Expect the bears to be out in full force this week as the Energy Crisis — yes, we’re using capital letters now — plays out in earnest.
Prices for West Texas Intermediate (WTI) crude oil blew past $81 to a new seven-year high. And the ensuing media freakout over inflationary pressures will weigh on a market already headed into monthly options expiry — along with other key October 2021 economic reports this week.
Headlines Monday morning reflected as much, with Bloomberg showing seven related to the theme.
Source: Bloomberg
Key economic reports will play into this week’s action, as we get JOLTS job openings data Tuesday, the all-important Consumer Price Index and Producer Price Index on Wednesday and Thursday, and both Retail Sales and Consumer Sentiment on Friday.
Source: Bloomberg
Expectation of the Key Economic Reports of October 2021
For what it’s worth, my models show inflation data coming in a little hotter than expected, with retail sales cooling off slightly as Google mobility data has shown this month.
Source: Google
The run-up in oil is helping to fuel a corresponding decline in natural gas prices, which should give us an opportunity to pick up a little more of the U.S. Natural Gas Fund (NYSEArca: UNG) this week.
Remember to buy a little at a time (a tenth or less of your intended max position) as prices relax over the next few weeks.
Coal markets are not likely to provide such an opportunity as prices for the Pittsburgh Coal Seam that CONSOL Energy Inc. (NYSE: CEIX) mines nearly doubled over the past week.
Source: Argus
As I write this, shares of CEIX are trading at $35.40, nearly 15% above our entry price this past Thursday.
I can’t stress enough to buy this one on down days — if it ever has one. This winter is going to be a nightmare in regard to fossil fuel availability at power plants worldwide, and CEIX is one of the very few that can increase production immediately.
The final key economic reports the week of Oct. 11 are earnings, with a slew of financials set to report starting on Wednesday.
Source: Earnings Whispers
Interest rates are rising as new COVID-19 cases have fallen over the past few weeks, and that has helped fuel inflationary pressures.
Source: Seawolf Research
Keep in mind that banks make more money when interest rates rise… I have a feeling Q4 is going to start off with a very unexpected bang.
That said, Friday’s looming options expiry should temper weekly action, and we want to look out for a chance to short one of China, Hong Kong, South Korea, gold or U.S. Treasurys.
The iShares China Large-Cap ETF (NYSEArca: FXI) is up 1.5% Monday and 7.7% for the week, so if I had to pick one, that looks like the best option at the moment.
This is shaping up to be one of the most interesting trading weeks of the year, and I’m anxious to dig into the key economic reports coming out in October 2021.
So stay tuned for this week’s watchlist… Even I’m interested to see what changes I’ll make.
All the best,
Matt Warder
Fortune Research
