This systematic approach to cycle confirmation demonstrates how experienced traders combine technical analysis with fundamental catalysts to identify high-probability turning points. Rather than relying solely on cycle dates, the methodology requires market confirmation through price action that contradicts what fundamentals would typically suggest.

The psychological foundation underlying this approach is sound. Market cycles often reflect the collective behavior patterns of participants, which can be influenced by recurring time-based factors. Whether these cycles stem from options expiration patterns, institutional rebalancing schedules, or deeper psychological rhythms, they provide a framework for anticipating potential volatility windows.

Technical Analysis Predicting Fundamental Events

One of the most fascinating aspects of today's GAME PLAN was the demonstration of how technical patterns often anticipate fundamental developments. This phenomenon appeared clearly in both GE and GameStop charts before significant news emerged affecting these companies.

Regarding GE's chart action before the India plane crash news, Gareth noted: "This is just the power of charts, guys. It is it's almost spooky, right? So, you had GE in this uptrend and just before this happens, it breaks down below this trend line and then all of a sudden it's starting to drop more and more."

This technical breakdown occurred before the fundamental catalyst became public knowledge, highlighting how price action often reflects information that hasn't yet reached broader market awareness. Whether this stems from insider knowledge, algorithmic analysis of subtle data patterns, or simple coincidence, the practical application remains valuable for traders.

GameStop provided an even more dramatic example of technical patterns anticipating news flow: "Look at the down move. What type of pattern is this, guys? All right, quick quiz. What type of pattern? You have a down move and then inside bar... This is a bear flag, right? And then lo and behold, it breaks the bear flag."

The bear flag pattern that formed in GameStop preceded the company's announcement about purchasing Bitcoin, which triggered a sharp decline as investors viewed this move as essentially abandoning the core business model.

Gareth's interpretation of this development provides crucial context: "The difference here is that it's very clear that GameStop is waving the white flag on their business, right? Their business is done. They wouldn't be going this route unless they realized their business is done, unfortunately."

This analysis highlights why GameStop's Bitcoin strategy differs fundamentally from MicroStrategy's successful approach. While both companies are using shareholder capital to purchase Bitcoin, MicroStrategy's decision came from a position of business strength under visionary leadership, whereas GameStop's appears to represent a desperate pivot away from a failing core business.

The Dollar's Technical Breakdown: Global Implications

Today's analysis revealed a potentially significant technical development in the US Dollar Index that could have far-reaching implications for American consumers and international markets.

"Take a look at the US dollar today. We may have an official breakdown. We don't have a confirmed move yet, but it is below the line. But what I think is significant about this is that these aren't just arbitrary kind of trend lines... What we're seeing here is an obviously long-term trend line going back here. And then notice how we put in a parallel to that, a parallel line to that right there. And now we're breaking."

The significance of this potential breakdown extends beyond simple technical analysis. A weakening dollar creates a complex set of winners and losers throughout the global economy. As Gareth explained:

"Cheaper dollars or lower dollars, it's bad for those of us in the US. Our buying power goes down. But if you're an international company, if you're someone who sells a lot of goods overseas, it actually makes your goods cheaper."

For American consumers, a weaker dollar translates directly into higher costs for imported goods, from electronics to energy to food products. This import inflation could eventually surface in future CPI and PPI readings, potentially contradicting the benign inflation narrative reflected in today's data.

Conversely, American multinational corporations benefit from a weaker dollar as their overseas revenues translate into more dollars when converted back to the reporting currency. This dynamic explains why some sectors of the stock market might benefit from dollar weakness even as consumers face higher costs.

Bond Market Dynamics: Understanding Fed Limitations

Today's discussion of the 10-year Treasury yield breakdown provided crucial education about Federal Reserve limitations that many investors don't fully understand. As Gareth explained:

"The long bond, the Fed has no power over the long bond, right? So the Fed controls the very short-term inter-bank lending rates. Basically, the short-term rates. The long bond is controlled by the market."

This distinction becomes critically important during periods of fiscal stress or international tensions. While the Federal Reserve can influence short-term interest rates through policy decisions, longer-term rates reflect market perceptions of inflation, credit risk, and economic growth prospects.

The upcoming 30-year bond auction highlighted in today's show represents a real-time test of international confidence in American fiscal sustainability: "Today we have that infamous 30-year bond auction, $22 billion being sold by the Treasury. We're going to be watching at 1:00 how the results of that bond auction go."

Gareth outlined the potential consequences if international demand for US debt weakens: "If people start saying, 'Hey, you know, let's say China, Japan, all these other countries,' they're like, 'No, you know what? We don't really want to buy the US 30-year because we don't believe in the sustainability of the US for 30 years with the debt that we have.' Then all of a sudden, they could say, 'Hey, unless you offer us 7% or 10%, we're not going to buy your debt.'"

This scenario represents one of the most significant long-term risks facing American markets. If international creditors lose confidence in US fiscal sustainability, they could demand significantly higher yields to compensate for perceived risks. This forced austerity scenario, while not likely in the immediate term, represents the ultimate constraint on American fiscal policy.

