Reckoning Time! CPI Day - Market On Open, Thursday 11 July
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CPI
by Alex King
CPI prints at 0830 Eastern today. It’s unlikely to be a nothingburger, though perhaps the most surprising outcome would be a no-change nothing-to-see-here market reaction. As always it’s not about what the number is, it’s about how markets react to the number, and it’s impossible to know that ahead of time. Into the close yesterday there was furious buying, but it seems some of this was driven by wrong-way options positioning (call sellers) covering rapidly in the face of a modest drift up during the day - this seems to have accelerated the closing bull run. Markets have a small hangover as I write (it’s about 6am Eastern right now). As I have noted for much of this week, seasonality says a local top in markets is due around now, to be followed by some weakness into Q3 and then perhaps a final run up into year end - but again, what one expects has no bearing on what happens so it is best to react, not anticipate. Personally I have wound off some risk - reduced long exposure and added a tiny smattering of shorts, and I mean tiny - if the market dumps I will be winding on more shorts, and if the market moons, more longs. We shall see.
If CPI days are new to you, it’s the close that matters and the next 1-2 days afterward. Unless you are fast-twitch trading in the immediate aftermath of the print, it’s usually best to not draw any conclusions from the first hour or two of the moves. This is usually big accounts dragging prices around seeking to trip up stop orders both long and short, before deciding on a direction and heading that way. You can make very good money from this craziness if you are focused, unemotional, have no opinion as to direction, and are ready to hedge and over-hedge if your initial trade is pointing the wrong way. Or you can take a more relaxed approach and just wait to see the close, and then decide. There are always ways to make money if you are calm and thoughtful.
So Let’s Get To Work
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Read on!