Be Thankful for Thanksgiving Week and Capitalize on it!

Hey There Income Hunters,

 

The fresh Covid fears have impacted the markets perfectly for the trends we will see in early 2022.

 

You have to be grateful when a short-term trend presents great entry points for trades you are looking to set up for.

 

One of the trades I have been talking about is the “value versus growth” trade. 

 

All you have to look at is the trends from the financial crisis to see how much “value” will outperform “growth” as the stimulus is removed. 

 

Now is the time to set up for this reversal in trend.

 

Today I will run through the trends and best way to play for a reversal. 

 

The most powerful forces fueling markets as we begin 2022 will be:

 

      • By January, a trimmed-down Build Back Better bill will pass. 
      • Down 10+ points in the November 2022 midterm polls, the Dems will NOT blow this opportunity to spend. 
      • By Q2 2022, the world will be seeing the tail end of the Covid-19 pandemic, and global reopening trades will be in full force. 
      • Fiscal juices will flow out of the U.S. and China. 

 

By the second half of 2022, higher bond rates will fuel reallocation of funds from Growth into Value. This is because higher rates negatively impact Growth valuations. 

 

Here is what you can expect out of the Growth/Value trade next year …

 

Paired Trade

 

Sell iShares Russell 1000 Growth (Ticker: IWF) / Buy iShares Russell 1000 Value (Ticker: IWD)

 

The recent short-term Covid spike brought buying into the stay-at-home stocks this week …

 

This provides an ideal opportunity to build a position to capitalize on the inevitable decline in Covid cases as more vaccinations are distributed and new drugs come on the market.

 

Bearish strategies in IWF along with bullish strategies in IWD is the most efficient way to position for a longer-term reallocation from growth to value. 

 

Here is the paired spread going back to the financial crisis. 

 

 

The chart shows Buying IWF (Growth) and selling IWD (Value). Notice the outperformance of IWF over the past couple of weeks.

 

This looks like a fake breakout above the old high in 2020 … 

 

This is an ideal setup to build a position selling IWF and buying IWD. 

 

Bring It Home

 

The macro theme is important to review as the short-term market dynamics shift. 

 

By taking advantage of the change in flows due to the Powell reappointment and anticipating the policy changes ahead, you will get out ahead of the flows and make easy money. 

 

Easy money trades include: buying opportunity in value, global cyclicals, energy, coal, and commodities.

 

Keep these ideas in mind as opportunities present themselves to build positions in each. As I find the right trades I, as always, will alert subscribers. Until then …

 

Live and Trade With Passion My Friends,

 

Griff

Get Energized for $100 Oil by Mid-2022

Hey There Income Hunters,


It was nice to see Light Crude Oil Futures (Ticker: CL) bounce off the $75 level …


I mean, it was a bit embarrassing seeing our president ask our adversaries to increase their oil output. I would think that may come back to haunt us … 


Think 1970s “oil embargo”.


Then we decide to release oil from the US stockpiles, which only reduces the supply in the US…


So basically the US is reducing domestic supply, while pushing for a reduction abroad, ahead of a bigger push from the demand side next year …


This will only put more pressure on the price of oil longer-term as per capita income outside the US grows, and more foreigners need to drive (China) and demand more power for air conditioners (India).


Today, we’ll take a closer look and I’ll share a good ETF to consider a bullish strategy on.  


Slick Stuff


So, Joe Biden wants to release oil from strategic reserves and reduce the pressure on price in the short term …  


However, a supply fix does absolutely nothing to stop the demand growth that we have seen since Q4 2020. 


The problem this creates is that the Organization of the Petroleum Exporting Countries (OPEC) has no option but to counter the production add with a production cut … or just refuse to provide production to the market per their original plan. 


What is actually laughable is OPEC is given a break by not having to meet current quotas which they can’t even hit. The strategic petroleum reserves (SPRs) are doing it for them. 


This creates a disaster scenario for consumer countries and WILL add to the pressure on prices in the months ahead …


Alerian MLP ETF (TICKER: AMLP)


I really like this ETF … It is balanced and diversified, and offers an excellent dividend distribution as you can see in the table below:



Well Diversified Holdings

This is an excellent mix of the transporters and service providers that will perform very well over time as the price of oil stays elevated or rises further. 


AMLP Holdings


AMLP Technical Setup


There is excellent momentum building in AMLP. Notice in the chart below that after a new low was put in on higher than average volume, the next day’s candlestick pattern was a bullish reversal inverted hammer.


