How I Plan On Trading Prior To The CPI Report This Week
May 7, 2023
jeffwood
The market reacted positively to a jobs number and Apple (AAPL) earnings last week and that led to a 1.85% gain in a day in the S&P 500.
What was so great about the report? More jobs were added than expected, but the market can’t have it both ways. The market is looking for all the reasons why the Fed will be forced to lower rates, but a resilient job market is only going to prolong rates.
I have a feeling Friday was a short squeeze from the amount of negativity and hedging going into last Wednesday’s Fed meeting.
Volume was light compared to the percentage increase on the day. Sure, the market could melt up on light volume like it did at the beginning of the year, but I still think there’s an increased downside risk from here. I’m not calling for a meltdown, but you can see the volume difference in the March pivot (blue box below) compared to what we had on Friday (black arrow).
The market is insisting the Fed will cut rates, but I think they are likely to hit pause and watch for sticky inflation. We still need to cross above 4200 to keep the rally going. It was nice to see a second bounce off the 50-day moving average, but we’re still in a tight trading range.
I’m not calling for a market meltdown, but I did take the opportunity to add some bearish positions.
Now, before we get into the trading reports you need to know about for the week ahead, let me take a quick second and tell you about a special, Free day of trading! Yes, I said FREE!
I am hosting a live trading webinar with my co-host Dave Durham, this Wednesday!
During this live trading webinar, we’ll be trading 0- or 1-DTE Options on the Indexes or Index ETFs. Our objective is to open a trade around 10:30 am and close it by 1 pm Eastern, just in time for the CPI report to be released.
Don’t miss out on this exciting opportunity. Join us on Free Trade Day for a fun way to experience new options tactics.
As with every week after a Fed announcement, we will have several of the Fed members speaking to the media this week. They can easily move the market any day this week. We also have the government fighting over the debt limit to watch out for. Outside of those items, here are the reports you need to know about for the week ahead.
Wednesday – 8:30 AM ET – CPI – The consensus is the Consumer Price Index will rise 0.4% month-over-month while staying flat at 5% year-over-year. By removing food and energy though, we could see CPI drop from 5.6% to 5.5% year-over-year.
Thursday – 8:30 AM ET – Jobless Claims – The market is expecting to see claims increase slightly over the last week, coming in around 245k. That would bring the 4-week moving average higher to 239.25k.
Thursday – 8:30 AM ET – PPI-Final Demand – After falling 0.5% in March, producer prices in April are expected to rise 0.3%. The year-over-year gain is expected to drop from 2.7% to 2.5%.
Remember to reserve your seat for an absolutely free, live trading session this Wednesday!
If you have any questions, comments, or anything we can help with, reach us at any time.
Email: [email protected]
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Jeff Wood
Editor, Filthy Rich Dirt Poor
Coach, Options Testing Lab
Any trade or trade idea discussed is for educational purposes only. They will not be tracked as an official trade recommendation.
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