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Interestrates

Interest rates 101: How they influence the market?As individuals, we face decisions every day that implicate saving money for a future use or borrowing money for consumption. If we want to make an investment, one important task for us is the analysis of transactions with present and future cash flows. When we place value on any asset, we are trying to determine the worth of a stream of future cash flows. Money has time value which means that individuals prefer a given sum of money the earlier it is received. Consider the following exchange: You pay $4,000 today and in return receive $3,500 today. Would you accept this arrangement? Not likely. But what if you received the $3,500 today and paid the $4,000 one year from now? Can these sums be considered comparable? Possibly, because a payment of $4,000 a year from now would probably be worth less to you than a payment of $4,000 today. It would be fair, therefore, to discount the $4,000 collected in one year; that means to cut its value based on the time that passes before the money is paid. An interest rate( r ) is a rate of return that reflects the relationship between differently dated cash flows. If $3,500 today and $4,000 in one year are equivalent in value, then $4000 − $3,500 = $500 is the required compensation for receiving $4,000 in one year rather than now. The interest rate—the required compensation stated as a rate of return—is $500/$3,500 = 0.1428 or 14.28 percent. Interest rates can be reflected in 3 ways: 1. Rates of return 2. Discount rates 3. Opportunity costs The opportunity cost is the value that investors are willing to quit by choosing a particular investment over another. If the party who supplied the $3,500 had instead decided to spend it today, he would have forgone earning 14,28% on the money. So, 14,28% is the opportunity cost of current consumption over investing in this example. From the perspective of an investor analyzing the market-determined interest rates we can see an interest rate r as being composed of a real risk-free interest rate plus a set of premiums that are required returns for bearing some different types of risk: r = Real risk-free interest rate + Inflation premium + Default risk premium + Maturity premium + Liquidity premium • The real risk-free interest rate is the interest rate for a completely risk-free security if no inflation is expected. In theory, the real risk-free rate echoes the time predilection of individuals for current versus future real expenditure. • The inflation premium compensates investors for expected inflation and reflects the typical inflation rate expected over the maturity of the debt. The aggregate of the real risk-free interest rate and the inflation premium is the nominal risk-free interest rate . • The default risk premium compensates investors for the risk that the borrower will fail to make a contractually agreed-upon payment on time and in the agreed-upon sum. • If an investment needs to be converted to cash quickly, the liquidity premium compensates investors for the risk of loss relative to the investment's fair value. • When maturity is extended, the maturity premium compensates investors for the increased exposure of the market value of debt to changes in market interest rates (holding all else equal). Trade with care. If you like our content, please feel free to support our page with a like, comment & subscribe for future educational ideas and trading setups.
TVC:DJIEducation
by financialflagship
97
EURUSD before Fed Tonight we are expecting a Fed Interest Rate Decision! No change in the interest rate is expected, but there will be movement! Jerome Powell's comments at the press conference will be extremely important! After today, many opportunities will be sought based on this news. We are looking for a higher probability in advance and we have expectations. Our expectations, as we have commented, are for a strong USD On H1 from yesterday we also have a lower bottom, which allows us to expect that the price will continue to 1.1836. Close above 1.1955 will be critical to the analysis If you have questions about how to trade this or another situation, contact us! To support us, like and comment!
Short
by ForexTrendline
EURUSD AnalysisUSD is rising everywhere. See the analysis from Friday: Today's possibility is for EURUSD. Here we have a very good example of a break and test of the trendline. After the impulse decline on Friday, which broke the trend line, we see a correction right next to it and repulsion. This situation, as well as the expectation of a strong USD, allows us to look for sell up to 1.1836! On Wednesday we expect the decision on the interest rate from the Fed! If you have questions about how to trade this or another situation, contact us! To support us, like and comment!
Short
by ForexTrendline
Cryptos, Stonks, Fiat, and, Interest rates... The Next Ten YearsIn this video I give you my macro view of what is coming in the next ten years. This video is designed to give you a feel of what I believe is a likely outcome based on a combination of my different views. I have played devils advocate many times before in order to get a feel for the markets. The reason is mainly to feel it and to observe other peoples reactions. For every buyer there is a seller so the views and comments will also vary, it's human psychology. Just remember: I am not a financial advisor, I suggest using this only as a guide. Always do your own research. If you don't know the long term pattern shouldn't you be doing your research instead of just following the crowd?
