As expected, Tuesday morning’s release of the latest CPI data triggered a wave of impulsive volatility as bears and bulls argued over what these latest data points mean.
But also not a surprise, the CPI result gave both camps something to crow about, meaning this half-empty/half-full news didn’t change anyone’s mind. (i.e. bulls stayed bullish and bears stayed bearish)
When people don’t change their minds, stocks tread water, which explains Tuesday’s trivial -0.03% loss.
As I explained to readers Monday evening, I didn’t expect the CPI data to trigger a meaningful move in stock prices and that’s exactly what we got:
We get another inflation reading Tuesday. Expect volatility for the first 30 minutes as impulsive traders overreact to the headlines. But after that, the market will return to what it was doing previously, which is this choppy consolidation under 4,200 before the next push higher. Unless the inflation reading is truly shocking, don’t expect it to have a lasting impact on the market.
While the result of Tuesday’s session was a draw, tie-breakers go to the prior trend, which was consolidating recent gains under 4,200 resistance.
The reflexive selling Tuesday morning would have triggered a bigger follow-on wave of selling if this market was overbought and vulnerable. Instead, supply dried up as most equity owners shrugged and kept holding. That tells us the ground under our feet is far more solid than most people think.
If this market was going to break down, it would have happened by now. While no one is excited about a 0.0% day, it counts as a win for bulls because it shows bears still don’t have any influence.
Keep buying the dips and selling the pops because this market is going nowhere fast. This choppiness means we need to collect profits early and often because holding a few hours too long is the difference between worthwhile profits and watching a winning trade turn into a loser.
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Jani Ziedins (pronounced Ya-nee) is a full-time investor and financial analyst that has successfully traded stocks and options for nearly three decades. He has an undergraduate engineering degree from the Colorado School of Mines and two graduate business degrees from the University of Colorado Denver. His prior professional experience includes engineering at Fortune 500 companies, small business consulting, and managing investment real estate. He is now fortunate enough to trade full-time from home, affording him the luxury of spending extra time with his wife and two children.