Charts and Data that Matter this Week

Hey There Income Hunters,

J-Pow’s message during the Jackson Hole Economic Symposium had a more supportive tone for the markets and stocks, which bonds and commodities loved.

The S&P 500 and Nasdaq made new all-time highs, while commodity, metal and miner prices continued their renewed resurgence.

My take on J-Pow’s message is two-fold:

      • He will maintain a bit more patience before starting the Fed’s taper program to scale back the $120 billion monthly bond buying program.
      • A recent dot plot that showed an earlier start (2022) to raising interest rates will not be realized and the original 2023 — at best — date is more realistic.

This update from J-Pow was also good news for my bearish US Dollar Index (Ticker: DXY) position and bullish metals and miner’s positions.

Significant Signpost

My most important signpost for the 2021 and the next decade is the US Dollar. I am 100% certain the transition to a new monetary system is the macro force that will dominate flows for years to come.

The short-term uptrend has reversed in DXY, with the current price of $92.68 resting just above the 50-day moving average and the uptrend line connecting the higher lows established during the recent rally.

DXY

As a proxy for DXY, I am long the Invesco DB USD Index (Ticker: UUP) 25 puts expiring on January 21, 2022.

My plan for this week is to add to my put position on a break of the 50 DMA and trend line on high volume. Notice the above-average selling volume over the past few sessions. I think this renewed downtrend will continue.

Physical Gold

Once again gold is breaking above the 200 DMA. Could this be the break-out to new highs by the end of the year?

There are a few positive stimulants that will drive gold higher in the months ahead. The big one is the fiscal spending, which will be driven by the infrastructure bills.

Next is the 10-year real rate of interest that historically drives Gold prices. The real rate is the 10-year yield minus the consumer price index (CPI).

The inverse correlation has diverged recently, but I believe J-Pow’s clarification on the Fed’s patience re: raising rates will propel real rates lower and gold prices higher.

Third, the dollar will be the most powerful force and, as mentioned above, I believe the dollar is entering a renewed down trend

SPDR Gold Trust ETF (Ticker: GLD)

GLD is a very liquid ETF with liquid options. As you can see below, Friday’s trade attracted much higher than normal volume …

I think there is a high probability for GLD to break out above the 171.50 area in the next couple of weeks …

I am long the GLD 175/185 call spreads to Jan. 21 as a proxy for physical gold. I am confident that GLD will take out the high established in early June at 178.80 by year’s end.

Bring It Home

Key Fed decisions can be turning points for trends, and I believe that is exactly what Friday’s speech and the flows represent — a renewed downtrend for the US dollar and the breakout for gold.

#Income Hunters sense when there is an opportunity to bag a nice kill. This is one of those opportunities.

Stay tuned, and as always …

Live and Trade With Passion My Friends,

Griff

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