TVC:DJI
by AriasWave
150 pips at USDCADIf you are looking for trades that can be executed quickly and have a good ratio. See USDCAD! About the 3: 1 ratio The potential profit is 150 pips at 1.2822 levels. The minimum stop that can be used is 1.2620 or 50 pips (the more conservative version is 1.2580) Regarding the quickness of movement: A decision on the interest rate by the Bank of Canada will be published today. Even if there is no change in interest rates, it is very likely that we will see a movement. Which allows for performance throughout the day. There are less than 9 hours left until the news! Technically, we have reason to buy even after the break of the one-hour trend! If you have questions about how to trade this or another situation, contact us! To support us, like and comment!
Long
by ForexTrendline
VISA. Ascending Triangle on Weekly. 3:1 RRR.NYSE:V is breaking a year long ascending triangle on the weekly time scale. Measuring by the height of the triangle, about $80, from the top of the triangle gives us a target of $296. This is 35% potential profit from the current price of $219. Taking the recent swing low as a guide, we can set our stop loss at $189. The triangle is not considered broken upwards until we see next week's candle trading above current week's candle, given that this week's close is above the triangle. Unfortunately I can't give a time window for this move. From a fundamental point of view, I suspect that Visa benefits from the Fed's increased interest rates. But I would need more research to understand precisely the magnitude of such effect.
NYSE:VLong
by TechNerdOmar
Macroeconomics 101: inflation, bonds, interest rates, stocksHello fellow traders and dear padawans. The equities market has been hit very hard the past 3 weeks or so, specially growth stocks. I think it is important to address what is happening behind the scenes that caused the selloff in the equities market so that many of you can better understand what is going on. This is a very basic explanation of macroeconomics and by no means thorough but I know that many of my followers would benefit from it at times like these. To establish a common ground I will start with some definitions of terms. I wanted to keep things straight forward so I am getting these definitions from investopedia.com because they did a much better job than I would, defining terms thoroughly yet concisely. Keep in mind these are short definitions of concepts that deserve in-depth study if you want to understand them fully. However, for the purpose of this discussion what follows is enough (you can always read full articles on investopedia.com or somewhere else). If you are well versed on those you can certainly skip ahead (or use this as a refresher). DEFINITIONS Inflation : Inflation is the decline of purchasing power of a given currency over time. A quantitative estimate of the rate at which the decline in purchasing power occurs can be reflected in the increase of an average price level of a basket of selected goods and services in an economy over some period of time. The rise in the general level of prices, often expressed a a percentage means that a unit of currency effectively buys less than it did in prior periods. Inflation can be contrasted with deflation, which occurs when the purchasing power of money increases and prices decline. Bonds : A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details include the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments made by the borrower. Treasury Notes : A Treasury note (T-note for short) is a marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years. Issued in maturities of two, three, five, seven and 10 years, Treasury notes are extremely popular investments, as there is a large secondary market that adds to their liquidity. Interest payments on the notes are made every six months until maturity. Treasury notes, bonds, and bills are all types of debt obligations issued by the U.S. Treasury. The key difference between them is their length of maturity. For example, a Treasury bond’s maturity exceeds 10 years and goes up to 30 years, making Treasury bonds the longest-dated, sovereign fixed-income security. Federal Fund Rates : The federal funds rate refers to the interest rate that banks charge other banks for lending to them excess cash from their reserve balances on an overnight basis. By law, banks must maintain a reserve equal to a certain percentage of their deposits in an account at a Federal Reserve bank. The amount of money a bank must keep in its Fed account is known as a reserve requirement and is based on a percentage of the bank's total deposits. They are required to maintain non-interest-bearing accounts at Federal Reserve banks to ensure that they will have enough money to cover depositors' withdrawals and other obligations. Any money in their reserve that exceeds the required level is available for lending to other banks that might have a shortfall. Note: although the Federal Fund Rates are charged to banks, banks pass them down to clients' personal/auto/student/mortgage loans and credit card interest rates so these interest rates cascade down to society as a whole. With those out of the way we can start discussing the relationship they have with one another as well as the equities market and understand what is happening with the stock markets. RELATIONSHIP BETWEEN INFLATION AND INTEREST RATES In general they have inverse correlation, meaning when one goes up the other goes down. The inverse correlation