Today, the Bureau of Labor Statistics will release its Consumer Price Index (CPI) report. Jerome Powell, will be watching it.
If the data is soft, indicating below a 2.4% annualized inflation rate, that would mark a significant drop from January's 3% number. The market is likely to rally on that news. Can we make an educated guess about it?
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1 TruFlation
One of the best free gauges for inflation data is the TruFlation site. It shows February beginning at 2.31% and ending at 2.17%—a small drop. The large drop (which you can see) follows in March.
January also measured a small drop, yet the BLS registered a rather strong reading. The reason turns on the different methodologies used.
It's at least possible, however, that the data behind TrueFlation's sequential months of declining inflation will materialize in this month's CPI reading.
Graphical Image of TruFlation Data.
2 $BTC Options Market
It's not enough, however, for the CPI reading to be soft. The options market needs to be in a position to sustain a bounce.
Looking at the Delta 25 skew, if the reading were to rise above 10%, then the market would already be too optimistic about a bounce.
The current reading stands at 8.66%. So, $BTC is positioned for a bounce.
Image showing the $BTC 25 Delta Skew for the day at 8.66%.
3 $ETH Options Market
If you want to see alt-coins rally, $ETH needs to be in a position to rally. It's delta 25 reading stands at 7.34%, so also optimistic, but not too optimistic.
Both $BTC and $ETH could bounce.
Image showing the $ETH 25 Delta Skew at 7.34%
4 Extreme Fear Remains
Good bounce rallies require a change in sentiment. Today, sentiment is still extremely bearish, with the CMC Fear and Greed index clocking in at 19.
That would have been the lowest reading of its history just a week ago.
This means that short traders could be caught "off sides" on this one and forced to cover for fear of losses.
Image showing Coin Market Cap's Fear and Greed Index with a reading at 19.
5 Concluding Thoughts
There's no certainty in trading or investing. Short-term event driven bets tend to look mostly like casino bets as there's often little you can do to increase your odds.
The evidence we have suggests that a bounce is possible, perhaps even slightly more likely than not. The market has been so beaten down of late that even if we are in the early days of a bear market, you'd expect a bounce.
Today might be that day. DYOR. NFA.
Happy Trading!
-Sebastian Purcell, PhD
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