I figured what better way to start off the new year than to take full advantage of the current sell off in equity markets. In addition to some lucrative short plays, I am really loving the RR of getting into commodity markets.
It's a story as old as time really! Well, maybe not that old, but it is a repeating phenomenon as old as derivatives.
When equity markets start to falter, and more specifically precious metals start to boom!
The main caveat for this trade is the fact that are extremely undervalued. That is not only my personal opinion but also an explicit fact. The SP500 Commodity Index vs SP500 Equity Index is at nearly a 50 year low.
Commodity prices have always positively correlated with higher and tightening monetary policies.
has already been increasing across the board and will hit the global economy in a synchronized manner. Higher is negative for bonds and equities, especially at current levels.
In addition to the inflationary pressure being applied to global markets, central banks will soon tighten monetary policies faster than markets can efficiently price in these policies to compensate respectively. With interest rates and on the rise, many individuals will turn to precious metals as a safe haven.
All factors align perfectly for commodity prices to enter an enormous bull market. And as we have seen recently, this scenario has already started to play out.
But enough with the fundamentals and preamble, lets get into the bare essentials.
-TK Cross underneath cloud
-Price about to test Senkou Span B (upper cloud boundary)
-Kumo Twist (Shorter time frames have twisted)
Stop loss: $21.25 or -15%
Target one (30% equity): $35.50
Target two (30% equity): $43.50
Target three (40% equity): Trailing stop set to (- 15%) from trigger
* Not financial advise *