happens because when interest rates are low people feel encouraged to borrow money, which leads to more spending thus creating more demand of goods and services than supply. When demand is bigger than supply prices will increase to both slow down demand and also (perhaps more importantly) to increase profit margins, which leads to inflation. Because the Fed can manipulate short-term interest rates via the Federal Fund Rates they are able to somewhat control inflation. When interest rates are high the process is inverse to the one described above: people feel discouraged to borrow and spend money; instead they prefer to invest in a fixed income instrument such as high yield savings accounts, CD, or bonds to take advantage of the high yields. It is therefore the job of the Fed to keep inflation and interest rates in balance. Although not everybody agrees, it is understood by economists in general that some inflation is good for economy because it encourages consumers to spend their money and debtors to pay their debt with money that is less valuable than when they borrowed it. Thus some inflation drives economic growth. One of these economists is John Maynard Keynes, who believed that if prices of consumer goods are continuously falling people hold off on their purchases because they think they will get a better deal later on (who doesn't like a good discount?). Another important element that factors into inflation is how much liquidity is injected in the economy (cash, or money supply). More money would translate into more demand and rise in prices. RELATIONSHIP BETWEEN BOND PRICES, BOND YIELDS (or INTEREST RATES), and INFLATION Bond prices and yields also have an inverse correlation: if the bond certificate price (AKA face value , or what the bond certificate is worth) increases the yield decreases and vice-versa. To make things simple and to better illustrate how bond prices and yields are related the example below uses what is known as ZERO-COUPON BOND, where the yield is derived from the relationship between the coupon payout and the bond face value (back in the day the bond certificate--a piece of paper--had small coupons that investors would rip off and present to the borrower to redeem their yields. That terminology is still used to this day although these coupons are not used anymore). Example: if the bond price is $1,000 and the borrower receives $1,100 back at the end of one year, the so-called coupon rate (the yield paid for each bond certificate throughout the lifetime of the bond) is 10% . So the formula to find the coupon rate is: COUPON RATE = ANNUALIZED COUPON VALUE/BOND FACE VALUE; in this case, 100/1000, or 0.1. That formula helps to understand why the bond price and bond yield (coupon rate) have an inverse correlation. It is important to keep in mind that bond yields reflect genereal interest rates. Like interest rates they can move up or down Like other asset classes such as options, a bond certificate holder can sell that certificate back to the market (known as secondary market). If the current bond yield is lower than when the bond holder "bought" their bond it may be interesting for them to consider selling it because it is now more valuable than when they bought it due to the inverse correlation discussed above. So for bond holders, decrease in interest rates is beneficial. Hopefully it is also clear that a rise in inflation that results in higher interest rates affects bond holders negatively. Who would want to sell a bond that is now less valuable than when they bought it? However, higher bond yields are attractive to new bond investors because it gives them more return for their investment overtime. THE IMPORTANCE OF THE 10-YEAR TREASURY NOTES AND ITS YIELD The government sells Treasury Bills/Notes/Bonds via auction. The yield of bonds is determined by investors' bids. The 10-year-yield's importance goes beyond the rate of return for investors; mortgage interest rates are derived from the 10-year yield for instance. But for the purpose of this text, it is important to understand that the market relies on the 10-year to gauge investors's confidence. Here we see another inverse correlation: if confidence is high, the 10-year yield rises and bond prices drop and vice-versa. Any change in the 10-year yield is closely watched by the markets and has enormous impact in other asset classes. PUTTING IT ALL TOGETHER: BOND YIELDS, STIMULUS, EMPLOYMENT NUMBERS, STOCKS, AND THE FED When Treasury bond yields rise bonds become an attractive investment because it is a safer than stocks--specially growth stocks where investors are placing their money on future success as opposed to present profits--since it is backed by the US government and provides fixed returns. While bond investors don't enjoy the big rallies of the stock market they also don't expose their capital to volatility and crashes. With the reopening of the economy in clear sight due to vaccination, and the better than expected job reports investors started fearing higher inflation. That is a simple math: more people making money and out on the streets will boost consumption, which will lead to rise in prices. As explained before, higher inflation causes the Fed to adjustment interest rates, which causes bond prices to fall and yield to rise. Despite what Jerome Powell has said last week--that inflation rise is going to be temporary--investors didn't feel much confidence, which caused the recent sharp rise in the 10-year yield Treasury. With that, bonds became a good