That reversal pattern was then met with an up day on higher than normal volume as well.

 


This is a very good spot to get in on the trade and you don’t need to risk a lot … you can close the trade if AMLP closes twice below $33. 


Bring It Home


The drug world is sorting out the Covid variants and designing boosters and oral medications that are inexpensive to purchase.


These developments will reduce Covid to a flu-like condition with full acceptance. This will open up businesses and increase demand for energy just as supply is shrinking. 


The AMLP trade can be played as a put sale while eventually taking ownership of stock, which you can then write calls on to increase your income.


This is a nice inflation beater and profit maker. These trades will keep you ahead of the game while building generational wealth. Have a great weekend and as always …


Live and Trade With Passion My Friends,


Griff

Will Covid Derail the Tech Rally?

Hey There Income Hunters,

 

Happy Thanksgiving!

 

I, of course, wouldn’t leave you hungry for profit-making content today …

 

Tuesday was another day of Invesco QQQ Trust Series 1 (Ticker: QQQ) downside and now European stocks are tanking with continental Covid numbers spiking.

 

It looks like we will see a total retrace of the recent rally up to new highs in QQQ.

 

From there, it will depend on whether the Covid trend will spike high enough and last long enough to trigger another lockdown. 

 

 

There continues to be diverging trends that warrant caution into next week.

 

Today we’ll take a look at them and see what the best trades may be heading to the Dec. 17 expiration.

 

The Impact of a Renewed Covid-19 Surge

 

Lockdowns in Europe would create a tailwind for Amazon and other stay-at-home stocks.

 

The USD dollar is rallying because $65 trillion in global growth is outside the US and only $20 trillion is inside — so a global growth slowdown brings capital back into the US lifting the dollar. 

 

Hence, a higher dollar revives deflation risk, which is good for tech stocks.

 

The question is: what will the situation look like in six months? 

 

      • The probability of a new Covid wave this winter is high, especially following the European spike.
      • In early 2022 the weakness in growth due to short-term Covid fears should shift to the US, favoring the Euro and weakening the dollar. 
      • Longer-term Covid is fleeting and each wave is more impotent than the next. I agree with Bill Gates who said by the summer of 2022, Covid will be rendered as harmless as the flu. 
      • Merck’s new covid oral antiviral drug is sub-$8 and is highly scalable and faster than antibodies. With logistics/transport improving, death rates continue to come down. 

So, in the next six months, fear of Covid in the US is bearish for the dollar and bullish for oil sector equities.

 

Sell the Dollar Index Fund ETF (Ticker: UUP)

 

 

Bring It Home

 

One outstanding macro theme is a weaker dollar.

 

Currently, the weakness is China and Europe are dominating capital flow into the US …

 

However, that will change in the weeks ahead, so positioning a bearish dollar strategy makes sense with UUP up at $26.

 

We’ll take a close look at energy tomorrow. 

 

Have a very Happy ThanksgivingI am very grateful for all of your support and contributions to our #IncomeHunter community.

 

As always …

 

Live and Trade With Passion My Friends,

 

Griff

The Hawk Is Back and the Market Is NOT Happy

Hey There Income Hunters,


Well, for most of the day the market did not know what to do. 


I was watching closely yesterday and, as regular readers know, I have been writing a lot about the poor internal Invesco QQQ Trust ETF (QQQ) indicators for the past few days. (In fact, I have a bearish strategy in QQQ). 


The market looked like it was just going to chop around throughout the day, but with half an hour to go, the QQQs headed south and kept going right into the close. 


That was the reaction I was looking for.


Here’s why:


Jerome “The Reappointed One” Powell, is much more hawkish than Lael “The Pretender” Brainard would have been, plus Powell has always had an itchy trigger finger on the rate hike lever. 


The market obviously believes that, too, as you will see based on its reaction.  


Today we’ll break it down and lay out Fed policy in the months ahead — which is the key to stacking gains …


What? Three Rate Hikes Next Year?


I was very surprised that the market priced in three rate hikes by the end of 2022. I do not believe that will be the case at all.


The recent consumer data is nowhere near strong enough to handle three rate hikes. Check out consumer sentiment and real disposable income, which is adjusted for inflation …



As you can see, both indicators are making new lows since the initial pandemic collapse. 


