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Still Unchecked Inflation Opens the Door for These Trades

by | Nov 8, 2021

What can I say… When we get things right, we get things right. That’s the case to start this week as we look at some stock market inflation trades.

When Federal Reserve Chair Jerome Powell said the central bank was “ready to pounce” on inflation, we said that was just another way of saying “we’re not doing anything right now.”

When inflationary pressures aren’t addressed, the market simply continues to inflate.

An example of that Monday was copper, which suddenly woke up from a weeks-long bearish turn.

Source: Bloomberg

And as a result, last week’s free trade on U.S. copper producer Freeport-McMoRan Inc. (NYSE: FCX) was up as much as 7% for those who got in on Thursday afternoon.

Source: Bloomberg

By now, you should know the drill.

When things are up like this, sell a little. And buy something on the watchlist — which, by the way, we’re not changing this week — that’s down.

Source: Bloomberg

Stock Market Inflation Trades to Watch This Week

On Monday, that included natural gas via the United States Natural Gas Fund (NYSEArca: UNG), and companies we like such as Arch Resources Inc. (NYSE: ARCH). Both are strong buys on weakness like we’re seeing.

But the one I want to draw your attention to is the one at the bottom…

Gold prices are threatening to make a higher high here, as uncertainty around the Fed’s tapering program has pushed people into safe havens.

Source: Bloomberg

But that doesn’t generally happen when the economy is growing (as it is post-delta variant) and inflation is rising (as copper showed us).

So for a bonus stock market inflation trade this week, let’s take a shot at shorting the yellow metal via buying a little ProShares UltraShort Gold (NYSEArca: GLL).

If gold punches through resistance and makes a new higher high, we’ll take this position off. But until then, grind it into the dust, folks.

Keep an eye on those inboxes…

All the best,

Matt Warder

Fortune Research

WRITTEN BY<br>Matt Warder

Matt Warder

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