Hey There Income Hunters,
Another free-flowing capital markets week turned into a toxic, Federal Reserve-manipulated environment …
Oh, and also, good morning!
As I was saying, Fed chairman Jerome “J-Pow” Powell decided to freak the market out during a Congressional hearing last week by saying our central bank had the tools to raise interest rates and drain money from the system.
The fact is, the Fed has a game plan they will not reveal to the American public … because if they did the markets would come unglued.
The plan, for those paying attention, is this:
Inflate money supply to the point where there is so much more money in the system than US debt that GDP goes below 80%.
Debt-to-GDP is the measurement of a government’s health — and the current level of 130% is unsustainable.
The markets will either totally crash or the Fed will keep printing money to inflate the debt away and help things remain elevated for longer.
This is the kick-the-can-down-the-road approach of most fiat or paper currency central banks.
So, the weeks and months ahead will determine the US’s path forward as the dollar steadily approaches the end of reserve currency status.
Check out the charts that matter so you can anticipate where global money is flowing …
Invesco DB USD Index Bullish Fund (Ticker: UUP)
UUP is an ideal ETF to trade to express an opinion about the US dollar.
Now, when a nation is at the end of their reign as the sole reserve currency of the world, their dollar is at risk of a collapse.
The collapse happens when faith is lost in the central bank — the Fed, in this case. The Fed is moving ever closer to this point as it flip-flops to serve its own needs.
The weekly chart pattern for UUP is a descending triangle, which is a bearish pattern.
This is a longer-term pattern and it may take a few months to break down. However, it most likely will, and these levels offer a good opportunity to set up bearish option strategies that will reap rewards before the end of the year.
iShares 20+ Year Treasury Bond ETF (Ticker: TLT)
Treasury Bonds are a critical product to monitor and trade.
The most important Fed insight is that for every dollar the central bank prints, the Treasury must issue a dollar of bonds to pay for it.
So, supply in bonds continues to increase as the Fed has to print more money in an attempt to devalue the dollar …
One of the best trades in the months ahead will be to sell TLT, which is a deeply liquid ETF that closely tracks the US 10-year Treasury Bond.
I’ll wait to sell TLT on a failure on above-average volume against the 200-day moving average, represented by the red line on the chart above.
SPDR S&P 500 ETF Trust (Ticker: SPY)
The Fed is desperate to find a way to slow the economy down without having to raise interest rates.
Raising interest rates when the economy is weak and debt is high is like committing economic suicide.
That is why they may be trying to ignite a stock market correction by talking tough.
Notice Friday’s selloff in SPY on higher-than-average volume …
Bring It Home
Every week is important as the global crosscurrents of information and money flow drive the transition to a new monetary system.
Pay close attention to these three markets and jump on unfolding trends to capitalize on the global flows out of US financial assets in the months ahead.
Have a great week, and as always …
Live and Trade With passion My Friends,