Hey There Income Hunters,
Happy Thanksgiving!
I, of course, wouldn’t leave you hungry for profit-making content today …
Tuesday was another day of Invesco QQQ Trust Series 1 (Ticker: QQQ) downside and now European stocks are tanking with continental Covid numbers spiking.
It looks like we will see a total retrace of the recent rally up to new highs in QQQ.
From there, it will depend on whether the Covid trend will spike high enough and last long enough to trigger another lockdown.
There continues to be diverging trends that warrant caution into next week.
Today we’ll take a look at them and see what the best trades may be heading to the Dec. 17 expiration.
The Impact of a Renewed Covid-19 Surge
Lockdowns in Europe would create a tailwind for Amazon and other stay-at-home stocks.
The USD dollar is rallying because $65 trillion in global growth is outside the US and only $20 trillion is inside — so a global growth slowdown brings capital back into the US lifting the dollar.
Hence, a higher dollar revives deflation risk, which is good for tech stocks.
The question is: what will the situation look like in six months?
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- The probability of a new Covid wave this winter is high, especially following the European spike.
- In early 2022 the weakness in growth due to short-term Covid fears should shift to the US, favoring the Euro and weakening the dollar.
- Longer-term Covid is fleeting and each wave is more impotent than the next. I agree with Bill Gates who said by the summer of 2022, Covid will be rendered as harmless as the flu.
- Merck’s new covid oral antiviral drug is sub-$8 and is highly scalable and faster than antibodies. With logistics/transport improving, death rates continue to come down.
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So, in the next six months, fear of Covid in the US is bearish for the dollar and bullish for oil sector equities.
Sell the Dollar Index Fund ETF (Ticker: UUP)
Bring It Home
One outstanding macro theme is a weaker dollar.
Currently, the weakness is China and Europe are dominating capital flow into the US …
However, that will change in the weeks ahead, so positioning a bearish dollar strategy makes sense with UUP up at $26.
We’ll take a close look at energy tomorrow.
Have a very Happy ThanksgivingI am very grateful for all of your support and contributions to our #IncomeHunter community.
As always …
Live and Trade With Passion My Friends,
Griff