Yo, Pit Crazies,

Our Head Income Trader, Bill “Macro Griff” Griffo, laid the inflation restructure setup on me in our Capital Gains session last night.

Effectively, the Bureau of Labor Statistics is remaking the inflation number to reduce the current level and make the comps look sweet going forward.

In other words, BLS is once again working to undercount inflation – and somehow this blatant attempt to juke the stats is slipping under the media’s radar.

I think this leads to the beginning of the end for rate hikes since these changes will hit in April, making inflation look much lower than it really is. It also provides cover to slow the rate hikes without losing face.

As word starts to seep out, how is the market taking it?

Well Microsoft Corp. (Ticker: MSFT) had earnings and said they were not going to grow for a year. The stock was unchanged by the end of the day on a 26 P/E and a $1.8 trillion market cap.

Oook.

MSFT Five-Day Chart With One-Minute Candles 

I think there is something to this BLS inflation thing. MSFT was not great, but not surprising.  

Does the market like it?

Volatility Nearly Always Tells the Tale

I don’t watch the news and have not watched CNBC since it was piped into the Pacific Coast Stock Exchange  in 2007.

I get my information from the implied vol in the options. It is better to find an edge in the prices that I see vis a vis where things came from. That’s an old guy trader trick I learned from floor traders before me …

– Trade the flow

– Position based on option prices

The flow yesterday was bullish. As much as the market was down at one point, it finished unchanged.

Well, what did vol do?

VIX was a bit lower by the end of the day and a lot lower from the peak. I think there is something to this BLS inflation change thing. Short term I think it is bullish SPX and bearish VIX.

I’ll show you how to take advantage when I go live tonight.

To Your Trading Success,

AG