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Trading System Signals on May 10, 2022 - Wild Chop Before CPI

Capstone Trading

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Extremely wild trading day before CPI. We were up on the day and did well navigating the wild reversals in the market.


"The world only ends once" is a bullish phrase I continue to hear. Its an interesting perspective that you should always buy because the market always goes higher and the only time it goes down for good is when the world ends. If the world ends, then we won't be here....so always buy. I don't agree. Markets can pull back 30-50% or more and remain there for 20-30 years or more. It wouldn't be the end of the world and we could still be prosperous as a nation even if the stock market wasn't parabolic with constant Fed stimulus.


Tomorrows CPI number at 7:30 am CST will be "the event" of the week. The bulls have called peak inflation since at least October as inflation has made new highs each month. If there is a down tick in inflation, it will be just one data point but the bulls may rush in with a screaming buy signal with just one down tick. The fact that there is one down tick in inflation, doesn't mean inflation is done rising. Sustained higher inflation will still provide more damage to the economy and to the market. It will also be interesting to see the markets reaction to a new high in CPI.


Seems like there is an extreme number of bulls calling a bottom. Trading based on contrarian sentiment would keep me bearish.

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