CHRIS VERSACE: Good morning, Action Alerts Plus members. It's Thursday, August 11th. This morning, stocks are moving higher following the July producer price index that mimicked what we saw with the July CPI report yesterday. What we mean by that is headline CPI for July contracted 0.5% on a sequential basis and came in at 9.8% on a year over year basis, below the consensus forecast of 10.4%.

The core CPI figure for July matched the consensus forecast of 7.6% on a year over year basis, but it was down compared to June's 8.2% reading, and its month over month comp fell to 0.2%, also below the consensus forecast. Now let's understand that that's a lot of numbers. But what the market is seeing in the July PPI report is good news as it's another signal that inflation pressures have likely peaked.

Again, that report, paired with yesterday's July CPI report, has the market narrative shifting back to the likelihood of smaller rate hikes by the Federal Reserve. In response, stocks are moving higher. Good news as I said. And while we and members should enjoy that as stocks continue to move higher, we have to remember that they're also recovering some lost ground from the June quarter. But we have to keep our eyes on the technical setup for the market.

I say that because stocks have rebounded rather sharply. I mean, the S&P 500 is up somewhat close to 15% since it bottomed in the middle of June. And again, understandable when we think about the why behind that. Earnings have held up better than expected. Inflation looks to have peaked. But from a technical perspective, the market is severely overbought following that sharp run-up. The VIX is oversold. And we've even seen a shift in the emotional tone of the stock market. The CNN fear and greed index is rebounded to 52 or neutral from roughly 27 or fear just a few weeks ago.

So while we enjoy the market rally and what it's done for the AAP portfolio, we have to recognize several things. First, the Fed is still going to raise interest rates to get inflation back down towards its 2% target. We are going to see a natural slowing of the economy as a result. Borrowing costs are going to move higher, making things incrementally more expensive, kind of hitting consumers in the disposable income wallet if you will. And as we discussed on today's opening comments, there are still other forms of inflationary pressures to be had.

So while things are looking better, we just aren't out of the woods yet. And the concern we have is that the sentiment shift is getting ahead of itself. And that has us watching the 4,270 to 4,300 level on the S&P 500. And what members need to know is this. We will continue to be prudent managers of the portfolio. And with that in mind, yesterday, we trimmed back our position in Ford Motor. Simple reason being the shares have run significantly over the last several weeks.

Do we continue to like the long term story in Ford, the transformation, the shift into EVs? Absolutely. That's why we still have something like a 3.3% position in Ford shares. We want to be around for that transformation to occur and the ensuing benefits to be accrued in the shares.

What did we do with some of those proceeds? We funneled them into shares of UPS. As we shared on the AAP August member call, this was one on our watch list. And we, as they say, delivered on that. The why behind UPS shares, well, as we saw in the July Mastercard SpendingPulse, we saw a hefty pickup in digital commerce sales in the month of July. Yes, some of that was due to Prime Day and the competing efforts, but we also see consumers shifting back to digital shopping to stretch those disposable spending dollars that they do have.

And let's remember too that we're entering a seasonally strong time of the year for digital shopping and therefore, UPS. We've got the back to school shopping season. And before too long, the year end holiday shopping season as well. Now, that's a wrap for today's rundown. Thanks for joining us. We'll be back tomorrow.