There is a ton of meaningful economic data coming out this week… Under normal circumstances, that’s where our focus would be.
But Monday morning’s premarket announcement that Jerome Powell would — as expected — be nominated for another term as Chair of the Federal Reserve trumps all other news. And we need to check the impact of Powell’s renomination on our watchlist
Markets initially jumped on the announcement but have since fallen back to flattish on the day.
But there’s one “market” that has continued to absolutely rip on the news… interest rates.
Powell’s Fed renomination means interest rate hikes in 2022 are now a certainty. He has no choice — the market is literally telling him to raise them here.
So how were we able to figure that out?
Well, when you’re correct about inflation, a lot of other predictions tend to pan out.
That’s because interest rates always rise along with inflation and consumer spending.
And over the long term, gold always falls when those two factors coincide.
The Impact of Powell’s Fed Renomination
That’s why back on Nov. 10, I noted the weird market action with interest rates, gold and the dollar all ripping together.
I then went on to say longer-term data shows this correlation won’t stick, however. Gold has a strong negative correlation to interest rates on the 10-year Treasury.
Source: Fortune Research
Since that day, our stake in ProShares UltraShort Gold (NYSEArca: GLL) is up 6.5%… not bad for a free newsletter!
But more importantly, now it’s sitting in a position where there’s about 1% upside remaining versus 3% to 4% downside.
That’s a good spot to take profits.
If you happen to own any of our other short watchlist members — ProShares UltraShort 20+ Year Treasury ETF (NYSEArca: TBT) or Direxion Daily FTSE China Bear 3x Shares (NYSEArca: YANG) — it may not be a bad spot for those either.
Also, last week’s retail stock that reported — Williams-Sonoma Inc. (NYSE: WSM) — was ripping, up about 4% relative to this past Wednesday.
I thought it was weird how much they sold off despite solid earnings. But honestly, that was par for the course last week.
As such, it’s probably also a good idea to take profits here and, accordingly, I’m taking it off the list.
Similarly, both of our coal plays — Arch Resources Inc. (NYSE: ARCH) and Consol Energy Inc. (NYSE: CEIX) — were up Monday.
I said this past week that we remain buyers of these two on weakness, as domestic U.S. prices for both coal types have not materially changed.
If you bought some after reading that… you know what to do.
These are positions we can hold through late February. But they’re also volatile, and that requires a gradual approach with a lot of maintenance.
Now if you’re looking for something to roll all these profits into, the United States Natural Gas Fund (NYSEArca: UNG) ticked its bottom volatility band Monday morning before rebounding.
Volatility is increasing, though, and there’s still downside to its summer highs around $14.20. As such, keep any purchase small… a tenth of any intended stake or less.
I also want to start keeping track of oil markets here as we move into the holiday travel season.
West Texas Intermediate crude oil has sold off hard over the past week, and this is an interesting spot to stake out a short-term, speculative long position.
As such, I’m adding the United States Oil Fund (NYSE: USO) back onto the watchlist, updated below…
It’s a short week, obviously. With Thursday being Thanksgiving and Friday a half-day for markets, most of us already have turkey on the brain anyway.
Source: The Simpsons
As such, we’re pulling the schedule forward a little. So keep an eye on your inboxes and look for a free trade tomorrow, and maybe a wrap-up on Wednesday.
All the best,
P.S. Wall Street knows the key way to beat inflation is by trying to flood the stocks that are set to outperform.
It just makes sense…
But what if I said there’s a way to uncover those stocks before the giant surge?
Well, thanks to this stock market trigger that’s already allowed me to lock in winners like 36.92% on APTV in seven days… 53.66% on PWR in four days… and even 83.87% on ALB in six days….
Everyday traders can follow along now!