You see, stubborn inflation is already forcing households and traders to get into more debt. 


Traders Living on the Edge


The growth in margin debt held at brokerage houses is incredible. (Margin debt is a way for traders to get leverage.)


It comes at a loft price — my account at TD Ameritrade charges 6%, when the overnight rate for banks is 0%.


But many traders forget that it works both ways. When the market corrects it can get ugly fast and wealth will deteriorate quickly.



It will always come down to debt — the economy is unable to grow without constant stimulus because of inflation and debt. 


Inflation is already a tax on consumers. One recent study found that inflation at current rates is the equivalent of a 2% tightening by the Fed. 


And the proof is in the much more expensive pudding.


Bring It Home


Yesterday’s hawkish reaction to Powell’s appointment was overdone and I am looking for opportunities to build positions in green energy raw materials like copper, platinum, iron ore, cobalt and lithium. 


That is a trend that can build jobs and bring back manufacturing. It is also supported by both parties, so money will be spent on it and it could be in the trillions of dollars a year.


J-Pow may be back but he will still be lying to convince the public that the Fed is in control. When he does, just come back to this chart to remind yourself how out of control they have been. 



The 1940s are a blueprint for you to see what is needed to shrink the debt down and get an economic reset.


That takes years of holding rates down and inflation up. Believe me, Powell is very far away from that goal.  


Have a great day, and as always …


Live and Trade With Passion My Friends,


Griff

How Much!?

Hey There Income Traders,

How much green has been created globally in less than two years?

If you guessed $20 trillion dollars of new money printed by central banks around the world, you are correct.

All that money and we still have two of the world’s largest economies, China and Europe, in a growth slowdown.

That can only mean one thing … more printing.

Chart, line chart Description automatically generated

Now, with global money managers already overweight US equities by 30% (which is the highest level since 2000) what can we expect for 2022?

 

Today, I’ll show you what else global governments have been doing and how that will impact markets in the months ahead.

 

More Printing & Borrowing Ahead

 

Besides all the printing to keep the economy going during the pandemic, global governments are also issuing green bonds — to the tune of $2 trillion so far — so they can invest in green energy. 

 

We should see that money spent on things like …

 

      • Steel for windmills
      • Copper for EVs
      • Silver for Solar & EVs

 

For traders and investors, the risk/reward plays for green energy are BHP Group (Ticker: BHP), RIO Tinto Plc. (Ticker: RIO) and VALE S.A. (Ticker: VALE). 

 

These three diversified major producers mine iron ore, coal, copper and nickel, which all expected to be in great demand in the years ahead.

 

They all put in a new low this week while RSI put in a higher low — a positive divergence reversal pattern … 

 

Check out the divergence between this group and the S&P 500 as the group has seen tremendous selling since Q2 began due to the weakness in China: 

 

Chart Description automatically generated

 

I like building a position in them for the next few weeks and holdin  into Q2 2022.

 

My top choice of the group is BHP. They are a leading miner supplying iron ore, copper, oil, gas, and metallurgical coal. 

 

My valuation model has them trading at a 10% discount and they also confirmed a positive price/RSI divergence.

 

Let’s take a look at the chart …

 

Graphical user interface, chart Description automatically generated

 

Bring It Home

 

This is the time of year to look at the big picture and beyond the end-of-year flows, which can be driven by tax loss sales, price manipulation for year-end pricing and end-of-year liquidity issues.

 

The Power Income Trader  policy gauge is flashing full green into next year and I also expect a Build Back Better deal will be signed in January at the latest. 

 

>> REMINDER: INTRO PRICING ON POWER INCOME TRADER ENDS TODAY. <<

 

I see big first quarter flows into green energy resources and these three stocks are a good bet on that. 

 

Have a great week and as always …

 

Live and Trade With Passion My Friends,

 

Griff

Reconciliation Bill Winner: Green Energy

Hey There Income Hunters,

 

While we wait on Biden’s pick for the Fed chairman — with the odds still 70% Jerome Powell gets reappointed — I took a look ahead to how passable the reconciliation bill is and who the winners are.

 

What are the chances for passage?

 

Looks like the soaring CPI has pushed Sen. Manchin further away from supporting the $1.75 trillion bill.

 

Democrats need all 50 Senators to get the legislation to Biden’s desk, so Manchin can hold the bill hostage, though a vote is expected today.

