FED ENGINEERING INFLATION – CHINA MOVES TO COOL INFLATION

To gain an edge, this is what you need to know today.

Tug Of War

Please click here for a chart of iron ore China commodities (FE_F).

Note the following:

  • In a strange way, a tug of war is erupting between the objectives of the U. S. and China regarding inflation.
  • In the U. S., the Fed has gone all out to engineer inflation.
  • The Fed believes that increasing inflation of 0.3 – 0.5% from the trendline will be good for the U. S.
  • In our analysis, to accomplish this goal of a few basis point rise in inflation, the Fed is taking a huge gamble.
  • Take a look at the chart of iron ore.  Granted iron ore is a very small part of the economy but it illustrates the point.
  • The chart shows a strong rise in iron ore price.
  • The chart shows that China is cracking down on commodity price increases.
  • China is the world’s largest consumer of commodities. The rise in commodity prices is one cause of inflation.
  • The latest fall in iron ore prices is coming after China adopting a zero-tolerance policy on irregularities in commodity markets.  China is warning against excessive speculation and hoarding.

Crypto

Cryptocurrencies are rising. Bitcoin has jumped more than 10% after falling about 7% over the weekend.

Ether is jumping about 17% after falling 8% over the weekend.

The fall in currencies over the weekend was related to the Chinese push against cryptocurrencies.

Ether is moving closer on a fix to reduce energy use by over 99%.  If implemented, ESG investors may start favoring ether over bitcoin.

Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial)  stocks in the early trade. Smart money is 🔒.

Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is 🔒.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade. Smart money is 🔒.

For longer-term, please see oil ratings.

Markets

Our very, very short-term early stock market indicator is 🔒.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking down and bonds are ticking up.

The dollar is weaker.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1885, silver futures are at $27.87, and oil futures are $64.42.

S&P 500 futures resistance levels are 4200, 4318, and 4400: support levels are 4000, 3950, and 3860.

DJIA futures are up 146 points.

Protection Bands and What To Do Now?

It is important for investors to look ahead and not in the rearview mirror.

Consider continuing to hold existing positions. Based on individual risk preference, on dips, consider holding 🔒 in cash or treasury bills or short-term bond funds or allocated to short-term tactical trades and short to medium-term hedges of 🔒 and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection bands by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

 

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This post was just published on ZYX Buy Change Alert.

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