Market On Edge Waiting For Consumer Price Index (CPI) Report

As a trader, navigating data reports such as the Core Consumer Price Index (CPI) can be a challenging task due to the pressure placed on the market.

However, at Simpler trading we have a skilled team of experienced traders who have navigated through the influence of these reports. All of our traders have their own style and preferred way to play market events. Let’s take a look at how Sam Shames, Vice President of Options at Simpler Trading, plans to trade the event. 

Key data events affect market

First, let’s dig into the data event. The CPI measures inflation in relation to consumer prices. The CPI measures consumer costs for important staples such as housing, gasoline, utilities, and food, and shows how inflation is holding at 40-year record levels.

CPI data is being released Wednesday at 8:30 a.m. Eastern. The forecast for the release is 8.8% for June, a slight increase from the previous month’s report of 8.6%.

Overall the market is concerned about inflation and interest rates and is looking for an indication of a peak in inflation levels. The consensus is that if the inflation rate is peaking then the Federal Reserve (FED) can cool off the aggressive raising of interest rates.

Market reacts based on expectations

As Sam mentioned in his live-trading session, it is important to understand that the data release is expected to be bad. Sam noted that it is not a direct correlation between bad data and bad market reaction. The market will react based on the expectation versus actual numbers.

If the CPI report comes out and is better than expected, this may get a positive reaction in the markets. Conversely, If the CPI reports numbers that are worse than expected the market reaction could be negative.

Sam is looking for the technology sector to lead the market higher and will be using that as a gauge for the strength of the move. Overall, Sam shared how this environment will be “messy” and is looking to shorten the time frame on his trades as these market conditions can be volatile.