Last night's PCE data really surprised the market—US core PCE year-over-year for September dropped to 2.8%, even lower than expected. This signal of cooling inflation has basically paved the way for a rate cut in December, and the market is now pricing in an 87% probability of a cut.

The reaction on the asset side was also pretty direct. US stocks continued to push toward historical highs, and Bitcoin was even stronger, rebounding directly past the $91,000 mark. The US Dollar Index didn't fare as well—once rate cut expectations rose, it started to weaken, now hovering around 99 and struggling to find direction.

However, it’s worth noting that this positive inflation data actually came at a cost. Personal consumption expenditures in September almost stagnated, goods spending plunged significantly, and real disposable income has flatlined for two consecutive months. In other words, it’s not that a strong economy has tamed inflation, but rather that consumers’ wallets have shrunk and they can’t spend. This is a potential concern for the economy.

From a trading perspective, US stocks still look technically bullish, and the traditional “Santa Claus rally” may continue. The 6776-6784 range on the S&P 500 is a key support level—if it holds, there’s room for further upside. The Dollar Index, however, appears weak, and any rebound may face selling pressure. The 98.60 level below is an important support; if it breaks, further downside is likely.

One last reminder: current economic signals are somewhat contradictory—inflation is cooling, but so is consumption, and there are data release delays. Although market sentiment is optimistic, these conflicting signals can easily trigger volatility, so keep positions managed carefully in the short term.