alternative to the stock market, causing investors to reallocate some of their capital into bonds. That and the fear caused by falling prices and the media (most of the media fuels panic--one month later everything is green again) resulted in the huge selloff we have seen the past weeks. CONCLUSION Phew, that was a lot. As I wrote on the preface of this text this is an overview of the subject matter so you can always read up on each one of the areas covered here to get more in-depth knowledge. However, I think this provides a good summary of what is going on on the markets right now. Hopefully you will have filled some gaps on your knowledge and will start making more sense of the interrelationship of the many aspects of economy covered here. This is a difficult subject to write about so I apologize if any idea is unclear. I can always clarify anything on the comments. Bottom line: when things are clearer (inflation + interest rates) the markets will most likely stabilize and follow its due course. Growth stocks will continue growing (perhaps at a slower pace) and you will continue making good returns on good companies. I am using this selloff as an opportunity to lower my cost basis and enter positions in stocks that were too expensive before. Sometimes a pullback is all you were looking for even if you lose money in the short term. And hey, one can always buy put options to hedge against their long positions. Good luck and safe trades! ===If you get anything out of this text, please hit the like button and/or follow for updates and new publications.=== ***The ideas shared here are my opinion, not financial advise to place trades. Please do your own research before buying/selling stocks***
FRED:WM2NSEducation
by Safe_Trades
6
Equity sentiment suddenly got very bearish this weekSentiment Is Suddenly Very Bearish on Equities, SPX, NDX, RUT It's been a volatile few weeks of trading as the S&P 500 pulled back a bit (and the Nasdaq pulled back a bit more). Bearish sentiment has grown as the price dipped. The $CPCE equity put/call ratio rose sharply this week to levels last seen in March 2020, near the beginning of the pandemic. The current put/call ratio on the $SPY S&P 500 ETF is 1.5. That's actually better than the average for the last 30 days (1.7), but it's still quite negative. Sentiment is even more negative on the $QQQ Nasdaq ETF, with a put/call ratio of 2.2. The $IWM Russell 2000 small cap ETF is looking even worse, at 2.3. Stock market options traders seem to think that interest rates will continue to rise and the stock market bubble is soon to burst. A lot of the finance wonks I follow on Twitter sold into Friday's strength. However, options on the $TLT 20+ year Treasury bond ETF are sending a different signal. With a put/call ratio of 0.9, bond wonks appear to expect at least a short-term weakening of rates and a rally in bonds from here. $TLT has entered a region of fairly strong technical support: Despite Negative Sentiment, There Are Lots of Fundamental Reasons to Be Bullish To be honest, I think the bearish sentiment in equities may be premature. We've got a fourth vaccine thanks to Johnson & Johnson, with Merck slated to help provide manufacturing capacity. This means we could get all US adults vaccinated 2 months earlier than expected. Plus Merck seems on the verge of getting approval for a Covid therapeutic that could be helpful as well. The savings rate rose during the pandemic, and a lot of that "quarantined cash" will be unleashed on markets as people get vaccinated. Plus, there's more liquidity in the pipeline. We've got another round of $1400 stimulus checks coming. Markets have been worried about a federal minimum wage hike, but it doesn't look like that will happen. The stimulus bill provides $300 billion of support to state and city governments, which removes one of the big risks to the recovery: rising state and local taxes to cover budget shortfalls. Despite rising interest rates, private lending has ticked upward in recent weeks: An uptick in private lending historically has been a confirmation signal that a recession has ended, as I laid out in a previous post: Plus, the jobs numbers this week surpassed analyst expectations by a wide margin, and the ECRI leading economic index has resumed its upward trend. So economic data are signaling continued recovery ahead. The Bear Case Is About Valuations and Rising Interest Rates The bear case would seem to be threefold. First, valuations are very high. Which is absolutely true, but won't necessarily stop them from getting higher. Second, more stimulus means more inflation, which means interest rates could continue to rise. (Inflation is bullish for stocks, but rising interest are bearish. So it's a tug of war between the two, and the question is whether rising interest rates will be enough to rein inflation in. The bears are betting that it will.) And third, there's a technical case for continued market weakness, because $SPY has violated its support trend line. However, I suspect it will establish a new, less steep support line a bit below the previous one. I suppose we could see a 10% correction to the 50-day EMA: But even that feels unlikely to me, given the strength of the fundamentals. I think this correction could prove much more modest than that: Admittedly, I'm not pouring cash into this market at these valuations. But despite rising bearish sentiment, I'm pulling cash out of the market, either. In my opinion, it's likely too early for that, given the fundamentals.
