Trading Plan – Monday 14th November 2022: The Fed won’t pivot on last week’s CPI

Mark NugentNov 2022, Trading Plan

Trading Plan – Monday 14th November 2022: The Fed won’t pivot on last week’s CPI

Good morning.

Last week was dominated by the US CPI print on Thursday which came in below expectation. The market over-reacted by seeing the miss as reason for the Fed to pivot to a more accommodating interest rate stance. Equities shot up and the USD fell.

I was in two trades: S&P500 and GBPUSD, both short. I closed half of each trade just before the CPI result and moved the stop loss for the remainder of each trade to breakeven. The subsequent equity strengthening and USD depreciation saw each stop loss hit. The equity trade made 0.51 percent and the GBPUSD trade made 0.61 percent.

I think it is unlikely that the Fed will pivot based on last week’s single data point. Therefore, I expect to see an equity and USD reversal as soon as Fed members confirm this stance. After all, core inflation at 6.3 percent is still horrible, and that is with the “inflationy” elements of fuel and energy taken out of the figure.

When the market reacts to the “no pivot” message, we can get back to shorting equities and trading a strong USD.

This week’s highlights are Euro zone GDP tomorrow and inflation in the UK and Canada on Wednesday. It could be a roller coaster.

As always, I go through my trading themes for the week in your video.

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