If you’ve been reading along with me for months, high inflation numbers shouldn’t surprise you… at all.
But Wednesday’s Consumer Price Index print clearly caught everyone else by surprise, coming in at 6.2% versus 5.9% expected.
Luckily, as we’ll get to further down, our watchlist is set up perfectly for trading the November 2021 CPI data.
Source: Bloomberg
This story is dominating major media outlets because it’s the largest increase since 1990 — a full 31 years ago.
Source: Bloomberg
It’s causing some incredibly weird market action, too, with interest rates, gold and the dollar all ripping together.
While not particularly normal, that trend has been developing over the past three weeks, as hedge funds buy protection and flee to safe havens in advance of the monthly options expiry next Friday.
Source: Fortune Research
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
This all lines up well for Monday’s bonus trade in the ProShares UltraShort Gold (NYSEArca: GLL). Gold is reaching back toward September highs while interest rates are bouncing off lows, so I’m still standing strong that shorting the yellow metal is the right move here.
There are some things that aren’t inflating, however…
Which brings us to another free trade off of our watchlist.
Trading the November 2021 CPI Data
As we’ve been saying, everything is inflating. Copper, coal, gold… everything except natural gas.
It’s down big from recent highs as production in the U.S. increases. And you know our motto by now: buy ’em on red.
The reason for this when it comes to the United States Natural Gas Fund (NYSEArca: UNG) is straightforward. Winter is still coming and although storage looks better, it all depends on the weather.
Coal prices in the U.S. haven’t come down even a little, so people will turn to a different energy source. We could easily see demand for gas skyrocket if we find ourselves in a long cold spell or a storm.
So as another way of trading the November 2021 CPI data, I like UNG. If it gets to $4 per mmbtu, let’s back the truck up.
And if I’m right… let’s sell ’em on green.
All the best,
Matt Warder
Fortune Research