C
by ChristopherCarrollSmith
13
What Analysts Got Wrong about the Recent Volatility.Since I'm not a professional analyst, I've sunk many hours of research in the past week to understand the recent move in the market on a deeper level. Here are my findings. I hope you find this informative. I've been hearing different analysts' opinions about the recent move in the stock market. I heard the money is moving from tech stocks to banks, or from growth stocks to value stocks. I'm here to say that neither is true. NASDAQ:GOOG is a tech stock and it's been rising. NASDAQ:COST is a value stock and it's been falling. Observe different stocks and you'll find numerous examples. The recent move is rather about companies in debt vs companies with free cash flow . It turns out that when interest rates are raised, it can be predicted with certainty that more money is going to flow into servicing existing debt rather than into productivity. Watch this talk with Brent Johnson to understand this concept, minute 50 to 60. Banks, who recently had their debts quantitatively eased, have more room to buy corporate bonds from companies like GM and Ford. This debt is used to service older debt. The big money, which understands this debt-based economy well, knows precisely where value is going when interest rates rise. Big money used their tried-and-tested calculations and decided to move their investments from free-cash-flow companies, to debt-generating companies. That's what's been happening, and that's the reasoning behind it. However, there is a point the smart money is missing and they keep missing it and never learn. There is much more value to reap from technology and innovation than there is in loan interests. This value of tech is not priced into their tried-and-tested calculations. It's probably too uncertain for them. But realize that when companies like Amazon, Apple, Google, Facebook, and Tesla create value through technology, they are carrying the rest of the useless debt-generating economy on their backs and creating prosperity for the entire nation and for the world. Real value is in productivity. The United States has moved slowly after WW2 from an industrial exporter to a liquidity and debt exporter of sorts, which also reflected on the US's internal economy. And that weakened the industrial sector over the decades and bubbled the financial sector to an overwhelming extent that it's sucking more and more money from productive businesses and pouring it into existing debts with the purpose of buying more time. The retail investor should learn and understand this in order to position themselves with high conviction on the side of technology and simply hold stocks like Tesla for a decade. You are already benefiting the economy by saving money aside and putting it in the right place and of course the reward is high. Let me know your thoughts. I probably made mistakes and left some statements in need of more elaboration.
SP:SPX
by TechNerdOmar
4
TSLA. Is the correction over? Time to Buy!After my idea about a correction in NASDAQ:TSLA , it's time for a follow-up. There is strong support at $560, while our target for 2021 is above $1200. So it makes sense to buy and buy aggressively at these levels. I see pre-market today opening lower than last close, but that doesn't bother me at all. The scare from rising interest rates is already priced in and has already taken effect over the past two weeks. Do not over-lever your trade. That's just my opinion. The absolute low in my estimation is at $440. So if you lever 5:1 for example, you might easily get liquidated. Dow Jones ( TVC:DJI ) has room to fall until 27000. That's a 10% drop from current levels. See the following chart. But the S&P500 has only 8% room to fall before it reaches major support. Judging by previous drops, that usually translates to a 16% drop in TSLA, which takes us to $560. Conclusion : TSLA is at a strong buy in my opinion right now and all the way down to $560. The risk is low but the reward is high short-term and extremely high long-term.
