Buyers Cautious Ahead of CPI

The generally positive but random action continues. Buyers are lurking about, but not showing a whole lot of conviction. After the breakdown on Tuesday, they need time to regain their composure, and the longer they hold, the more likely they are to dip a toe back in.

Keep in mind that consumer price index report tomorrow morning is going to be very important, and that may keep the action contained as bulls and bears alike limit exposure until the news is out.

The CPI is important because it is one of the best indicators of inflationary pressures, and inflation is always the Fed's top concern. It is easy for the Fed to battle economic weakness or negative fallout in the subprime mortgage market by cutting rates.

What is far harder is fighting inflation in the economy once it establishes a toehold. To kill inflation requires killing the economy, and the Fed never likes to be forced to do that.

The CPI report in the morning is very likely to produce a strong reaction, and that will keep the big institutional buyers on the sidelines today. We should have a mild day and maybe even a little selling pressure as we wind down, and longs move out of the way of tomorrow's news. Unless you like gambling on economic reports, it's a tough day to make major moves.

Make sure you check out the first edition of my new ETF Shark Alert Newsletter. I'm quite excited about the opportunities that are going to pop up in this market in the near future following our recent correction, and the ETFs are going to be a great way to play them.

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James "Rev Shark" De Porre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. De Porre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.