Good afternoon everybody. JD here with your Rational Trader market analysis daily.
We got a big one today: the Consumer Price Index (CPI) report just dropped — and once again, it came in softer than expected.
That’s a fancy way of saying: inflation’s cooling down.
And I’m not surprised.
The Deflation Bomb Just Keeps Ticking
I’ve talked about this before — what I call the “deflation bomb” — where inflation isn’t just moderating, it’s unwinding fast.
And the CPI numbers back that up. The market loved it — initially.
But then something strange happened.
The VIX Got Spooked — Again
Right after the report, the VIX (Wall Street’s fear gauge) dropped hard, just like you’d expect.
But then we got breaking news out of the Middle East — an evacuation at the U.S. embassy in Iraq — and the VIX snapped higher.
That kind of intraday reversal shows just how twitchy the market still is. And how reluctant institutions are to let go of their fear trades.
SVXY Is Still Mispriced
The ETF I’ve been watching — SVXY, which goes up as volatility drops — didn’t move nearly as much as it should have. And that’s key.
It tells me the market still hasn’t fully accepted this drop in volatility. Fear is sticky.
But when it breaks? SVXY could re-rate fast.
How I Traded It
I took an intraday trade in my Money Fortress account, playing the morning pop in SVXY before the Iraq news hit. I exited early and banked a small profit — about 69 basis points.
Why exit early? Because intraday risk is easier to control, especially when headlines are flying.
But the big picture hasn’t changed. I’m still targeting SVXY at 55, and I still think volatility breaks lower, maybe even below 15.
When that happens, you’ll want to be on the right side of it.
Talk soon,
JD
The Rational Trader
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