Confidence, Bond Yields Slipping

Hey There Income Hunters,

Well, I called the Fed-engineered correction early last week …

And, sure enough, Fed chairman Jerome “J-Pow” Powell announced during congressional testimony on Thursday that the central bank would raise rates and drain money from the system if inflation remains at current levels.

While I don’t believe the Fed will raise rates, it’s clear to me that officials are talking stocks down to give themselves the cover to print more money later.

And what’s this? The SPDR S&P 500 ETF (Ticker: SPY) is in the danger zone, crossing below the 200-day moving average on high volume.

SPY did the same thing in June (red circle) and snapped back the next day. Today will be interesting.

There are many signs this could be an extended correction …

Check them out below along with the Trade of the Week …

Going Stag

Forward-looking consumer expectations are showing stagflation (low growth/high inflation), and consumers don’t appear to be chomping at the bit to spend …

Higher prices may be part of the reason …

Awfully Bad Timing for the Delta variant

One of the biggest risks facing markets over the next couple months is the Delta variant of Covid-19 …


Global Covid-19 cases.

Some locales, despite rather high vaccination rates, are reinstating some major anti-virus measures.

Los Angeles, for example, brought back a mask mandate this past weekend as public health officials are struggling with an alarming rise in cases tied to the Delta variant.

Not great for consumer confidence!

And stocks in the travel and leisure industry paid the price on Monday.

I SPY

If you are expecting follow through on the SPY downtrade, you’ll be interested in this move …

      • Buy four SPY July 23 420-strike puts and sell four SPY Jul 23 412-strike puts.
      • Also buy one SPY July 23 430-strike call 

That means buying 24.5% vol and selling 28.5% vol. When priced yesterday, it was $1.49 for the put spread and $134 for the call spread.

The risk profile is below …

Bring It Home

Probabilities favor an extended correction here and could lower bond yields be a further warning sign?

I continue to dollar cost average into the quality miners, while all signs point to higher inflation for longer

Live and Trade With Passion My Friends,

Griff

 

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