Inflation has been off the charts since the beginning of the year so one would think a high Consumer Price Index report wouldn’t be a surprise to traders. But the way that indicator impacts the market is a bit more complex.

As we look to see if today’s news will cool the current rebound rally we are seeing, take a look at how the CPI releases have impacted the S&P so far this year.

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The vertical lines are the days the monthly CPI numbers came out. In most cases this year the news reflected rising prices, yet the response by the market has varied. This would indicate that it is often priced in before the news comes out. The big exceptions to that would be when it is much higher (or lower) that the market expects or when it is a trigger for other action as a result of rising prices. The Feds have indicated they are going to keep jacking up rates until they feel they have slowed down inflation.

Trying to trade this type of economic news can cause even the best trader some serious headaches. Using the right option strategy can be a great way to catch a breakout that results from unexpected news. Don Fishback has outline some of the most of effective options strategies in his “QuickStart Guide” and even explained which conditions in which they perform best. If you haven’t read it yet, grab a copy here.

Keep learning and trade wisely,

John Boyer


Market Wealth Daily