Monetive Wealth Market Musings

Trade the CPI print

As we wait for the CPI numbers to be released tomorrow, the consensus has settled at 7.3% headline number that would be an increase from the 7% last month. Financials are seeing some profit taking after a couple of weeks of running on 10 yields moving up closed to 2% and a bit of steepening of the yield curve. 2% still looks elusive and has cooled off some.

Energy has been far and away the best performing sector for a few months. The last few weeks are no exception. The run seems to be slowing down down primarily on expectattion of coordinated SPR release to come soon. This is a political necessity especially with a 7 plus inflation number for the second month in a row. Longer term, stil looks bullish for Oil. There is still structural undersupply in Oil and the selloff is likely to be shallow. I am still long Oil Majors but a short term hedge on the commodity itself should take care of any pullback I will look to add mid and small size oil producers on the pullback for an eventual blow off top into the summer demand months.

From a money flow perspective, re-opening is the hottest theme in play. Starting with England last month, we have seen a deluge of data from countries removing covid restrictions partially or fully. This is also happening in the US and looks to speed up with most restrictions being removed by spring if no more variants come up in the meantime.

My expectation is the CPI is going to come in between 7 and 7.3 rather than surprise higher or lower, lets call it a neutral print. Why do we think this: Market action itself has been Risk-On this week so smart money is indeed betting this way with brisk buying in tech. The 10yr has cooled off after failing to breah through 2%. Volatility is selling this week. Finally the probability of 50bps hike has also gone down slightly. That brings us to our trade. Once again this is just educational and not to be considered a recommendation. Please consult a Registered Investment Advisor and do your own research before you trade.

Continuing my recent collaboration with ArchnaTrades, we are bringing you more opportunistic trades into the CPI data tomorrow. We are looking at 2 Trades: DataDog and AirBNB. DDOG reports tomorrow ahead of CPI and ABNB reports on Feb 15 after market close.

Both of these are right out of my Thematic Watchlist and present exciting risk reward opportunity. For now both these are momentum/technical setups and should be traded as such.

Here is Archna’s substack.

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