The marquee event of this week is the US CPI event on Thursday. Traders will be looking at this data closely for how fast the Federal Reserve will be hiking interest rates. The best opportunity would likely come from a miss in the CPI data as this would unwind some of the recent stock weakness post a firmer NFP print.
So, if the US CPI print came in below 6.4% y/y for the core, below 7.9% y/y for the headline, and 0.3% or more lower for the core m/, reading then US stocks should rally higher. Should this print as outlined above then it is helpful to know that the S&P500 has some very strong seasonals to support this outlook.
If you look at the seasonal chart for oil you can see how marked the strength is for the S&P500. Over the last 25 years the index has risen 20 times out of 25 for an average return of 4.3%.
Major Trade Risks:
If US CPI prints above 8.3% y/y and above 6.7% for the core then stocks could see some more downside in the near term.
Don’t just trade it, Seasonax it!