GAME PLAN REVEALED: CPI Data, Bear Flags, and Key Trader Setups

The market is a master of deception. This morning, the release of the latest Consumer Price Index (CPI) data sent an initial jolt of optimism through the futures market, but a closer look reveals a far more complex and cautionary tale. In this morning’s GAME PLAN show, Gareth Soloway, Chief Market Strategist at Verified Investing, peeled back the layers of the headline numbers to expose the underlying currents driving the market.

Today’s analysis goes beyond the surface-level reaction, exploring the troubling signs of potential insider trading, the critical technical patterns shaping the S&P 500, and the subtle yet powerful verdict being delivered by the bond market. We’ll also dive into the specific, actionable trade setups in key stocks and commodities that Gareth is watching, providing the alpha that separates informed traders from the herd.

Decoding the CPI: More Than Meets the Eye

At first glance, the CPI report seemed to offer a sigh of relief. The headline year-over-year number came in slightly better than anticipated at 2.7%, just below the 2.8% forecast. However, the devil, as always, is in the details. The core CPI, which strips out volatile food and energy prices to give a clearer picture of underlying inflation, told a different story. It came in hotter than expected at 3.1% versus a 3.0% consensus.

This divergence between the headline and core numbers is a critical piece of the puzzle. The "better" headline figure was largely influenced by a significant drop in oil prices over the past month. When you remove that temporary relief, the stickier parts of inflation are proving more stubborn. This nuance was not lost on Gareth, who also voiced a growing concern about the integrity of the data itself.

"Remember, BLS numbers have been shady for a while and likely to become even more suspect over time as more political influence gets inside of them."

This skepticism is born from observing market behavior around these releases. It’s a reminder that traders must look beyond the headlines and analyze the market’s reaction and intermarket signals to find the real story.

A 40-Minute Head Start: The "Game Within the Game"

One of the most alarming observations from this morning’s price action occurred well before the official 8:30 AM EST data release. For 40 minutes leading up to the announcement, S&P 500 futures were already marching higher. To a seasoned market observer, this is a massive red flag.

"Now to me that tells me insiders got this number ahead of time and were buying the futures... this is something we've seen more and more recently where ahead of big announcements or data, there is a leakage going on where individuals are getting these numbers and trading illegally."

While it’s impossible to prove without a formal investigation, this pattern of pre-announcement buying suggests that privileged information is being used to front-run the market. For retail investors and traders, this is a sobering reality. It underscores the importance of not blindly chasing the initial headline reaction, which may be fueled by players who had a significant head start. The real opportunity often lies in understanding the secondary reaction, once the broader market has had time to digest the full report.

The S&P 500 and the Anatomy of a Fade

The market’s initial pop on the CPI news fits a pattern that has become all too common in recent weeks: a gap up at the open, followed by a slow, grinding fade throughout the day. Yesterday was a perfect example, with the S&P 500 opening higher only to reverse and close down for the day. This price action is reinforcing a bearish technical pattern on the daily chart.

The S&P 500 is currently consolidating within a bear flag formation. This pattern consists of a sharp downward move (the "flagpole") followed by a period of choppy, upward-drifting consolidation (the "flag"). Typically, these patterns resolve to the downside with another move equal in magnitude to the initial flagpole.

For this bearish outlook to be invalidated, the market needs to show decisive strength. As Gareth pointed out, there is a clear line in the sand.

"Any daily close above the high of the start of the bear flag... any close essentially above $6,428, that would then be negation of the bear flag."

Until that level is breached, the path of least resistance remains sideways to down, especially with a major parallel trend line also serving as a cap on any rallies. The initial CPI pop is already showing signs of fading, suggesting the bears remain in control of the broader trend.

The Bond Market’s Verdict: The 10-Year Yield as a Truth Meter

While equity futures had a brief moment of euphoria, the bond market was busy telling the real story. The 10-year Treasury yield is often a more sober and insightful barometer of economic reality, and its reaction to the CPI data was incredibly telling.

Initially, the 10-year yield dropped, which is the expected reaction to "good" inflation news that might allow the Fed to cut rates. But that dip was short-lived. The yield quickly reversed and began rallying sharply.

