Protecting Your Account From Inflation and Hikes

Everyone seems to be getting very bullish right now, but is that the right position for the market participants?  Are there red flags that could signal an outlier move to the downside is coming?  Or is this going to simply be a grind higher with a solid trend for a few months?

The big concern for much of the market for the last year has been high inflation that has been battled by many rate hikes from the Fed, and the next CPI data will be coming out around the same time as this e-mail goes out.  I’m preparing for the worst on it, but since I can watch the number and the market reaction before making a move, my preparation may go out as a bit unnecessary.  But I’m doing my homework anyway so I’m ready and have a game plan if the CPI data comes out on the high side, as that could signal further rate hikes are coming from the Fed.

Let’s look at some market indicators that make me a bit concerned about the inflation numbers.  First, I like to look at some core commodities like oil and gold, represented here by the ETF’s GLD and USO:

As you can see in both charts, these commodities are near highs.  That’s a bit concerning as it indicates commodity prices are rising.  We can see similar in the ETF DBC, which is a basket of commodities:

Next, I see TLT is trading near highs, meaning the market has been lowering expectations of rate hikes throughout this rally:

And finally, I see that INFL, an ETF designed to hold stocks that are expected to perform well in a higher inflation environment is breaking out:

What does all of this mean?  To me, I see the expectation for rate hikes falling while the market is also pricing in higher inflation.  So, I need to be prepared for some market downside if the CPI is higher than expected today, and I love getting leverage via options when the VIX is at recent lows.  This is a potentially explosive outlier setup, and I’ll be looking at names with potential big breaks for my next Outlier Watch List.

So please go to https://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades.  As always, if you have any questions, never hesitate to reach out.

Keith Harwood

[email protected]

Auto-trading, or any broker or advisor-directed type of trading, is not supported or endorsed by TradeWins. For additional information on auto-trading, you may visit the SEC’s website: All About Auto-Trading, https://www.sec.gov/reportspubs/investor-publications/investorpubsautotradinghtm.html
TradeWins does not recommend or refer subscribers to broker-dealers. You should perform your own due diligence with respect to satisfactory broker-dealers and whether to open a brokerage account. You should always consult with your own professional advisers regarding equities and options on equities trading.

1. The information provided by the newsletters, trading, training and educational products related to various markets (collectively referred to as the “Services”) is not customized or personalized to any particular risk profile or tolerance. Nor is the information published by TradeWins Publishing (“TradeWins”) a customized or personalized recommendation to buy, sell, hold, or invest in particular financial products. The Services are intended to supplement your own research and analysis.

2. TradeWins’ Services are not a solicitation or offer to buy or sell any financial products, and the Services are not intended to provide money management advice or services.

3. Past performance is not necessarily indicative of future results. Trading and investing involve substantial risk. Trading on margin carries a high level of risk, and may not be suitable for all investors. Other than the refund policy detailed elsewhere, TradeWins does not make any guarantee or other promise as to any results that may be obtained from using the Services. No person subscribing for the Services (“Subscriber”) should make any investment decision without first consulting his or her own personal financial adviser, broker or consultant. TradeWins disclaims any and all liability in the event anything contained in the Services proves to be inaccurate, incomplete or unreliable, or results in any investment or other loss by a Subscriber.

4. You should trade or invest only “risk capital” money you can afford to lose. Trading stocks and stock options involves high risk and you can lose the entire principal amount invested or more.

5. All investments carry risk and all trading decisions made by a person remain the responsibility of that person. There is no guarantee that systems, indicators, or trading signals will result in profits or that they will not produce losses. Subscribers should fully understand all risks associated with any kind of trading or investing before engaging in such activities.

6. Some profit examples are based on hypothetical or simulated trading. This means the trades are not actual trades and instead are hypothetical trades based on real market prices at the time the recommendation is disseminated. No actual money is invested, nor are any trades executed. Hypothetical or simulated performance is not necessarily indicative of future results. Hypothetical performance results have many inherent limitations, some of which are described below. Also, the hypothetical results do not include the costs of subscriptions, commissions, or other fees. Because the trades underlying these examples have not actually been executed, the results may understate or overstate the impact of certain market factors, such as lack of liquidity. Simulated trading services in general are also designed with the benefit of hindsight, which may not be relevant to actual trading. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. TradeWins makes no representations or warranties that any account will or is likely to achieve profits similar to those shown.

7. No representation is being made that you will achieve profits or the same results as any person providing testimonial. No representation is being made that any person providing a testimonial is likely to continue to experience profitable trading after the date on which the testimonial was provided, and in fact the person providing the testimonial may have experienced losses.

8. The author experiences are not typical. The author is an experienced investor and your results will vary depending on risk tolerance, amount of risk capital utilized, size of trading position and other factors. Certain Subscribers may modify the author methods, or modify or ignore the rules or risk parameters, and any such actions are taken entirely at the Subscriber’s own election and for the Subscriber’s own risk.