Trader reveals the three things he’s watching for on Thursday

With the S&P 500 trading in a tight range near record highs, BK Asset Management strategist Boris Schlossberg is watching for three events Thursday.

1. Nordstrom earnings

Nordstrom's earnings report after the closing bell could shed light on the state of the struggling brick-and-mortar retailers.

A positive earnings report "could be a sign that the problems with retail are beginning to even out" and that "retail is stronger than we think," Schlossberg said Wednesday on CNBC's "Trading Nation."

Shares of Nordstrom are up 2 percent in the past year. That represents serious underperformance against the broad market, but actually makes the stock the best-performing multi-line retail name in the S&P 500 in that period.

"While Nordstrom is still subject to the significant macro headwinds, we do believe the concept has more 'staying power' on a longer-term basis" Piper Jaffray research analyst Erinn Murphy wrote in a note Tuesday.

2. Inflation update

A key economic report is on tap for Thursday morning — the Producer Price Index for final demand. PPI-FD measures the prices that U.S. producers are paying for goods and services. Since the producers will eventually sell their products to consumers, this report is often considered a leading indicator of consumer inflation.

Inflation data is especially important now, since rising prices give the Federal Reserve its rationale for raising short-term interest rates. Yet as Schlossberg points out, the last PPI-FD report actually showed a mild month-over-month drop in inflation.

"If we have another month of negative inflation data, that's going to make the assumptions of three rate hikes very problematic," Schlossberg said, referring to current market consensus about the Fed's future interest rate policies.

Shifting views on the Fed could have serious impact on the value of the dollar, bonds and equities, he added.

3. The VIX

The CBOE volatility index has gripped investors' attention lately. The VIX, which measures the magnitude of the moves traders expect to see from the S&P 500 in the future, is near 10-year lows, thanks to the S&P's gradual upward glide.

"Volatility is supposed to be mean-reverting, and if that's the case, we may be in serious trouble," Schlossberg said. The VIX remaining at multiyear lows "suggests that it could pop like a ball from underneath water."

To be sure, the VIX has remained at historically low levels for some time now, frustrating the many investors who have tried to bet on rising volatility through the use of products that track the VIX futures (as the VIX itself cannot be traded).

"If the VIX starts to go really high, that means equities are going to be in trouble," Schlossberg added, obliquely referring to the negative correlation between the volatility index and the S&P 500 itself.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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