NASDAQ:TSLALong
by TechNerdOmar
NASDAQ - Bearish or Bullish? As you probably are aware, 10 year yields are have been increasing for the past week or so as the fear of raising interest rates increases. In short, yields go up with interest rates as bond prices decrease. When rates are projected to go up - as markets are a forward looking indicator - stock prices will decline as investors are pricing in a higher cost of capital for companies across the board. The companies that are impacted the most are growth stocks such as the ones listed in the Russell 2000 and NASDAQ 100. These companies get hit harder by decreasing interest rates because they are borrowing at a higher rate than value companies such as Walmart or United Parcel Services. On the 4 hour NASDAQ futures chart, price action has held the 180 day EMA as well as the green uptrend line very strongly since the COVID - 19 crash. There have been two times since December 8th where the NASDAQ futures price action has broken below 180 EMA. In both cases, the NASDAQ failed to turn bearish shortly reversing and turning higher. Obviously, this time it's different for the reason that I mentioned above - interest rates. On the 4 hour chart, NASDAQ Futures has sold off around 9% over the past week - flirting with corrective territory. Previously, NASDAQ Futures sold off close to 12,671.25 before appearing to have turned bullish prior to getting rejected by the 180 day EMA. After the 180 EMA rejection, NASDAQ Futures touched 12,671.25 and appears to making a break to 13,130.50. I am currently holding TQQQ (ProShares UltraPro QQQ) which is a 3x leveraged ETF on QQQ. At the time of writing this, I am currently down on my position with plans to add to my position if NASDAQ Futures can break above and hold the green uptrend line that I have drawn. As of right now, the key level that I am watching is 13,130.50 with hopes that the NASDAQ Futures can break above the 180 EMA (Blue Line) with volume. In my personal opinion, I would turn more bullish on the NASDAQ and even more bullish on TQQQ if the NASDAQ Futures can hold the 180 EMA (Blue Line) with the 20 EMA (White Line) and 50 EMA (Orange Line) crossing over the 180 EMA with volume.
CME_MINI:NQ1!Long
by madisonsoun97
3
$TQQQ Market Correction DDThe market was extremely bloody last night, where we saw $TQQQ trading at highs of $98.07 at one point and subsequently closing at $87.90. I believe this can be attributed to the rising bond yields trend we are currently witnessing, particularly in the 5 year and 10 year treasury yield. Between the start of February 2021 to February 24th, the 5 year treasury yield has been steadily increasing at an average of 0.01 to 0.03 daily, while the 10 year treasury yield has been increasing at an average of 0.01 to 0.04 daily. However, yesterday on the 25th of February, this skyrocketed. The 5 year treasury yield shot up by 0.19 from 0.62 to 0.82, while the 10 year treasury yield shot up by 0.16 from 1.38 to 1.54. Typically, when the 5 year treasury yield goes beyond the 0.75% threshold and the 10 year treasury yield goes above the 1.50% threshold, the stock market tend to sell off in reaction to that. This huge one-day surge in yield return as a result of a lack of interest in bonds likely exacerbated the sell-off. I believe that this correction is extremely healthy in a market where a lot of the valuations are rather high; and this is unlikely the "huge market crash" or the "bubble pop" premonition that many investors are fearful for, especially considering the fact that a huge $1.9 trillion stimulus will be incoming. However, it will undoubtedly do us good to remain cautious and keep some cash on the side because in the short-term, the hardening of yields will likely lead to some volatility - which means more frequent dips for you to average your positions; but more importantly, eventually, the consequences of printing these money will likely catch up to us in the form of record-level inflation and interest rate rise, possibly killing the bull run - and we need to be prepared for it. For now, I expect growth from the support zone of this bullish channel back to the $100 to $110 range. This is not investment advice so please do your own due diligence! Support this idea with likes and share your thoughts below.
NASDAQ:TQQQLong
by AntrePoint
2
Gold Short Term BUYGold hit a big support level and rolling fibonacci bands support this level. If treasury bond yields hit a panic high yesterday,which I think happened we will at least have a slight softening of real interest rates for a while. banks can easily buy T Bonds with yields at this level and hold them for a while as they are financing at zero rates so they will be buyers for a month or so at least. Ultimately the FED cannot control rates over 10 years but the market tanked too much in the T bond future. This does not mean total relief for equities as they are not good if inflation returns and earnings are impaired. Gold however can still be financed at close to zero and European rates are still below zero for Bunds. Although this is a short term view,it may also have been a medium term low but right now just in for a trade.
