One Big Number; Two Bigger Weeks

January 2023 CPI data are scheduled to be released on Tuesday at 8:30 A.M. Eastern Time. But not so fast, it is complicated. From the BLS website

"Starting with January 2023 data, the BLS plans to update weights annually for the Consumer Price Index based on a single calendar year of data, using consumer expenditure data from 2021. This reflects a change from prior practice of updating weights biennially using two years of expenditure data." 

I'm not even pretending to know what how that will affect the numbers and myraid of calculations, only that whatever comes out has a even or better chance of being revised next month. Nonetheless, the markets will react, for an hour or into and after the close, maybe bleeding into Wednesday. Then on Thursday the PPI is out and the BLS mystery cycle of calculations begins again.

That is no way to trade market direction. Nor do we try. Instead, we look at verifiable, reliable and historically more right than wrong patterns, trade models and indicators. Much of our work is proprietary and some simply observational, and sometimes a little of both,  like these two patterns below that are especially relevant beginning on Tuesday and running at least the subsequent two weeks and likely into March 17th monthly options expiration.

(1) The Latter Half of February: One Of The Weakest Times of The Year

Seventy-two years of historical data is not a guarantee, but it is and edge. Last year SPY fell from 448 to 410 over the same period, That's about a 400% return on March monthly SPY puts. In the latter half of February in 2021 the SPY fell about 20 points, good for about a 200% return on March monthly puts. 

What about 2020? I'm gald you asked:

SPY Feb-Mar 2020

SPY falls from 340 to 220 over six weeks, beginning Feb 16, 2020

I hope you see where I am going with this. Whatever the CPI/PPI numbers turn out to be next week our Blue Line Trading System members have their key levels which if taken out will literally "put" them on the right side of an end-of-February market slide. 

(2) Interest Rates

US 10Yr Yield

On Friday's close the US Treasuries 10 Year Yield Trading Model triggered a Buy Signal indicating higher yields ahead. On the above chart I've annotated SPY levels at prior Buy Signals going back about a year. In every case SPY was lower as interest rates went higher and on 4 of the 5 Buy Signals SPY ws significantly lower in the 4-6 weeks subsequent to the Treasury Interest Rate Buy Signals, i.e., 40+ SPY points lower. 

This is how we trade, Premium ($99/mo) for Intermediate-Term ideas and PRO ($249/mo) for more aggressive Short-Term strategies, on-line and in your email box, (almost) every day. Now, on to the Super Bowl.