The NASDAQ broke out a three-point down trend line in the last week of January 2023, subsequently it followed up with additional advance right after the February Fed meeting.  The Facebook parent company Meta reported earnings on February 1, 2023 after the market close.  The street loved how Meta CEO Zuckberg talked about efficiency (cutting cost) repeatedly during the earnings conference call.  The cheers for Meta carried the market advance overnight and created a gap up open on February 2, 2023.  We have been warning about this breaking above the established trendline b in our previous blog.  The NASDAQ was overbought in short term and a correction/digestion period is expected.

Since the February 2 high, the market has corrected for six days.  The January CPI data will be released on next Tuesday February 14, 2023.  We believe the CPI data will be a positive catalyst to drive the market higher.

In our previous blogs, we also talked about the triple bottom in the NASDAQ as a support for the current bull leg.  It takes a lot of infighting among the market participants to form a triple bottom over a span of two months.  Our projection of the CPI data release on Tuesday as a positive catalyst without knowing in advance what the CPI data would be is based on cycle forecast of the established bullish trend.  Fundamental events move the market in the direction of the cycle.  It is only six weeks into the current weekly cycle, and it’s reasonable to expect this weekly cycle low to high phase to last at least 12 weeks.  So we expect additional six weeks of up trend in this weekly cycle.

Also from the mid October 2022 seasonal low perspective, we expect the market to rally seven months as minimum, which also leads to the same period of this weekly cycle’s top timing band, sometime around April/May.

If you want to take a trade in this setup, you could buy QQQ calls when it’s negative on Monday, the day before CPI data release.  Use time as a stoploss signal.  If the market doesn’t up on Tuesday after CPI release, you should get out of this trade.  The stoploss and wait are minimum.  The market should move up after CPI data release, if it doesn’t, something is wrong with the trade.

Below is the NASDAQ daily chart.

You see that it is below trendline b and near the smaller channel’s lower band (catching support).  It is also above its 200-day moving average. It is already 6 days into the high to low daily cycle correction phase.  Another 1-2 days correction will make it a proper place for the daily cycle to bottom.  So we expect the CPI data release to provide a long trade.