FX_IDC:XAUUSDLong
by thewickedwiz
2
Coffee, Global Agriculture Inflation BoomNotice the major multi-year higher low formed in 2019, followed by the rounding basing pattern and subsequent breakout outside of the multi-year triangle. The higher low in 2019, before the Covid deflation crash, tells me the agriculture complex was already bottoming ahead of Covid and now has a full head of steam. Corn, Soybeans, Sugar, Fertilizer have all been ripping to the upside like mad. Way to play coffee is through the ETF NIB Not investment advice. DYODD
ICEUS:KC1!Long
by Ludwig_Von_Mises
Are You Positioned for Quad 2? I hope you're readyWe're already in the midst of record runs in the equity and commodity markets but as bubbly as it seems, its not over. We are in an environment that not many people are familiar with. The last time Growth and Inflation on a global scale were accelerating as fast as they are now was immediately after World War 2. Previous commodity cycles were sparked by 1 or 2 catalysts. The current macro setup has nearly the most accommodative and bullish catalysts for global growth and inflation that we could imagine. Fed on autopilot, Fiscal out the wazoo, supply chain disruptions and shortages everywhere, all major political interests want a weaker dollar. Given that is the case and YoY GDP will probably show about +10% and CPI +3% in the 2nd Quarter, there's a good chance this current run, especially for commodities, could continue for a couple more months before a major correction. Things I have been and remain bullish on: Potash, Sugar, Wheat, Soybeans, Corn, Cocoa, Coffee, Orange Juice, Copper, Uranium, Crude Oil, Natural Gas. I've added to my exposure recently Aluminum, Nickel, and Coal.
CBOT:ZW1!Long
by Ludwig_Von_Mises
Coal is Non Consensus, ContrarianContrary to opinion of virtue signalers, lots of coal is required for the production of electricity, solar panels, and electric vehicles. Coal didn't go away, we just outsourced it to China, which consumes 50% of the world's coal. This is just a simple mean-reversion play. It's one of the few commodities still near their 2020 crash lows and has healthy upside in this global macro Quad 2 (global growth and inflation accelerating simultaneously). Ways to express this trade via equities include HCC BTU ARLP NRP ARCH HRNG SXC METC CEIX Not investment advice. DYODD.
DJ:DJUSCLLong
by Ludwig_Von_Mises
Make-Or-Break for Stocks! Eyes on the Fed 👀Stocks have retraced significantly in what appears to be a megaphone-like pattern. For the pedantic, a proper megaphone pattern requires higher highs as well, which we don't seem to have, but the spirit of the megaphone pattern is expanding volatility which we do see, especially on the down side. These current levels are a make-or-break for stocks. The level 3867 is crucial here, as it is the intersection of a tend line and a technical and Fibonacci level. If we break this we will have a lot of momentum, and could easily slice through 3846 to find support at 3824 or even 3810. Fundamentally, investors are fearful that a rise in the bond yields will result in a more hawkish Fed, and stocks are loving their low interest rate environment and easy money policies. Watch for hints of the Fed's direction when Jerome Powell speaks tomorrow. If you have faith in the stock market, then any dip should be considered a buying opportunity, as once the news is digested, hawkish or not, stocks will likely rip back to highs.
FX:SPX500Short
by quantguy
Using Treasury Protected Securities to HedgeFar be it from the lips of any trader to question the bull run, but all good, crazy things must come to an end. And it is in this spirit that we plan for the future. Everyone with the tiniest bit of gumption is a genius in a bull market, but it's when the stock comes crashing down that separates the real traders from the future embittered. This is comparing all the TIP ETFs I could find with the effective Federal Funds rate. The idea is that while a TIP will protect your money from inflation, you want to pick one that is resilient in the face of high-interest rates. I've named my favorite, for the specific reason that it is the most volatile. So while it will succumb to a market crash it may more quickly recover. The nightmare is to be left bag holding a 2001-2007-type scenario, or 2007-2012. Now I'm a trend follower. Not a trend-setter. So my plan is to beat the market and generate some money in this environment and then lose 20% of the portfolio at the top when this thing starts flatlining - whenever that might be. It's been right around the corner for a decade and with the stock market totally beholden to the FED, it's not hard to imagine a subtle policy change like slightly raising interest rates totally blowing this thing for 2-3 years. At that time I hope to bail into some combination of TIPS and Food Retail (Ingles, Albersons, Kroger) to weather the storm. It's not wrong to take advantage of the mania, but you better have a plan on where to put your money.
FRED:FEDFUNDS
by PreferredStonk