By Jeff Bishop – WeeklyMoneyMultiplier.com
We’re entering the final days of the month with a flurry of earnings, economic data, and political catalysts. For example, just today we have:
- Earnings from BBY, HPQ, MNST, SQ, BOX, CPB and a lot more
- President Trump meets with North Korea’s Kim Jong Un to discuss a nuclear strategy
- Fed Chairman Powell speaks on Capitol Hill
- Former Trump lawyer, Michael Cohen, will be speaking at the House committee
Now, I tend to put my focus on economic data, market volatility, and big-picture catalysts because that gives me the best view of market sentiment for my style of trading.
What’s my style of trading?
I use a simple crossover strategy that I call my “money pattern.” It gives me a signal of what I should be buying or selling. If you’d like to learn more about that click here.
That said, to turn it up a notch, I’m using options to express my opinion.
Why?
Because if you are on the right side of the trade with options, you can make large sums of money off small stock movements.
Now, this all might sound complicated, but believe me… it’s not.
In fact, I’ve had some monster scores over the last couple of days…
… all while being on a mini-vacation with my family.
Yesterday I was up $37K in UNG options…
My strategy makes money in bull and bear markets.
But most important, it caters to my lifestyle- the busy professional.
I’m able to do most of my trading on my iPhone. On Thursday, I’ll be joining Jason Bond, Nathan Bear, Taylor Conway, Kevin Elliott, and Matthew Campbell for Orlando Mastermind meetup. We’ll be teaching some 40 plus Millionaire Roadmap clients how to improve their trading results.
That said, there is a lot to cover today, and I want you to be ready. Click here to see my latest thoughts on energy, the Fed, and how I’m trading while on the road.
Commodity ETFs – USO and UNG in Focus
Now, if you’re wondering about my position in the U.S. Natural Gas Fund (UNG), and was playing for a reversal in natural gas. My thinking was the market is probably going to head higher… but wanted to take advantage of the volatility in the commodities prices.
Notes about USO and UNG
Here’s what I’m noticing with the energy market… it seems like there’s a correlation with what’s going on now with the Federal Reserve, U.S. and China, and potential slowdown risk, just as it did in 2016.
In the chart above, you’ll see the daily chart of the United States Oil Fund (USO), which tracks WTI crude oil prices…
Now, compare that with USO’s performance between November 2018 and today…
They both look pretty similar to me…
That said, I’ll be continuing to watch energy exchange-traded funds (ETFs) like USO and UNG.
Last night, Russia noted that they’ve cut production by up to 150K barrels per day (bpd) from its production levels in December… and the Organization of Petroleum Exporting Countries (OPEC) stated it’s committed to cutting supply.
Well, what’s that mean for the energy market?
Less supply… same level of demand… energy prices go up.
But what’s the Federal Open Market Committee (FOMC) got to do with all of this?
Powell’s Testimony Before Senate Panel Summary
Federal Reserve Chair Jerome Powell noted:
- Some economic data have softened, but they’re still pointing to spending gains.
- Monetary policy is going to be data dependent as economic outlook changes.
- The U.S. job market is expected to remain strong.
- Inflation close to 2%.
- The Fed’s balance sheet size will be driven by reserves and currency demand.
- Favorable economic outlook with some bumps in the road.
Let me break it down for you…
The FOMC tries to do all it can to bolster the stock market… you see, no one wants to be the person to send the markets into a frenzy… remember what happened in December when the Fed decided to raise rates?
I think that’s why the FOMC did a complete 180 on its policy this year, noting it can be “patient” and no longer needs to gradually raise rates.
What does a strong labor market have to do with anything?
A lot.
You see if unemployment ticks down… then inflation will kick up… and that’s no good for the market. When inflation rises, your money doesn’t get you as much as it did in a normal inflation rate environment, around 2% for the U.S.
That said, when inflation rises, companies will be less likely to hire new workers, and their costs rise… consequently, this would significantly impact their profits… causing stock prices to fall.
The markets know this… which could be one of the reasons why energy, gold, and other commodity prices have been running higher.
You see, traders will buy commodities and commodity ETFs to hedge against potential inflationary pressures, as well as political risk… and I think we’re seeing that now with the course of action the Fed is facing.
That said, we’ll be continued to focus on Powell’s comments as he speaks on Capitol Hill, the President of the United States (POTUS) meeting with North Korean leader Kim Jung Un, as well as earnings.
As always, I’ll be keeping an eye on bonds and the yield curve with Powell’s comments, as well as stock-specific plays like TSLA.
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