 

This guy Manchin does sound like the smartest guy in the room … He tweeted this out on where he stands …

 

“The threat posed by record inflation to the American people is not ‘transitory’ and is instead – getting worse,” signaling his hesitancy to support more fiscal spending.

 

He is obviously just positioning himself to get the spending amount even lower …  I think the bill will still pass.

 

No matter what, there are a few goodies in there and today I’ll run through them and what sector may perform best. 

 

Clean Energy Benefits for Longer

 

The biggest winner in the framework is clean energy … the final version of the bill appears to have a similar amount of tax benefits and spending as the initial despite the framework’s much smaller overall cost. 

 

The clean energy provisions appear to last for 10 years in the framework, while nearly every other proposal would last for a shorter period than previously proposed.

 

Latest on the EV credit in the House $1.75 trillion BBB Act:

 

      • EV car buyers will get an instant $8K EV rebate for M3s < $55K 
      • They will get an instant $8k for M-Ys < $80K if AGI doesn’t exceed $250K for individuals or $500K for couples. 
      • Although Sen Manchin will likely kill the $4,500 bonus for union-made EVs.

The Fiscal Stimulus of the Reconciliation Bill IS Disappointing Overall

 

As you can see the net Fiscal stimulus starts at .6% GDP in 2022, and then trends lower over the rest of the period. 

 

 

The effect in the later years is the $2 trillion in budgetary savings from higher taxes. The pain is always pushed out to the future administrations. 

 

How do WE make money on EV and infrastructure spending?

 

I think there are two commodity plays that make sense right now …. 

 

The electric vehicle play is copper because electric vehicles require more than 4x the amount of copper than for combustible engines — and that’s just the beginning.

 

The demand for copper for EV charging is supposed to rise more than 1000% by 2030.

 

For the infrastructure build, Coal will be in great demand. Per Bloomberg:

 

“Almost every lump of coal that U.S. miners will dig out of the ground next year has already been sold, as surging natural gas prices prompt utilities to burn more of the dirtiest fossil fuel.”

 

The transition to clean energy will take much longer than predicted because there was never a natural increase for energy demand put into the equation. 

 

Bring It Home

 

The Fed continues to talk tough about inflation and every time they do, we get a pullback in various sectors of the commodity market. 

 

Right now, copper and coal offer decent value and although we may see more volatility into year-end, you can make some nice profits holding both into the end of Q1.

 

I expect Q1 to be a strong growth quarter as the world reopens and that will boost two of the commodities most in demand.

 

Have a great day and as always …

 

Live and Trade With passion,

 

Griff

Yellen Transitory Speech Hits Commodities

 

Hey There  Income Hunters,

 

Nervous much?

 

Money flowed into gold and bonds and out of commodities and financials yesterday, suggesting unease in the market.

 

It may have been driven by Treasury Secretary Jenet Yellen pounding the table about inflation being transitory and going back to normal by the second half of 2022. 

 

Yet in May of this year she said the return to normal would be the second half of 2021.

 

I’ve got news for you … next June her opinion will change again because inflation will stay elevated for years. 

 

Biden’s announcement to make a decision on Jerome Powell’s status as Fed chairman in four days may have also added some volatility yesterday. The odds continue to show a probable Powell reappointment (70%).

 

I think the three remainin Fed seats that need to be filled are of huge importance for the Democrats and those changes could be a major shock to the market.

 

I’ll cover that and more today at 11:30 a.m. today during a Power Income Hot Read event.

 

This is a critical time in the markets as the Fed could change dramatically in the weeks ahead and cause major disruptions in the market. I’ll reveal the most likely scenario and the trades I plan to make. See you there …

 

Today, we’ll look at trends in volatility heading into a holiday week and some signs that there are cracks showing in the foundation of the market.

 

Impact on Volatility into Holidays

 

As you can see from the graph below, the VIX trades off into the holiday and rallies coming out of it. 

 

The specific numbers over the past 10-years for Black Friday are:

 

  • 7 days into Black Friday VIX is down an average 3.82%

  • 10 trading days after Black Friday the Vix is up 5.02%

 

First Signs of Credit Stress

 

The all-important credit spread signpost is flashing a warning sign.

 

Notice the investment-grade BBB rated spreads breaking above the downtrend for the year.

 

 

High Yield Spreads Diverging from Stocks

 

I think this signpost is significant because a higher cost for corporations to fund their business will eventually hit profit margins and stock valuations. Definitely something to watch. 

