Hey There Income Hunters,
There is a new sheriff in town, and she is one tough cookie.
I am talking about the Federal Trade Commission Chairperson Lina Khan.
And Lina is scaring the daylights out of big tech …
You see, the FTC was created after the Depression to apply some serious antitrust firepower. That lasted until Ronald Reagan told the enforcers to back off and let business be disciplined by free markets …
Well, the pendulum is about to swing back to regulatory crackdown — and the progressives are loving it.
Kahn has been given a lot of authority to make decisions, like approving antitrust subpoenas without agreement from other commissioners.
This is serious and impacts markets in two ways:
It could reverse tech outperformance and drag down the Nasdaq and the S&P 500 indexes, which are both heavy on tech.
It will force the administration to move even further left and launch modern monetary theory (MMT) to take fiscal stimulus to an even more outrageous level …
Today, I want to show you how much Tech has already moved and where those flows are going now.
Progressive (And I Don’t Mean the Insurance)
The Progressives are gaining control and demanding the Fed finance their $3.5 trillion dream spending bill.
This may push Biden to fire Fed chairman Jerome Powell and appoint 2-3 new doves to the Fed board to push their agenda.
We are talking hyper-inflation, and the reallocation of capital out of tech into energy has moved quick over the past week …
Check out the outperformance of energy over tech in recent days. The chart below shows the energy/tech ratio comparing the SPDR Select Energy Sector ETF (Ticker: XLE) and the SPDR Select Technology Sector ETF (Ticker: XLK):
Energy has been the King of the Sector ETFs for sure …
Below is an illustration of the sector performance over the past month …
Energy has outperformed Tech by more than 17% in a month. That is a massive move.
I saw this coming because of how ESG was making it impossible for energy producers to expand operations.
Demand for energy is high NOW not 10-years from now. So, once the market started realizing it, you had a quick XLE move to the highs …
Now the energy trade is getting a bit crowded and, although I think it can go a lot further, I think XLE will get up to $60 and chop around for a bit.
Yesterday I closed a 129% XLE winner that was a simple $XLE NOV19 49/50 CS that I put on at $.35 and closed at %.80. Now I have my sights set on the next big move …
Move Down the Supply Chain
On the energy and commodity side, a trend higher in price begins with the underlying asset, then shifts to the producers and then to the transportation and service providers …
Below is the chart for the Alerian Master Limited Partnerships ETF (Ticker: AMLP):
AMLP is a deeply liquid ETF that tracks quality companies that provide pipeline transportation, gathering and processing of Oil, natural gas, and coal resources.
The top-10 holdings are the cream of the crop, including two of my favorites: Enterprise Products partners (Ticker: EPD) and Energy Transfer (Ticker: ET) …
You can view all the holdings and review all the details in the AMLP fact sheet.
Bring It Home
These are great trades for maximizing return on investment …
I am going to purchase a $AMLP Nov19 36/38 Call Spread for $.50 …
- Your max loss is the $.50
- If AMLP closes above $38 at expiration your max revenues is $200 …
- Your net profit would be 200-50 = 150
- Your return on investment would be 150/50 = 300%
The fundamentals and technicals meet on this one so your probability of capturing the full 300% is good.
You can also consider selling XLK against it if you prefer paired trades to profit from reallocation out of tech.
Please keep the emails coming! Volatility is high and there are many great opportunities for trade like these …
Have a great day today and as always,
Live and Trade With Passion,