Hey There Income Hunter,
The Fed and Biden administration finally got a bit of relief from the soaring inflation we have endured in 2022.
Here are the highlights …
Month-over-month:
- Headline CPI was flat
- Core was +.3% m/o/m
- Both were .2 below expectations
Year-over-year:
- Headline CPI was up 8.5% vs 9.1% in June
- Core was up by 5.9% unchanged from June.
The drivers were a 7.7% drop in gasoline prices, while energy fell 4.6% m/o/m, though still up 33% over 2021. Food was up another 1.1% over June and nearly 11% over last year.
So, essentials are still much higher compared to last year. Plus owner equivalent rents data is still way undercounting the actual rental cost rises.
However, the bottom line is CPI has peaked, and now the question is what will the pace of moderation be …
Today, we’ll look at some wild swings in the market and opportunities to position for what lies ahead.
Sell the Euro Versus the Dollar
The CPI crushed the dollar, giving traders a great opportunity to buy the dollar versus the euro.
Europe is in an absolute mess as its scrambles to find a solution to replace Russian energy imports that have been cut off.
Germany, in particular, is being squeezed because its manufacturing machine relied on cheap energy from Russia.The entire European economy is in danger of going into a deep recession and that will send the euro lower.
I purchased Invesco Euro Currency (FXE) Sept. 16 95 puts after the CPI number for $.75 …
They closed at $.87 and as you can see from the chart below, yesterday’s candle is a bearish shooting star …
Traders may consider picking up 95 puts with a stop loss on a close back above Wednesday’s close.
Bring It Home
Now the narrative can shift from “inflation has peaked” back to how the economy is doing.
The next couple of weeks may be quiet, but as we head into September, fear can reenter the market from a few of different angles:
- The Fed quantitative tightening (QT) will double from $45 billion to $90 billion on Sept. 1.
- The China/US relationship could reach a boiling point and have a negative impact on global trade.
- The seasonals for stock and bonds turn the most negative for the year from late August to December
So stay tuned and I’ll keep you up to date on market internals and trades that will take advantage of the volatility ahead.
I also write a market report that is sent to subscribers and present live at least one a week to discuss strategies to consider.
Pick up the phone right now and call 1-888-872-3301 to speak with our customer service team for more details.
And as always …
Live and Trade With Passion My Friend,
Griff