CPI & PPI Market Analysis – SPY, QQQ, Bonds, Gold & USDJPY
There’s not a lot going on in markets at the moment and, broadly speaking, things are moving as expected. But with PPI and CPI coming up, there are a few things worth watching. My focus is mainly on Treasury buybacks, the long end of the bond market, gold and USDJPY before we move into next week’s Fed meeting.
If Treasury increases long-end bond purchases materially above the planned $4 billion just ahead of CPI, I would take notice.
A stronger inflation print would be an obvious catalyst for another selloff in the long end, so a larger-than-planned buyback could simply be an attempt to support liquidity and reduce the risk of disorderly moves in yields.
Anything above $4 billion would get my attention. Given the recent developments, I would not be surprised to see something closer to $5–6 billion. If Treasury goes materially above that, however, I would start considering whether they are preparing for a more stressful rates scenario around CPI or next week’s Fed meeting.
Gold is worth watching alongside this as we are seeing relatively high-conviction flow in GLD, while Chinese buying has also picked up again.
Bessent, Japan and USDJPY
Bessent also appears increasingly focused on USDJPY, and there is a fairly simple reason why.
Japan has struggled to control the move in the yen through intervention alone. When Japan intervenes to support the currency, part of the funding can ultimately come from selling dollar assets, including US Treasuries. That matters because additional Treasury selling can put upward pressure on US yields – exactly the type of move Bessent is trying to contain.
The options market is now increasingly positioned for further downside in USDJPY.
The most active dollar-yen option has been a November put around the 142.85 strike, while total put volume expiring through year-end has been running at more than three times call volume.
At the same time, positioning in the yen remains extremely stretched, which creates the potential for a much larger squeeze if the currency starts moving.
Structures targeting USDJPY below 150 by year-end have become increasingly popular. To me, that suggests the market is positioning for something more meaningful than a short-term pullback. There is growing interest in a broader regime shift in the yen.
September Roll Risk Meets PPI, CPI and the Fed
We are also entering one of the more important risk windows of the month, with PPI, CPI and then the FOMC all coming in relatively close succession.
At exactly the same time, the September index futures roll is getting underway.
ES volume is likely to increase materially as open interest migrates from the September contract into December. That means headline futures volume becomes less useful as a directional signal because a large part of the activity is simply related to the roll.
The bigger risk is the interaction between macro events and these large execution flows.
When you combine CPI or Fed-related repricing with heavy roll activity, moves can become exaggerated in either direction. You can also get sharp reversals once the execution flow clears, so I would be careful reading too much into raw futures volume over the next several sessions.
SPY Positioning
SPY positioning has weakened since yesterday, with market makers becoming more active around 770 as expected.
The 765 area provided immediate support, but 760 remains the main level I am watching below.
The volatility regime remains negative. As we move deeper into the macro risk window, that matters because market makers are more likely to sell as the market falls rather than mechanically buy dips.
That increases the potential for downside moves to accelerate if 760 starts to give way.
QQQ Positioning
QQQ positioning continues to look slightly better, mainly because of the strength in the AI trade.
That said, I would expect some hedging and profit-taking ahead of CPI and the Fed after the recent move higher.
The immediate support area is around 714–715.
The volatility regime is negative here as well, so if that support breaks, the move can become relatively sharp.
VIX
Bullish VIX volume remains elevated, although the 17 area is still likely to act as an important resistance level in the short term.
As long as VIX remains contained below that zone, volatility expansion is limited. A clean move through 17 would make the setup considerably more interesting, particularly given the macro calendar ahead.
Gold and GLD
GLD, which I use as the main liquid proxy for gold positioning, is trading almost exactly around $400.
That level should provide some support, particularly because the volatility regime in gold remains positive.
Combine that with renewed Chinese buying, the options flow we are seeing and the possibility of a larger-than-expected Treasury intervention in the long end, and gold is one of the more interesting assets to watch into the inflation data.
If Treasury comes in meaningfully above the planned $4 billion and yields respond lower, momentum in gold could pick up fairly quickly.
For now, my main focus remains the interaction between Treasury buybacks, the long end of the bond market, USDJPY and the increasingly crowded macro calendar.
Markets are still relatively calm, but with PPI, CPI, the September futures roll and the FOMC approaching, I would not expect that calm to last indefinitely.