This special edition attempts to combine and summarize the bazaar trading activity for the week ending May 6 along with anticipating today's Consumer Price Index report.

Those watching Jerome Powell's comments after last Wednesday's Federal Reserve Open Market Committee (FOMC) meeting, specifically during the question and answer session, may have noticed the market reaction to his answer about not actively considering 75 basis point increases and that "neutral" was a concept not a specific level. Within 10 minutes, the S&P 500 Index added 38 more points and then another 60 more 22 minutes later, pushing it up 100 points by the end of the session. It went on to close the day up 124.69 points or 2.99% higher.

In hindsight, since the markets already prepared for a possible 75 bps rise, a modest favorable reaction seemed about right, but perhaps the reversal that occurred two days earlier after reaching a new low played a role. The next day, both conclusions proved woefully inadequate as the S&P 500 Index gave up all of Wednesday's gains and then some, closing down 153.30 points or -3.56% lower.

In the trading world, whipsaw describes a condition when prices go in one direction, but then reverse just as the trend starts. The origin of the term comes from the push and pull action used by lumberjacks to cut wood with a saw called a “whipsaw” since it moves back and forth. In this context, the whipsaw action on Wednesday and Thursday probably damaged numerous growth stock enthusiasts anxiously awaiting an opportunity to buy the dip after the reversal day on Monday May 2.

In anticipation to the release of the Consumer Price Index for April, the S&P 500 Index, along with others, declined as they apparently expect and prepare for more discouraging inflation news. Alternatively, it could just be a case of "sell the rumor and buy the news." If so, it seemed reasonable to expect another reversal like the one that occurred on Monday May 2, when it made a lower low then closed up on the day.

However, the reversal occurred before the release of the CPI report as the S&P 500 Index (SPX) made a lower low and a lower high but managed to close up on the day adding 9.81 points or +.25% to end at 4001.05.

The Consumer Price Index for April will be released at 8:30 a.m. ET, an hour before the markets open, but the futures will give an early indication since they will already be trading.

Although the yield on 10-Year Treasury Note declined 8 basis points to close at 2.95% helped equities close higher, other indicators such as SPX Advancing -Declining volume, New Highs - New Lows and market breadth were all weaker than the reversal  made on May 2.

The options market reflects the uncertainty as implied volatility, IVX reached 30.58% Monday just below the 52-week high made on March 7 at 30.67%. Yesterday it pulled back slightly to close at 29.38% as shown on the chart below. Notice historical volatility (realized) reached its highest level in the last 6 months.

Multiple sources estimate April's CPI at 8.1%, vs. the March reading at 8.5%, to further explain Tuesday's reversal as traders attempted to front run the better inflation report. However, should it come in at greater than 8.5% the equity decline will quickly resume?