Hey There Income Hunters,
You know, there’s nothing quite like found money.
Government handouts. Bank errors in your favor. Trading errors that go your way.
No matter what form it comes in, it’s a good feeling.
What really counts, though, is what you do with it …
Once, in my 30s, I received a pension and profit sharing check I didn’t even know I was entitled to.
So … I immediately booked a trip for my family and my sister’s brood for a week of skiing in Vail.
It was an awesome, lifelong memory. But money always burned a hole in my pocket … I guess you can say I wasn’t much of a saver.
It seems today’s generation is much savvier in terms of saving. (Though perhaps not as good on the slopes.) That may be due to the uncertainty we’re facing — a global pandemic has a way of refocusing priorities.
Regardless, with over $680 billion in government handouts over the past year-plus … so far the biggest beneficiary is savings.
Check out these numbers …
I think it’s time to revisit what’s happening to spending activity (velocity) and its impact on inflation …
I’ve also spotted a pretty strong S&P 500 signal that I confirmed with Queen of the Candlestick Licia Leslie.
What A Ride
Yes, Thursday was a wild day that left us with another S&P all-time high …
Except this new high was on …
- A negative price/relative strength index (RSI) divergence. (You can learn how to get strong with RSI here.)
- A reversal candlestick hanging man pattern.
The hanging man looks like this …
And it’s a bearish reversal candlestick pattern that occurs after a price advance. The body should be small (red box) and the lower shadow (line below the body) should be at least twice the size of the body, with little or no upper shadow …
So we had two sell signals for the price of one. Take a look:
Another signal we have in our favor for a short S&P position right now is the Sell April, Buy May cycle that has delivered a drop of roughly 3-5% six years in a row.
I purchased a SPY 418/413 put spread expiring May-21. I would love to hold it through expiry and capture the $5 strike differential, which would mean for every one contract I own I make $500.
However, if the drop occurs early I’ll close it out. I don’t expect much more than a 3-4% drop and would like to get long if that does occur.
Bring It Home
I think this selloff is a short-term correction and expect a further “melt-up” rally into the summer … A melt up would mean a fast move higher driven solely by momentum as opposed to fundamentals…
As I’ve said before, spending activity is measured by money’s velocity — which is at all-time low. Velocity — how many times a dollar is spent — is a key signpost for high inflation. Even without higher velocity, we are seeing inflation rise in the everyday goods and services we purchase.
Next week, I will tell you how the Fed is hiding real inflation from the CPI number. The pressure continues to build in inflation and I’ll show you when it will spike much higher.
For now, as you can see in the chart below, money supply and velocity continue to further diverge. … Get ready for a powerful snapback as spending activity picks up around June or July.
I am short iShares 20 Plus Year Treasury Bond ETF (Ticker: TLT) and long energy and commodities just in case the spending activity picks up sooner.
I will certainly keep you up to date in any changes.
Have a great weekend and as always …
Live and trade With Passion My Friends,