Hey There Income Hunter,

The Fed minutes announcement yesterday triggered another short covering rally to the S&P 500 “magnet” 4300 number, and the market closed nearby at 4274.

It really sounds like the Fed doesn’t know what to do.

They mentioned both slowing growth and still-high inflation.

Here are a couple of highlights …

• Staff Projection for Economy ‘Noticeably Weaker’ in July Than in June

• With inflation remaining well above the Committee’s objective, participants judged that moving to a restrictive stance of policy was required

The bottom line is they will be data-dependent and pray that inflation continues to come down …

Today, I’ll share new info that points toward a renewed pickup in inflation ahead.

Key Dates

Mark your calendars for …

• Powell Speech in Jackson Hole Aug. 25-27

• Non-Farm Payroll Report Sept. 2

• CPI Report Sept. 13

• Fed Policy Meeting Sept. 21

The Powell speech at the Jackson Hole Economic Symposium will give him a chance to shift the Fed’s narrative one way or the other. 

It is a tough decision because the economic numbers continue to flash signs of both recession and inflation.

Let’s take a look at the news that hit the tape yesterday. Inflation in the UK hit double digits for July. This is a global issue due to a global energy crisis … 

Now, in the US, last month’s CPI dropped, but it was 100% due to gasoline prices collapsing, and that could reverse for next month’s report.

The other major problem is how quickly the US oil reserves are shrinking because of the administration’s decision to release their stock just so they could get gasoline prices down. 

Lastly, as you can see below, the natural gas prices that Europe must pay to meet their electricity demands continues to skyrocket. 

This rise in Natural Gas is causing collateral damage for other essential commodities.

According to reports published this week, Europe has lost about half of its zinc and  aluminum smelting capacity within the past year.

A further surge in power prices could knock more plants offline over the winter, the region’s

biggest metal producers warned. 

Zinc and aluminum are needed to manufacture electric vehicles, so any loss of capacity for those essential commodities will push prices higher. 

Bring It Home

Based on recent events, I have suggested subscribers buy the United States Oil Fund ETF (USO) … 

USO has dropped substantially from the highs, oil is a much cheaper and more efficient alternative to natural gas. 

USO is consolidating just above an uptrend and 200 dma. A call spread to Sept. 16 makes sense and I anticipate a move to the 78-80 area by the Sept expiry.  

Get on board for the next leg of the commodity rally. Questions? Email me or drop a comment below.

As always …

Live and Trade With Passion My Friend,

Griff