Two Charts for the Next Two Days
“Determination becomes obsession and then it becomes all that matters.” – Jeremy Irvine
Investors are obsessed with data.
Every tick, percentage, gain, or decline is consumed voraciously and analyzed endlessly.
And that’s because the Federal Reserve has taken a stance of obsessive data dependence.
The future and pace of race hikes hinge on data points and the story they’re telling or not telling.
The US central bank has undertaken the most aggressive series of rate hikes in decades as they battle the highest level of inflation since Ronald Reagan was in the White House.
So now, every upcoming data release leads to hand wringing… because it’s the most important data release… until the next one.
Unfortunately, for investors with frayed nerves, we start each month with a cannonade of government releases.
The financial news media fret, “Oh no! Is this going to be bad news is good news? Or is it just going to be bad? How is the market going to react?”
For almost two decades I’ve been a trend and catalyst trader.
And I keep my sanity – as well as protect my portfolio – with my own obsession with data.
I don’t get lost or confused by all the noise. I strip all that away and focus only on the facts.
In turn, I end up having a clearer picture of what to expect from markets... even as the rest of the financial world endlessly questions what the indexes will do next.
272 Days and Counting
A lot can happen in 272 days.
In fact, that’s ample enough time to cover the gestation periods of baboons, bears, bison, cows, chimpanzees, elk, gorillas, hippos, humans, moose, and a whole host of other animals.
It’d almost be easier to list all the animals that have gestation periods longer than 272 days… like donkeys, whales, elephants, and such.
My point is that’s a considerable amount of time.
Now, as an investor, you may be asking why should you care about that specific number of days? Well, that’s how long it’s been since the markets have fallen on one of the most important monthly data releases.
Tomorrow morning, before the opening bell, we’ll receive Consumer Price Index (CPI) data. This is the Fed’s favored measure of inflation. And that makes it a key one to watch.
But what if I told you, you could just ignore it? Ignore all the financial hype and headlines because the trend is on your side?
Take a gander at this… the Invesco QQQ ETF (QQQ) has risen on the monthly CPI report for eight consecutive months!
The last time it fell on this report was July 13, 2022… 272 days ago.
In terms of friendly trends, that’s about as friendly as you can get.
But truly reflect on this piece of information for a moment…
Every month, as we approach the CPI release, the financial news media debate how the markets are going to react.
Yet, any fool with the ability to look up historical prices – such as myself – can clearly see that there is nothing to debate.
The QQQ has gained on monthly CPI every time since August 10, 2022.
Now, you may ask, “Well, why is that?’
And the answer is straightforward… since peaking in June, headline and core inflation have steadily declined since.
Now, we could argue whether the decline in inflation has been as fast as the Fed or investors ideally want. But it doesn’t matter… there’s progress being made. That’s all you should care about since that’s all the Fed cares about.
Without a doubt, the mainstream financial media will chew on their fingers over how the markets are going to respond to Wednesday’s CPI report. As always, there will be countdown clocks, forecasts, and instant analysis – a veritable circus leading up to the release.
But here’s what I’m leaving with you today… don’t let it concern or distract you.
This trend has been your friend. And since August, it’s been one of the friendliest trends month after month after month.
But that doesn’t necessarily mean it’s automatically smooth sailing for the week. Because there’s a report that follows CPI, and its trend hasn’t been as kind.
All Eyes on the PIs
On Thursday, before the market opens, we get Producer Price Index (PPI) data.
This is another favored indicator for the Fed to watch as this impacts CPI.
Unfortunately, the trend here hasn’t been as accommodating. But still not something in my mind to lose sleep over.
Since August, the QQQ has dipped on PPI releases five times. And from December through February, we saw three consecutive declines with each drop considerably worse than the last.
That was the longest series of declines we’d seen over the past year on this data print.
But that unwelcome trend was broken last month. And I think we could be in store for another positive reaction this week.
Much like CPI, PPI has been on a steady decline since its peak of 11.3% in July 2022. And evidence of another solid move lower in March would be a welcome jolt.
The market is obsessed with data. And that’s because the Fed is obsessively data dependent.
For the past year, I’ve been able to keep myself – and my readers – sane with my own data obsession: how the markets react to each data release. And there are clear trends that can provide guidance so gains, as well as ensure you sleep better each night knowing what to expect.
Two charts ahead,
Matthew
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This market commentary is opinion and for entertainment purposes only. The views and insights shared by the author are based on his many years of experience covering the markets. But they are subject to change without notice and opinions may become outdated. And there is no obligation by the author to update any information if these opinions become outdated. The information provided is obtained from sources believed to be reliable. But the author cannot guarantee its accuracy. Nothing in this email should be considered personalized investment advice. Investments should be made after consulting your financial advisor and after reviewing the financial statements of the company or companies in question.