Stock market volatility ahead of CPI was the dominant theme on Tuesday, as traders navigated sharp intraday swings while positioning for the latest inflation report. The index rose about 1% at the start of the day, then fell nearly 3.25%, before rebounding by roughly 2%.The swings in the market also helped push the VIX 1-Day to around 20, which is elevated and could set up a volatility crush following the morning CPI report. However, the volatility release we saw on Monday was fairly tepid after the initial morning bounce, so the same may be true following today’s report.The CPI report is expected to show strong headline inflation and more modest core CPI readings. Market-based pricing still suggests that headline CPI will come in at around 4.25%, which effectively rounds up to 4.3%. I do not think the market will respond negatively unless the numbers come in meaningfully hotter than expected. With the VIX 1-Day closing around 20, the market is not positioned the same way it was heading into last week’s jobs report.At this point, the spread between the dispersion index and the 3-month implied correlation index remains very wide, well above the levels seen during previous market peaks. From that standpoint, I would think there is still more unwinding left to occur in the market overall.Silver fell sharply on Tuesday, breaking below support around $67.25 and the 200-day moving average. With that support now broken, it is difficult to identify another meaningful support level on the chart until around $58.50.As long as the 10-day exponential moving average continues to act as resistance, the path of least resistance for silver appears to remain lower.Gold also appears to be weakening, with the metal now trading below its 200-day moving average and under key support at $4,225. The break suggests that downside risks are increasing, with the next major support zone located between $3,900 and $4,000.Oil continues to be stubborn. It has repeatedly held support around $85, but it has also been unable to break above $95. At some point, something is going to have to give.The head-and-shoulders pattern resolves in one of two ways. The first is a break below the neckline near $85, suggesting a move back toward $70. The second is a failure of the pattern, with oil breaking above $95 and taking out its prior highs.Anyway, see you later.Original Post