"Domestic inflation reflects domestic monetary policy." --Martin Feldstein
 
"Not so fast, my friend" --Lee Corso
 
I'll Gladly Pay You Next Tuesday...
So, a horse walks into a bar... no that's not it... maybe it was three guys and a chicken. Wait, wait, ahh, let's just tell it like it is. The Bank of Japan... wait for it... delayed it's own forecast -- yet again -- for reaching 2% consumer level inflation. The BOJ says that you can expect, or rather they expect to see, 2% inflation by March of 2020 (they really, really mean it this time), or roughly a year later than previously suggested.
 
Nobody really thought that the BOJ would stick to their projections anyway. This is the sixth time that this particular expectation has been pushed out since Haruhiko Kuroda became Governor in 2013. That's averaging a change roughly one and a half times a year. I have a better idea, Haruhiko. Just tell the folks of Japan that you are trying your best, but that you simply do not know. How refreshing would that be from a central banker?
 
By the way, as we have said in this column in previous days, the BOJ was acting a little more unpredictably than were other high-profile central banks around the world. The Bank of Japan decided this morning to keep the target for the Japanese 10-year paper at 0%, and it's short-term deposit rate at -0.1%, despite the bank having acknowledged at the last meeting that the economy was "expanding moderately." A dovish BOJ. Who would have thought it? At their last meeting, by the way, the BOJ had raised full-year guidance on GDP from 1.6% to 1.8%. The U.S. dollar suddenly finds a bid this morning, and that "badly in need of a revamp" U.S. dollar index creeps closer to 95. Next up, Super Mario.
 
For a Hamburger Today
Does the European Central Bank officially alter policy today? Not likely. What markets will do today is watch and listen. Listen to that craft-master of the spoken word, ECB President Mario Draghi. Draghi is a pro, and he will speak at 08:30 a.m. ET.
 
He will not get pinned down. He will leave enough room to leave you wondering about the future -- and his own ability to wiggle out of anything. He also will not back-track. Growth in the eurozone can be expected to hit 3% quarter-over-quarter on an annualized basis this year, perhaps even this quarter. Simply put, not only is Europe not a basket case, they are hotter than we are. (Uh... Sarge, we're not at all hot. Oh, yeah... uhm, sorry guys, I forgot. But they are.)
 
Listen, gang... the European Central Bank has had their foot on the gas for a while, still buying almost $70 billion worth of bonds a month, which has bloated their balance sheet to $4.9 trillion. That's larger than the Fed's balance sheet, for those scoring this game at home. The caveat is that European inflation, like U.S. inflation, like Japanese inflation, is not hitting target, because none of these guys understand the failure of the Phillips Curve in the modern environment. (It's really not that hard, guys... I mean adapt, already.)
 
Inflation expectations aside, Draghi realizes that accommodation can be taken too far, and he rattled world markets -- probably intentionally -- back on June 27 when he indicated that the central bank might start winding down it's quantitative easing program. Some folks are looking to the Kansas City Fed's Jackson Hole conference in late August as a possibility for Draghi to set up the ECB's September meeting for real action. Today, we just listen.
 
Raging Energy
Yesterday, U.S. equity markets batted .1000. Eleven sectors went green on the day, even the recently beleaguered Financial sector. Health Care? Hot. Materials? Hot. Bond Proxies? Discretionary names? Tech? Hot, hot, hot. Hottest of all? Energy.
 
The weekly EIA data on U.S. inventories for WTI Crude contradicted the number released the night prior by the API. The Wednesday numbers showed sizable draws for both Crude, and Gasoline. Huzzah. On top of that, the EIA (Energy Information Administration) also reported that within the U.S., refinery inputs had decreased 125K barrels per day from just last week. Throw in a significantly weakened U.S. currency, and rock and roll... rally time.
 
The Energy Select Sector SPDR ETF ( XLE) screamed to a gain of nearly 1.5% on the day. Withing the sector, Murphy Oil ( MUR) , Transocean ( RIG) , Newfield Exploration ( NFX) , Helmerich & Payne ( HP) , Marathon Oil ( MRO) , Noble Energy ( NBL) , Apache ( APA) , and Chesapeake ( CHK) all scored daily increases in their stock prices of 4% or greater. Of those mentioned, APA and NBL are the most heavily weighted in that exchange traded fund. This is one arena that will be impacted today by post central bank policy meeting dollar valuations.
 

 
 
Steel Curtain
We all know that the Trump administration has wielded Section 232 (Cold War era trade act) as a threat to impose either tariffs or quotas on steel imports -- due to national security concerns. Talks this week between high-level American leaders, such as Commerce Secretary Wilbur Ross, Treasury Secretary Steve Mnuchin, and China's Vice-Premier Wang Yang, have been termed "productive."
 
