Hey There Income Hunter,
We are heading into the most volatile and pivotal time of year.
September is not only the start of fall …
It is also the start of the seasonal fall in the stock market …
Remember, over the past 30 years, September has been the worst month for stocks
Going back 20 years, SPX, on average, has performed the worst between the middle of September to the middle of October.
That same period is when gold kicks off a bullish run.
Hmmm, sounds like a great paired trade idea.
There are multiple factors in play for a long gold strategy and a short S&P 500 ETF (SPY) strategy.
Today I’ll run through them and give you a trade to consider.
S&P 500 Index SPX Seasonal Trend
As you can see below, on average, over a 20-year period, SPX has its worst period of the year from mid-September to mid-October (red oval).
This period coincides perfectly with the critical dates in September including:
- Sept. 8 ECB rate hike of .50-.75%
- Sept. 13 CPI inflation report is due
- Sept. 16 option expiration
- Sept. 21 is the Fed FOMC meeting with expectations for another .50-.75% rate hike
The European energy crisis is heavily weighing on the global economy. There is no easy solution and the ECB will very likely pivot back to QE before the Fed due to the severity of its energy crisis.
The choice Europe has to make is to play nice with Russia so they can fill their energy needs at least until they expand their domestic production, or find alternative suppliers.
They would have to sweeten the pot a little for Putin and include settlement in gold …
Putin has already made this arrangement available and is working with China to include gold with a basket of commodities to back an Asian digital currency.
This is where Gold comes into the story … Now, gold has played a major role in previous periods of global monetary transition – and this time will be no different.
I think now is the time to build a position for the inevitable move.
It isn’t a guarantee that the Sept./Oct. period is when the shift from stocks to gold really kicks in, but there are plenty of tailwinds over the next six weeks or so for the trade to begin trending in gold’s favor, including …
- Russia and China are in a powerful position to launch an alternative neutral reserve currency that is backed by gold and other commodities.
- The US will undoubtedly have to shift back to QE to monetize the Treasury bond issuance. This would be extremely bullish for gold.
- The bullion banks are the least short gold they have been in decades. This means they are preparing for a significant rally.
Gold Seasonality Trend
Notice the massively positive seasonal trend for gold between mid-Sept. and mid-Oct. The timing is ideal and these factors contribute to a high probability of success.
Bring It Home
This is what my Power Income Trader program is all about.
I study the macro fundamentals and join them with technical indicators to find the lowest risk highest reward trades.
This particular trade is one I have been dabbling in for the past few months while I wait patiently for the big turn once the Fed is forced to pause its tightening campaign.
You don’t want to miss the turn with a core position and I have the trades lined up and ready to go.
I could pull the trigger in the days ahead and if you join Power Income Trader you will be part of an exclusive club …
PIT subscribers receive trade alerts for entry, exit and risk management, as I myself make every trade I send out.
I’d love to have you join our community of excellent traders that contribute ideas and information because we are all in this together. Call 1-888-872-3301 with any questions and for all the details.
And as always …
Live and Trade With Passion My Friend,
Griff