How To Trade the CPI Reaction

Take off your fundamental analysis “hat” and follow the price action.

PRE-OPEN MARKET COMMENTS TUESDAY – Don’t try to rationalize the move with your “expert” fundamental analysis. Yes the number was “hot”. So what. If Asset Managers are looking to buy dips for longer term investments and their models tell them that inflation is going to be mild soon, they don’t care about the number. They want to buy dips. From my perspective, the “hot” number and a mild reaction to it would tell me that the bid is strong and that the market is getting numb to inflation. If we get a big market drop it will tell me that the big money feels that inflation will be an issue for a long time. They will pound this bid into oblivion and long term Asset Managers will pull bids and wait for a better entry point. If we want to follow the  “smart money” we follow price. 

We want to attack them, we do not want to poke at them. We also want to see stacked consecutive candles of a single color on heavy volume with little to no overlap. Anything less is a sign to wait. Mixed long candles with overlap tell you not to trade. Giant ranges with long wicks and tails on heavy volume tell you not to trade. These are all things we have covered.