Video Transcript:
On the surface, CPI looks like a quick win. It’s fast, volatile, and comes with big, shiny candles. The reality, though, is that candle is often a trap. It’s an inducement move designed to get novice traders chasing the market. If it were only that simple—red means bad, sell; green means good, buy—everybody would have this figured out. But not so fast.
Dan here from Trader Dale. In this video, I’m going to cover how I handle high-impact news events with a little more precision and a cleaner risk profile than simply chasing that first candle. I’ll walk you through an example from this week’s CPI report, and I’ll leave you with a high-impact news event checklist. So, let’s get to it.
Too many traders focus on the news and what that number is supposed to mean for the general market. A lower year-over-year number should mean good things for the economy, right? Sure, I guess. But is that already priced in? What does a lower CPI print even mean in the context of future rate cuts? None of this is something you know as a novice trader or as a non-economist. So, don’t waste your time.
Instead, focus on and observe the market reaction. What is the impulse move following the CPI print? Is it up or down? What’s the clear swing high and swing low driven by that news inertia? This is something tangible, something solid to operate from. Whereas trying to quantify the macro impact of a 2.3 CPI print against a 2.4 expectation and a 2.6 historical reading gets fuzzy. That’s unclear.
I don’t need a thesis about the number print and its macro implications. I need to see how the auction behaves once the number hits. What do the buyers and sellers think?
High-impact news is often released an hour before the New York session opens. CPI is a textbook example of that. So, simply do this: observe it and answer one question. What was the impulse move of that news release? Was it up or down? That’s it.
I’m not trying to be first. Being early on a CPI open is how you become the liquidity for someone else’s plan.
Moving into the New York session open is where you validate or invalidate that impulse move from the CPI release. For me, a data morning comes down to three things, in this order: location first, flow second, and the actual CPI print a distant third.
Let’s walk through the high-impact news preparation. This is the checklist I want to leave you with.
First off, mark your key areas of interest before the CPI release: liquidity, balance, imbalance, etc. These are the levels you’re actually willing to do business at. CPI can reprice overnight inventory in seconds. However, it cannot fully frame your day after the fact.
Number two, understand the dominant force in the market heading into the release. Who’s in control? Are we trending? Are we balanced? That context is what you’re about to test.
Number three, observe the CPI reaction. Did the bulls lift, or did the sellers dump? Who is aggressive in those first few minutes after the print? What is the initial impulse move?
Number four, mark off the news inertia: the swing high and swing low. Those become your reference points and often your targets for the New York session open.
Okay, number five, ask one question at the New York session open: Did the New York session impulse confirm or negate the CPI news inertia?
That’s the whole checklist.
If the New York session open accepts price in the direction of that CPI impulse move, with flow confirmation, I’m watching for continuation into the next area of interest from my plan.
If the New York open fails to sustain that impulse and price comes back through it, that shiny CPI impulse candle may have been the trap. In that case, I’m watching the other side of the map.
What you’re seeing on your screen is exactly what took place during this week’s CPI release. The initial thrust following the CPI news release was wildly bearish and flushed out some key levels. However, once the New York session opened, price failed to offer any sort of continuation or any strong bearish flow at all.
Instead, price came back through the initial CPI impulse move with heavy bullish flow, trapping the traders who chased the initial CPI move and delivering price back to the opposite side of the map.
I hope that was helpful. We’ll see you guys in the next video.
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