All eyes are on May's Consumer Price Index report today as prices rose more than expected. The economy and the Federal Reserve are caught in a balancing act between growing too fast and too slow. The CPI is one of the biggest factors of inflationary pressure.
The bond market has been climbing higher and taking technology and small-cap stocks with it. The put/call ratio and momentum levels show that stocks are overbought. Because of this combination, I don't expect much upside in the S&P 500 in the near term. The Russell 2000, however, has been trading sideways for most of 2021. An extended sideways move raises the probability that stocks will take on a directional bias.
Considering the overly bullish sentiment and current momentum levels, I have identified two stocks that are vulnerable to trade lower. If you're long these stocks, you can exit the positions. If you're looking for a bearish trade, you can buy put options or short the stocks.
In today's video, you'll discover why the small caps are rising… whether the bond market will continue to trade higher… whether the put/call ratio is increasing or decreasing… and which two stocks are cooling off and ready to fade.
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