Oh man, am I excited… We’re halfway through the week and things have been positive all around for our Fortune Research trades. Not only are we getting some opportunities in our energy recommendations, but I’m seeing an inflation stock to buy in 2021 as we reach the end of October.
While the S&P 500 makes new all-time highs and the Nasdaq rallies behind strong earnings from Microsoft Corp. (NYSE: MSFT), the market is seeing bearish flow across small-cap names Wednesday.
Included in those small caps are all of our energy stocks — except for the United States Natural Gas Fund (NYSEArca: UNG).
If you’ve been reading along for the past few months, you should know the drill by now… Sell a little (a tenth of any intended stake or less) when they’re up, and buy a little when they’re down.
In this case, that means selling a little UNG and buying a little Arch Resources Inc. (NYSE: ARCH), Peabody Energy Corp. (NYSE: BTU) or CONSOL Energy Inc. (NYSE: CEIX).
BTU reports Thursday, and after ARCH’s announcement that it sold its 2022 Powder River Basin coal for all-time contract highs of $16, I would expect it to raise forward guidance
Our copper play, Freeport-McMoran Inc. (NYSE: FCX), is also a great buy here if you’re so inclined. I like all of these for one specific reason: inflation. And I’m comfortable buying them on any down day… but I especially like buying them on big down days like Wednesday.
But the question on everyone’s mind is “why is this happening?”
The answer is pretty simple.
Things are down because they were WAY UP before… That’s it.
Source: Bloomberg
Small caps and commodities are just pulling back from making a higher high. No big deal.
And in fact, when we look at Russell 2000 volatility, we can definitively see this isn’t a trending phenomenon.
Source: Bloomberg
An Inflation Stock to Buy in 2021
But the interesting part of Wednesday’s action is in interest rates, which just ran straight down to make a big higher low.
Source: Bloomberg
I wrote a few weeks ago about the negative correlation between interest rates on the 10-Year Treasury and gold, hence why there’s a gold play on our watchlist now.
But I have also been keeping some kind of a financial company on the list for weeks as well.
That’s because as interest rates rise, banks make more money. But interest rates can only rise after they’ve fallen!
So this week’s BONUS TRADE in the SPDR S&P Regional Banking ETF (NYSEArca: KRE) is all about that… And it’s smaller-cap focused to boot.
Remember to buy just a little at a time on down days… maybe a little more on big down days like this.
Honestly, the ProShares UltraShort 20+ Year Treasury ETF (NYSEArca: TBT) also looks great here, but I prefer the small-cap exposure right now.
Source: Bloomberg
As always, buy ’em on red!
All the best,
Matt Warder
Fortune Research
P.S. What if traders knew — down to the exact day — when a single stock was going to explode by 100%, 150% or even 200%?
Think about that…
What if someone could count down to a date and sit back and watch as a stock shoots nearly vertical?
Most folks don’t believe that type of timing is possible.
But thanks to an odd market event New Money Crew Head Trader Lance Ippolito calls a “breakout date…”
It’s completely possible… He’s already seen it happen — and cashed in BIG.