Oil's Hidden Inflation Signal: The 10% Monthly Surge

Buried within today's technical analysis was a crucial insight about potential inflation pressures that may not yet be reflected in official statistics. Despite benign CPI and PPI readings, oil prices have surged over 10% in just the first half of January.

As Gareth pointed out: "If you go back to the beginning of the month, so basically, remember the CPI and PPI numbers we got? This was the last day of the month on oil. Look at what oil's done since then... just in 12 days of the month, oil's up 10%."

This rapid price appreciation in a key input cost creates a timing disconnect between current inflation readings and future inflationary pressures. Since energy costs flow through virtually every sector of the economy, this 10% increase will eventually surface in transportation costs, manufacturing expenses, and ultimately consumer prices.

The implications extend beyond simple cost pressures. Gareth noted that recent oil price spikes were driven by geopolitical tensions: "There was chatter that there were evacuations of personnel from Bahrain and Kuwait... oil was spiking on the worries that there was going to be some attack on Iran."

This geopolitical premium in oil prices highlights how quickly energy markets can shift from benign to inflationary based on international tensions. With multiple global conflicts ongoing and US foreign policy potentially shifting under new leadership, energy price volatility could become a persistent source of inflation pressure in coming months.

Bitcoin's Risk Asset Reality: Correlation Patterns Revealed

Today's analysis provided valuable insights into Bitcoin's evolving role in financial markets, particularly its continued correlation with traditional risk assets despite occasional safe-haven characteristics.

"Bitcoin down yesterday. Bitcoin down today. Here was the last down day on the stock market right here. This was last Thursday when Elon and Trump had their feud on social media and Bitcoin was down. So you guys see the pattern here."

This correlation pattern contradicts the narrative that Bitcoin serves as a reliable safe-haven asset during market stress. While Gareth acknowledged that Bitcoin has shown brief safe-haven characteristics during specific events, the overwhelming pattern shows it behaving as a risk asset that declines alongside equities during market stress.

"I'm a true believer that eventually Bitcoin becomes a safe haven asset. And we've seen I've said this yesterday, we've seen flashes of it being a safe haven asset... But overall, those are that's about one or two percent of the time. Otherwise, when normal markets are behaving normally, it remains a risk asset."

This realistic assessment provides crucial guidance for investors considering Bitcoin allocation within their portfolios. While Bitcoin may eventually evolve into a safe-haven asset, current evidence suggests it should be treated as a risk asset for portfolio construction purposes.

The technical levels Gareth identified remain relevant for traders seeking to capitalize on Bitcoin's continued volatility: support around current levels with resistance at $125,000-$127,000.

Gold's Bullish Breakout: Technical Confirmation

In contrast to Bitcoin's risk-asset behavior, gold demonstrated classic safe-haven characteristics, breaking above key technical resistance levels as broader markets struggled.

"Gold today continues to act well. Take a look. Gold is up about $27, 0.8%. We talked about the downslope here hitting resistance, resistance, resistance, but also holding major support upsloping and across. So, this was bullish consolidation."

The technical pattern Gareth described represents a textbook example of how consolidation periods often precede significant moves. The combination of declining resistance (downsloping trendline) with rising support (upsloping trendline) created a converging triangle pattern that resolved to the upside.

"Once we broke above this trend line, consolidation retrace to the scene of the crime and right up again we go."

This "scene of the crime" concept represents a fundamental principle of technical analysis where former resistance becomes support once broken. Gold's ability to hold above the broken resistance line during subsequent pullbacks confirmed the breakout's validity.

Looking ahead, Gareth identified clear upside targets: "This is very obviously short-term resistance right here around $3,385. If this gets through here, we should test $3,440. And if that gets broken back to $3,500 all-time highs."

These specific technical levels provide actionable guidance for both traders and investors seeking to capitalize on gold's bullish momentum while understanding where the uptrend might face meaningful resistance.

Conclusion: Connecting the Technical and Fundamental Dots

Today's GAME PLAN revealed a market environment where surface-level positive news masks deeper structural concerns. The failure of benign inflation data to generate sustained rallies, combined with technical breakdowns in key assets and the approaching cycle date window, suggests that experienced investors should proceed with heightened caution.

The institutional selling into retail buying pattern identified by Gareth represents one of the most reliable warning signals that market participants should monitor. When sophisticated investors consistently use good news as selling opportunities, it often foreshadows more significant adjustments ahead.

As markets navigate the critical cycle date window in the coming week, the interplay between technical levels and fundamental developments will likely determine whether current market resilience continues or gives way to more significant volatility. The tools and insights provided in today's analysis offer a framework for navigating whatever conditions emerge, emphasizing the importance of probability-based decision making over emotional reactions to headline developments.

For investors seeking to build long-term wealth, today's discussion reinforced the fundamental principle that sustainable success comes from understanding market mechanics rather than chasing narratives. Whether dealing with inflation data, technical breakouts, or geopolitical developments, the disciplined application of analytical frameworks provides the foundation for making informed decisions in an increasingly complex market environment.