Productive is a fluid term that can be used to describe actual progress, or simply the fact that everyone sat down, and nobody got hurt. China accounts for nearly half of the U.S. goods trade deficit, a deficit that ran a mere $-65.9 billion in May. There are fears that action may result in a trade war, with multiple players. Then again, how does the administration go about seeking a fundamental re-balancing of this, or any other, trade relationship that has become so wildly one-sided.
 
For his part, China's Wang has referred to the recent talks as "an even more daunting task." Wang has warned of brewing confrontation and stressed that neither side needs to "defeat" the other. In the meantime, in yesterday's trading, U.S. Steel ( X) ran 4.8% and AK Steel ( AKS) ran 3.6%. They both report quarterly numbers next Tuesday. Nucor ( NUE) chugged 2.2% higher ahead of this morning's earnings release.
 
Macro
 
08:30 - Philadelphia Fed Manufacturing Index (July): Expecting 23.1, June 27.6. In the world of manufacturing surveys, Philly has been hot, real hot. Of the five major Fed districts that release such surveys, Philadelphia at the headline has been the leader in each and every month of 2017. It's not just the headline either. The strength has been where it needs to be. Philadelphia has seen consistent growth in New Orders, and those New Orders have stretched out into Backlogged orders. That in turn has driven employment in the space. Look for Philly to stay hot.
 
08:30 - Initial Jobless Claims (Weekly): Expecting 245K, Last Week 247K. This data point is still part of our weekly economic buffet, but the truth is traders do not watch this one very closely at this point. They will on the day that the regularity of this item comes to a screeching halt, but not until then. The four-week moving average for first-time jobless claims, which is how economists view this series, now stands at 245,750.
 
10:00 - Leading Indicators (June): Expecting 0.4%, May 0.3% m/m. The leading Indicators Index has been running above zero all year, not that this will matter all that much in the marketplace. The series runs with a minor lag, and a combined index of ten indicators that have already been priced into the financial markets. Consider that this item is to the headline level economy what the Labor Market Conditions Index is to the BLS data on Jobs Day. This is a broad stroke that nobody pays attention to, that was designed to simply explain a mosaic picture far too complex to be explained in one broad stroke.
 
10:30 - Natural Gas Inventories (Weekly): Expecting 49B, Last Week 57B cubic feet. Despite an expected 16th consecutive weekly build in the Natural Gas space, the commodity has started to show some life of late. Blame the weak dollar, if you want, but if Nat Gas can get past this 3.08 level, I do not see much traffic on the chart all the way up to 3.30.
 
Sarge's Trading Levels
 
These are my levels to watch today for where I think that the S&P 500, and the Russell 2000 might either pause or turn.
 
SPX: 2498, 2485, 2473, 2464, 2457, 2449
RUT: 1456, 1448, 1441, 1432, 1423, 1417
 
Today's Earnings Highlights (Consensus EPS Expectations)
 
Before the Open: ABT (0.61), BBT (0.76), BX (0.60), DHR (0.97), DOV (0.99), GPC (1.31), KEY (0.34), NUE (1.07), OMC (1.38), PM (1.23), PII (1.08), SHW (4.58), SNA (2.56), TRV (2.15), UNP (1.39)
After the Close: COF (1.91), CTAS (1.11), ETFC (0.48), EBAY (0.45), MSFT (0.71), NCR (0.75), V (0.81), WHR (3.53)
 
(Get Morning Recon delivered directly to your inbox each market day. Click here to sign up for e-mail delivery of Stephen "Sarge" Guilfoyle's Morning Recon, Jim Cramer's Daily Booyah! or other great free newsletters from TheStreet.)

At the time of publication, Guilfoyle was long APA, KEY and NUE, although positions may change at any time.

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, was long APA and NUE.

More from Currencies

3 Currencies to Watch in a Bear Market for Gold

3 Currencies to Watch in a Bear Market for Gold

US Bond Yields Rise as Treasury Adds Billions to Weekly Auctions to Fund Deficit

US Bond Yields Rise as Treasury Adds Billions to Weekly Auctions to Fund Deficit

Market Movers: Central Bank Meetings

Market Movers: Central Bank Meetings

Striking Options: NASDAQ, FX, and Equities

Striking Options: NASDAQ, FX, and Equities

Why the U.S. Dollar Is Rising Amid Trade Tension

Why the U.S. Dollar Is Rising Amid Trade Tension