Inflation Data Primary Reason for the Market Drop

Tom Gentile

Posted in

By: Tom Gentile
April 17th, 2024

6 mins read

Originally published via our newsletter previously. Subscribe for early access!

What do options traders do when days like this happen

Assess if there is a belief there is a further drop to come. If so, stand aside and manage current open option trade positions. Is it time to close the positions and take what profits are still there? Does one close the trades if they are in a losing position so as not to take any further loss on those trades?

These questions are dependent on one’s belief of market direction from here.

The CPI came out today and the data showed inflation is running hotter than expected, which may likely curtail any rate cuts from the Fed. This is different from what the markets have been told and were expecting just a couple of months ago.

The data was CPI came in at 0.4% vs expectations of 0.3% and up 3.4% year over year. I’m reading the fed funds future data has a 20.6% chance of the fed cutting rates in their June meeting.

Not only a month or so ago I remember it being in the realm of a 50% assessment a cut was coming.

Whether they do or not will be seen, but since the market doesn’t like uncertainty and the news received today is raising the uncertainty of a cut.

This may be a sell-the-news scenario and a bounce in equities prices may eventually come our way, but right now two things: 1) I am managing my positions and targeting prior price levels that may be support in the event things start to regain upside momentum or 2) I am looking to see if there are opportunities where stocks are coming off a resistance that could be viable option trades to the downside.

Market in Focus: SPY – SPDR S&P 500 ETF Trust

Image 15

When it comes to options trading, or rather when it comes to researching where to go to get education on how to become a successful options trader, you will here the saying (and I paraphrase) you can learn to make money in options trading whether the market goes up, down, or sideways.

I believe that to be true as I have done that, and I teach that.

When you see a pattern like in the SPY chart I don’t see a reason to be fearful of the markets dropping, but opportunity to consider a simple strategy like a ‘Long Put’ on securities I feel are poised to drop.

The pattern I see potentially playing out is an old support, like the 10-day SMA that was once a support for SPY, acting right now like a new resistance area.

Bullets (red) 1-4show where SPY traded at or just under the 10-day and shortly thereafter resume its uptrend above it. It now looks like that 10-day is acting like the indicator the SPY is using as new resistance. 

 If that holds as resistance we may have more downside coming our way.

Tools & Observations

We are going to discuss another viewpoint on how to assess Money Calendar data.

The question on a day like today when the market drops (or pops) for whatever reason.

The markets have had a pretty hefty drop due to the diminishing expectations of upcoming fed rate cuts;  This last sentence is only a speculative statement based on the CPI numbers coming in hotter than expected.

The concern is will the Fed cut at all this year and if so how many and when?

I showed you the technical picture in the Market in Focus page of this week’s newsletter. The economic news has been out since before the market open and now that the market is closed for today we saw the effects of all this on the investor’s psyche by the price action seen today.

When looking for the next options trading opportunity or more one of the valuable tools in my software, Money Calendar, is what we will look at now.

Typically, what’s looked at is the Mony Calendar patterns with start dates this week or even the day you are researching.

One other thing that can we find valuable is to see if patterns happening today may still be there a few days to a week out.

One can compare the number of days of the pattern and the average profit move that happened for both (multiple) scenarios.

The following are images of the Money Calendar data for DICK’S Sporting Goods, Inc. (NYSE: DKS) with a start date of today or next Wednesday.

MC Data DKS Start Date 2024-04-10
MC Data DKS Start Date 2024-04-10
MC Data DKS Start Date 2024-04-17
MC Data DKS Start Date 2024-04-17

The data for the Money Calendar pattern on DKS with a start date April 10 shows a 29-day pattern.

The data for the Money Calendar pattern on DKS with a start date a week later, April 17, shows a 23-day pattern.

Here is an interesting thing, though. The avg. profit on the pattern starting April 10, is $6.91 and the one with a start date April 17, is $6.61.

The potential upside price gain on the stock is only a difference of $0.30. If one waits a week the only difference is the stock will move $0.30 less than what’s expected on the pattern starting today.

What I see is one can wait a week and basically expect the same price move amount. It doesn’t matter what the price at the time of the option trade, as one can decide what strike price to trade based on what the price of DKS is at the time they decide to trade.

If one is not quite ready to pull the trigger on an options trade with a start date of, in this example, today, knowing there is another pattern on the same stock a bit later out AND one knows the expectation of the price move is pretty much the same, it may ease the anxiety of having to decide on actually trading today.

If there was no DKS pattern at a future date maybe one decides on going with a trade now.

The education uses the tools and analyze these types of situations, because it may help you decide when to act on an options trade.

Tom Gentile
C1P: Chief 1-Percenter


Stock and options trading has large potential rewards, but also large potential risk.

You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.

This is neither an offer to buy/sell/ or recommend a particular stock or option.

Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.

No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.

Disclaimer of Warranties and Liabilities Tom Gentile and TomsTradingRoom, LLC including employees, consultants, and editors (“Publisher”) cannot and do not warrant the completeness or accuracy of the content found in our areas, or its usefulness for any particular purpose.

Tom Gentile and TomsTradingRoom, LLC also make no promises that our content or the service itself will be delivered to you uninterrupted, timely, secure, or error-free. Under no circumstances will Tom Gentile and TomsTradingRoom, LLC be liable for direct, indirect, incidental, or any other type of damages resulting from your use or downloading of any content on our site.

This includes, but is in no way limited to, loss or injury caused in whole or in part by our negligence or by anything beyond our control in creating or delivering any portion of Tom Gentile and TomsTradingRoom, LLC.

You are agreeing that you bear responsibility for your own investment research and investment decisions. You also agree that Tom Gentile and TomsTradingRoom, LLC will not be liable for any investment decision made or action taken by you, or others based upon reliance on news, information, or any other material published by Tom Gentile and TomsTradingRoom, LLC.

Tom Gentile and TomsTradingRoom, LLC relies on various sources of information that we believe to be accurate and reliable. However, we make no claims or representations as to the accuracy, completeness, or truth of any material contained on our site.

Tom Gentile and TomsTradingRoom, LLC are educational portals, providing content for educational and informational purposes only. Neither Tom Gentile nor TomsTradingRoom, LLC are a broker/dealer. Investors need a broker to trade stocks and options and must meet certain requirements. All securities, futures, and investments data and ideas are offered to self-directed investors. All prices in USD unless noted otherwise.

A full disclaimer can be found here:

Sign Up Now for Free Education!