 

 

Secondary Equity Offerings on the Rise

 

      • SoftBank and Silver Lake Partners will sell stock in a secondary offering
      • Mercadolibvre MELI yesterday filed for a secondary common stock offering
      • DoubleVerify Holdings Inc. (DV) Launches 8M Share Secondary Offering
      • NKLA files to sell 29.04M shares of common stock for holders
      • Custom Truck (CTOS) Announces 12.3M Share Secondary Offering of Common Stock
      • STepStone Group prices secondary offering of 4.5 mln shares

The increase in secondary offerings may signal a trend to fund via stock offerings as rates rise.

Recent reports also indicate that some new issues have been coming cheap to secondary issues, which has not been the case all year. 

The Dollar Rally is also a Warning

The rally in the dollar is another drain on liquidity because so many non-US lenders lend in dollars and their margins get squeezed as it rallies. 

The dollar also represents the price of leverage, which is rising and may continue as QE is reversed. 

I actually see resistance for DXY up at 96.30, so it will be important to see it fail up against that level or it may cause a larger move out of risk assets into bonds and gold. 

Bring It Home

 

My highest conviction trade continues to be the precious metals. 

 

I think the Fed situation is incredibly important and I see any decision from Biden transforming the Fed into a more easy, less independent entity.

 

This will be a very inflationary scenario that would push long-term bond rates higher with silver and gold being the best performers. By their price action yesterday, I would say investors are already looking ahead and are reallocating into precious metals. 

 

With $10 trillion sitting in financial assets, that is the move to get ahead of.

 

Live and Trade With Passion My Friends,

 

Griff

Glasgow Climate Pact a Joke … Buy This!

Hey There Income Hunters,


One of the goals of the COP26 summit in Glasgow, attended by 26 nations from around the globe, was to consign coal power to history.


Well, that didn’t happen.


Instead a few coal-reliant countries indicated they will not completely stop using coal until after the 2040s.


Get this, the only thing the COP crowd agreed on was to have better ideas at next year’s event.


The truth is, 1 billion people in China do not even own cars yet.


In India, 1 billion people do not have air conditioners.


Yet their income per capita is rising and the demand for more electricity and coal is still the world’s largest base for electrical power.


The bottom line: There are mathematically unsustainable constraints on fossil fuel supply without even acknowledging the demand side of the equation.


That’s why I want you to meet me on Thursday at 11:30 am for a Power Income Trader Hot Read session during which I’ll dive into the coming energy crisis of 2022. 


Keep an eye out as I’ll be sending my Power Income readers a direct link to the event later today. 


Then get ready as I’ll show you a systematic approach to trading an out-of-control Fed and US government policy that is driving 70s-style inflation. I’ll also give you trade ideas and a plan to make more money during this inflationary period than you ever thought possible. 


Now let’s look at potential profits based on policy backlash …


The ESG Backlash


Environmental, Social and Governance promotion is awesome in theory …


However, to have pushed it so hard with huge energy demand coming in a post-Covid world has created an energy crisis that will last years.


Here’s why:


  • India is still 70% dependent on fossil fuels and the country’s use has doubled since 2000. Energy consumption is projected to grow at three times the global average.


  • Middle class expansion in India due to urbanization trends will drive a massive surge in air conditioning demand for the next five years.


  • ESG halting the necessary investment needed to support an increase in production of energy fueled by coal and oil. 


You WANT Coal in the Stocking This Christmas


Alliance Resource Partners LP (Ticker: ARLP)


ARLP is an important thermal coal producer. It also carries oil and gas assets. They are a domestic producer headquartered in Tulsa, Oklahoma. 


They are highly ranked among peers by industry observers, and ARLP distributes $.80 annually in dividends with a 7.52% yield.


After a 20%+ correction recently they are primed for a run at new highs in the weeks ahead. 


Technical Setup


As you can see, volume has been low on this correction and the $10 level provides excellent support.  


Consider a Jan. 21 10/12.5 call spread for $.90 or better for ARLP. This allows plenty of time for more details on the infrastructure spending bill and new stimulus to hit the market. 


The $10 level can be used to stop yourself out of a trade and limit your loss. However, ARLP is a quality company and I think coal producers will resume their bull trend, so now is the time to get in. 



ARLP Bull Strategy


I like a Jan. 21 10/12.5 call spread for $.90 or better for ARLP. 