"But then look, we went all the way down here and the market has rallied back up on the 10 year, which means people are now saying, wait a minute. First of all, do we trust these numbers? And second of all, wait a minute, the core is actually slightly hotter."

This U-turn in the 10-year yield was the market’s way of saying it wasn’t buying the bullish narrative. Bond traders looked past the headline, focused on the hotter core inflation, and priced in a more hawkish reality. Crucially, as the 10-year yield pushed higher, the S&P 500 futures began their fade. This intermarket relationship is a powerful confirmation that the initial stock market rally was built on a shaky foundation.

Actionable Alpha: Key Setups to Watch

Beyond the macro picture, the GAME PLAN is about identifying specific, high-probability trading opportunities. Here are the key charts and levels Gareth is monitoring:

Tesla (TSLA): A Breakout in Need of Confirmation

Tesla has broken out of a wedge pattern, which is a bullish signal. However, the breakout candle showed a "weak close," pulling back significantly from its highs. This indicates a lack of conviction. For the breakout to be trusted, it needs confirmation. A daily close above yesterday's high of $347 would provide that confirmation and could open the door for a move toward $400.

MP Materials (MP): The Ominous Topping Tail

Rare earths player MP Materials printed a textbook bearish reversal candle yesterday. Known as a "topping tail," this formation occurs when a stock rallies to new highs (in this case, an all-time high of $82.50) and then reverses sharply to close near its lows. This signals massive selling pressure and suggests a significant top may be in place, making it an attractive swing short candidate for a move lower.

Cameco (CCJ): A Confluence of Bearish Patterns

Uranium miner Cameco is flashing multiple warning signs. The chart shows a potential Head and Shoulders pattern forming right at a major resistance trend line. A break of the pattern's neckline around $72 would trigger a measured move target down to a major gap fill level at approximately $61. The setup is further supported by a wide-range red candle that helps form an "in-spirit" bear flag.

Day Trade Opportunities: Sea Ltd (SE) and Circle (CRCL)

Earnings season continues to provide volatility. Sea Limited gapped up from $146 to $167 on its report. While it’s approaching a gap fill at $168.50, Gareth identified a higher-probability day trade short level at the $172.50 double top. He stressed this is not a swing trade, as the stock is nowhere near its 2021 highs, a crucial lesson in context.

Similarly, Circle (CRCL) jumped from $160 to $182 after its first post-IPO earnings beat. A well-defined resistance zone for a day trade short exists between $187 and $190, an area containing multiple pivot points and gap fills.

A High-Risk Sleeper and Commodity Check-In

For investors with a higher risk tolerance, Gareth highlighted a "sleeper play" in 3D Systems (DDD). This small-cap 3D printing company has been beaten down but holds fascinating long-term potential, with ventures into printing human organs. While extremely high-risk, it’s the kind of speculative play that could yield massive returns over time if its technology matures.

In commodities:

Silver: Remains in a chop, with ascending resistance around $39.70 and firm horizontal support at $34.65.
Oil: The recent drop was a key factor in the headline CPI number. Having confirmed a breakdown below major trendline resistance at $65 a barrel, the odds now favor an eventual move down to the next major support at $60.
Natural Gas: Still weak, but a potential swing trade bounce opportunity may be setting up at the $2.63 support level for those willing to trade the volatile energy source via ETFs like UNG.

Conclusion: Trade with Probability, Not Passion

The ultimate lesson from today's analysis is a philosophical one that underpins the entire Verified Investing methodology. Successful trading is not about being right or wrong, bullish or bearish. It is about understanding and applying probabilities, based on the objective evidence of the charts.

"Once we start following our hearts and our feelings, the market is like a shark. It's like we are in water that has chum in it and the sharks are there and they will eat us alive."

This powerful analogy, drawn from years of experience and early-career lessons, serves as a vital warning. The market preys on emotion. The only defense is a disciplined, logical, and probability-based approach. By dissecting data releases, confirming signals across different markets, and identifying patterns with historical precedent, traders can move from being "meat in the water" to becoming the shark. The path to consistent profitability is paved not with hype or hope, but with the cold, hard logic of the charts.