loader image

How to Trade This Nonsense Debt Ceiling Debate

by | Oct 4, 2021 | Market Updates

If you’ve never watched financial media before, you’d think the sky was falling. If you listen to me, however, you know that we can usually ignore those narratives.

Taking center stage among Monday’s headlines is the ongoing “debate” about whether to raise the debt ceiling in 2021.

This meaningless back-and-forth has been part of the fabric of our financial conversation since mortgage-backed securities almost blew up the world back in 2008.

If you go to Google Trends and pull up a 17-year chart for “debt ceiling” you can even see every time it has become a national “issue” for us.

Source: Google Trends

Every little blip on that chart represents a period of time when this nonpartisan hack bit of political theater showed its face.

And every time one of those little blips went back to zero represents the period of time immediately following — where this utterly useless conversation receded back into the ether.

Spoiler alert… This is all for show. 

It doesn’t matter if Democrats, Republicans or frickin’ aliens are in charge of the country, we’re going to raise the debt ceiling in 2021.

Why? Because we have to.

Keep in mind, the U.S. Dollar is the world’s reserve currency. So if the United States were to actually default on its debt, it would trigger a cascading failure of markets around the globe.

And given how frequently senators, congressmen and Federal Reserve board members like to trade on inside information, you can bet they’d be selling into this down day.

More likely, they’re buying instead.

Trading for When We Raise the Debt Ceiling in 2021

The markets that are benefiting the most from the action — commodities and crypto — are getting some quiet tension in the background.

Source: Bloomberg

With crypto up again, you should be selling to close the Grayscale Ethereum Trust (OTC: ETHE) — which we’re up nearly 7% on in just a week and buying some iShares Russell 2000 ETF (NYSEArca: IWM), Direxion Daily S&P 500 Bull 3X (NYSEArca: SPXL) and ProShares UltraPro QQQ (NYSEArca: TQQQ)… which are all down.

Because when this political theater finally dies down toward the end of the week, all those other things are likely to rip.

Now, while this week is pretty light from a data standpoint, next week is heavy with the release of inflation data, producer price indices, retail sales and manufacturing data.

It’s also monthly options expiry again, which has brought the bears out to party every month for the past year.

That means the watchlist for this week needs to have a balance of longs and shorts in it.

So keep an eye on your inbox, folks… Fortune Research is going full switch-hitter.

All the best,

Matt Warder

Fortune Research

WRITTEN BY<br>Matt Warder

Matt Warder

What to read next

99 Problems and a “Pivot” is One

99 Problems and a “Pivot” is One

A friend of mine sent me this chart about three months ago. I should probably print it and keep it in my wallet next to a photo of my daughter. Given the sheer number of questions I’ve fielded lately, I’ll probably end up showing this chart more than her picture.

read more
Everything Everywhere, Going Down, All At Once

Everything Everywhere, Going Down, All At Once

When our momentum reading went negative last week, I didn’t know that we’d have the second largest bank failure in U.S. history three days later. All I knew was that it went negative… and that we got out of the way.

read more
Trust But Verify…

Trust But Verify…

I want to talk about our version of “Trust but Verify” in the markets. Qualification is the most important part of the investing process. And this F score value strategy looks to be crushing the current market.

read more

Have any questions? Contact Our Customer Service Team