I would also consider adding to the trade on a break above the 50-day moving average on higher-than-average volume. 



Your return on the trade if target is hit at expiration would be:


Net Profit: $250-$88 = $162 

Return on Capital: $162/$88 = 184% 


Bring It Home


The Climate Pact in Glasgow came to no pact at all.


Now we return to a green energy revolution that is going to create even more demand for coal, while we wait 3-5 years as the EV industry is built. 


Rotation throughout the fossil fuel complex plus nuclear energy powered by uranium will present plenty of opportunities throughout the rest of 2021 and all of 2022. 


Don’t forget to join me on Thursday at 11:30 a.m. tomorrow for a special Power Income Trader Hot Read session. Your link is coming later today.


Until then …


Live and Trade With Passion My Friends,


Griff

Bond Markets Flashing Danger Signs

Hey There Income Hunters,

 

There’s a warning sign flashing.

 

I picked it up from the US Bond Market Option Volatility Estimate (MOVE) index.

 

MOVE is considered the VIX for bonds and yesterday it recorded a high that had not been reached since March 2020. 

 

The MOVE index has been high for weeks while the volatility of the S&P 500 (Ticker: VIX) was hovering near year lows. 

 

As you can see, spikes in bond vol provide warning signs for spikes in stock vol …

 

Chart, histogram Description automatically generated

 

Today, we’ll take a look at a couple of other bond signposts that can provide ideas for trading stocks and bonds. 

 

Bond Market Rules of the Road

 

There is a fundamental connection between bond and stock volatility, and it is this:

 

The Weighted Average Cost of Capital (WACC) — the combined debt and equity returns required by the market for a company to fund itself. 

 

In other words, as the value of the stock goes down, the risk of the interest rate on its debt rising goes up.

 

On the other hand, if the interest rate on its debt rises, debt financing risks rise, and this must be accounted for in valuation of the stock.

This is all in theory, and as we have seen, a market can stay irrational longer than speculators can stay solvent.

 

However, all else being equal, under the WACC, if interest rates rise, the cost of financing business goes up and sends stocks lower. 

 

The risk of stocks going lower as interest rates rise is higher now because of the Fed taper and uncertainty surrounding Washington and the debt ceiling.

 

Historic Levels of Corporate Debt 

 

The corporate bond market is bursting at the seams, with leverage at historical extremes. 

 

Check out the corporate debt-to-US income-ratio as measure by gross domestic product (GDP). It is incredible to see that corporations are 25% MORE leveraged today than during the dot-com bubble … 

 

Chart, line chart Description automatically generated

Now, we know the Fed will come to the rescue with a helicopter drop of new money. The key is to lighten up and even catch a bit of the correction so you can turn around and jump on the ride back up. 

 

Here is an important signpost for potential problems developing in the market …

 

Corporate Bond Market Signpost

 

The corporate bond market and housing market are the most sensitive to a rise in interest rates.

 

Graphical user interface, application Description automatically generated


This may end up being a fake breakout but if the outright breaks above 2.5% it will take on more urgency.

 

iShares Investment Grade Corporate Bond ETF (Ticker: LQD)

 

LQD is an excellent ETF to trade as a proxy for corporate bonds. Over 50% of the holdings in the ETF are BBB credit bonds. 

 

When the corporate debt burden becomes a problem and BBB rated bonds get downgraded LQD will trend down hard. This is because funds holding BBB bonds, which are the lowest rated “investment grade” bonds, will be forced to sell, causing a meltdown in LQD

 

Market makers will be loaded with bonds that are plunging and will drop their bids for LQD to account for the markdown in the inventory they hold from redemptions. 

Chart, histogram Description automatically generated

 

The graph above does not look like it is ready to break down. First of all, the volume after breaking the 200-day moving average is lower than average. 

 

Secondly, if LQD breaks the uptrend line and makes a new low it will trigger a positive relative strength index/price divergence as RSI would not make a higher low.

 

LQD is trading within a down channel, though, and the underlying conditions outlined above will eventually cause a breakdown.

 

So , LQD should be sold on rallies back towards 133 until it is able to break back above the 200 DMA on above-average volume.

 

Bring It Home

Understanding bonds and their impact on stocks was a game changer for my success as a trader. My Power Income Trader has this built in by focusing on the Fed, Government and Treasury’s policy. (Access to the program is currently closed)

 

We may see the TLT and LQD bottom this week, but that won’t change the overall debt picture.

