If you trade futures, inflation reports like Wednesday’s Consumer Price Index and Thursday’s Producer Price Index are some of the best catalysts to play — but only if you know how to position correctly.
We saw that again this morning with CPI, which sent futures swinging. And with PPI set to drop tomorrow, there’s still another round of potential volatility ahead. If you want to take advantage of these reports, here’s how I approach them.
Step 1: Identify the Key Report and Time
Inflation data releases at 8:30 a.m. ET. That means you have about an hour of futures trading before the news hits, which is crucial for setting up trades. The key is understanding how markets reacted to past CPI or PPI reports.
For example, in January, CPI sparked a big rally in the S&P 500 (SPX) and Nasdaq 100 (QQQ), with both hitting all-time highs before fading. Other times, inflation data has triggered sharp sell-offs, especially when numbers come in hotter than expected.
Step 2: Watch for the Initial Reaction
The first 15 minutes after the report drops are critical. Markets will often see a sharp move in one direction, but that doesn’t mean the move will hold. I look for a “fake-out move” — an initial spike or drop that quickly reverses.
If CPI came in below expectations, I’d watch for an immediate pop in futures and then a potential retracement. If inflation came in hotter, which it did this week, I’d look for an initial sell-off and then a possible bounce. The goal is to wait for confirmation instead of jumping in immediately.
Step 3: Use Key Levels and Technicals
Ahead of the report, I mark key levels on SPX and QQQ. If we gap above resistance and hold, that’s bullish confirmation. If we spike higher but immediately fail, that’s a potential short setup.
The same applies to downside levels. If we gap lower but buyers step in at strong support, it’s often a good place to go long. But if we break key levels cleanly, there’s a higher probability of extended downside.
Step 4: Trade Small and Take Profits Quickly
When trading CPI and PPI, I never size too aggressively. Inflation days bring extreme volatility, and the worst thing you can do is overcommit and get caught in a whipsaw move.
Instead, I take small positions in S&P 500 futures (ES) or Nasdaq futures (NQ), using defined risk. And I take profits fast. Inflation reports can trigger moves that last all day, but they can also fade just as quickly.
What to Expect for PPI Tomorrow
With CPI now in the rearview, the focus shifts to tomorrow morning’s PPI report. If we see another strong move, I’ll be watching for opportunities in futures, especially if we gap above or below key levels.
But the key to trading inflation reports is simple…
Don’t chase the first move, wait for confirmation, and keep your risk in check. If you can do that, these reports can become some of the best trading opportunities of the month.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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