 

I’ll leave you with the daily chart on the iShares Russell 2000 ETF (Ticker: IWM). 

 

It had the most bearish daily candle yesterday … a bearish engulfing pattern, which means the open was above the previous days close and the close was below the previous days open.

 

If you want some downside protection or to take a flier on a short-term correction, you could onsider a $IWN NOV22 234/232 put spread for $.69

      • Max Loss – $.69
      • Max Profit – $1.31 for a return of 189%

Graphical user interface, chart Description automatically generated

 

Live and Trade With Passion My Friends,

 

Griff

Hot Stocks and Data for the Week

Hey There Income Hunters,

 

It was a wild week for the Consumer Discretionary sector, as Tesla Inc. (Ticker: TSLA) and the travel and leisure stocks took a beating … 

 

Meanwhile the materials sector led by miners and suppliers, including Sherwin-Williams Co. (Ticker: SHW) and Air Products & Chemicals (Ticker:APD) were the best performers of the week.

 

 

The market has now shifted from an inflation-is-transitory mindset to the-Fed-has-lost-control-of-inflation psychology. 

 

Yet, even still, investors are not prepared for the impact higher inflation will have on the markets. 

 

There is a massive opportunity to capitalize on the moves that are coming. I have been there and my new POWER INCOME TRADER program is designed to take advantage of inflation for massive trading profits. 

 

Today, I’ll share the hot stocks to watch for the weeks and the key data that could move the markets.

 

This Week’s Market Movers

 

The data that matters this week is the Retail Sales and Industrial Production report on Tuesday at 8:30 a.m. and initial jobless claims on Thursday.

 

 

US Treasury Supply

 

20-year bond auction: On Wednesday, the Treasury will issue $23 billion 20-year bonds at 1pm. 

 

Now, after last week’s terrible 10- and 30-year bond auctions that pushed the iShares 20+ Maturity Bond ETF (Ticker: TLT) down 3.3%, the 20-year bond auction may pressure TLT again this week.

 

Here is the TLT technical setup:

 

Expect TLT to break the 50 DMA and test the 200 DMA heading into Wednesday. I purchased a TLT Dec 17 148/146 put spread last week looking for it to test the 144 level where I would close the trade.

 

Real Interest Rate Watch

 

After the highest inflation report in 40 years, the 10-year real interest rate, which is the consumer price index (CPI) minus the 10-year nominal rate, reached a new low. This ignited a major breakout for silver and gold and also boosted precious metal miners.

 

Notice the trend higher in CPI versus 10-year and overnight (O/N) interest rates below. As the spread between CPI and interest rates widens, precious metals will soar higher …

 

 

This is because investors are forced to move out of bonds and into real assets in an effort to find returns that keep up with inflation.

 

This is the trend to watch this week. We may get a re-test of breakout levels since both are near overbought conditions. 

 

However, there are plenty of catalysts that would send the precious metals much higher in the weeks and months ahead including:

 

      • Fed chairman Jay Powell being replaced by a more dovish Lael Brainard, which would mean more spending and inflation
      • A more protracted correction in the stock market that would force more the Fed to come to the rescue of the market and retreat from QE taper
      • Geopolitical risks  

 

The Long-term Trend for Precious Metals

 

Inflation has reached a plateau in the past couple of months that has caused a shift in the psychology of investors …

 

The Fed’s control mentality has changed as inflation has proved to be anything but transitory and as confidence in the Fed has been tainted by their insider-trading scandal.

 

Gold has always been much more than an inflation hedge and that will become much more clear in the months ahead.

Gold and silver have always represented “real money,” and when central banks lose control of their currency, precious metals are the true alternative as a store of value.

 

Check out the historic ratio of gold to the Dow for a glimpse of how much gold will outperform the Dow in the years ahead. 

 

 

Bring It Home

 

POWER INCOME TRADER launched ast week and it will help you not only stay ahead of inflation, but exploit it to make incredible trading profits and generational wealth.

 

I know how to attack inflation and  have been killing it this year. It helps that I am one of the few traders working today who traded the inflation of the 1970s and 1980s.

 

Now I’ve built a system designed to anticipate Fed policy so you can get ahead of the market and crush it consistently. 

 

But demand has been soo huge for POWER INCOME TRADER that we’re closing access for founding members tonight.

 

Don’t miss out

 

Live and Trade With Passion My Friends,

 

Griff