Is The Inflation Boom Quickly Turning To An Inflation Bust?

ByTTT

We are only 6-months into the year, and it seems like the inflation boom is quickly going bust.

The last few months have been very interesting as we see traders (rotating) moving out of one investment or market and into another. But as losses mount and capital diminishes, traders are eventually forced to liquidate even their favorite holdings to meet margin calls and raise needed cash.

As followers of pricing, our opinions or forecasts are not of much value. What is important is price, as price directly determines our trading profits or losses.

When market conditions change or at times when our trading begins to rack up losses, the best thing we can do as a professional is to go to cash. Going to cash allows us to get our perspective back. It allows us the possibility to enter the markets once more and provides the potential to make a lot of money.

Markets go up, and markets go down. What makes the big difference is how we manage risk and how well we do in following the direction of price. Knowing and controlling one’s emotions dictates how long we can play the game or how successful we will be at it.

As we review a few interesting and relevant long-term weekly charts, we realize that for many of us, the best option is simply to go to cash, watch, and wait.

FOOD: WHEAT -23.74%

  • Wheat had a 5-year run gaining more than $8 a bushel.
  • From December 2021 to March 2022, it gained more than $4 a bushel.
  • In March 2022, it made a 14-year double top at $12.
  • From its peak, it has now been trending lower for 31 weeks.
  • Wheat is a good indicator of the level of consumer food inflation.

WHEAT CFD • WHEATUSD • OANDA • WEEKLY

HOUSING: LUMBER -67.14%

  • Random length lumber futures experienced a 14-month exponential rally.
  • From its March 2020 Covid low it has rallied $1403 for a 500%+ gain.
  • It is now down $1125 or -67.14% from its May 2022 peak.
  • Lumber is a good indicator of the health of the new housing construction market.

RANDOM LENGTH LUMBER FUTURES • CONTINUOUS • LBS1! • WEEKLY

AUTOS: PLATINUM -29.15%

  • Platinum experienced an 11-month rally that now has fizzled rather quickly.
  • From its Covid 2020 low its price had more than doubled.
  • It is now down -$376 per ounce or -29.15% from its February 2021 peak.
  • Platinum is a good indicator of the health of the new automotive sales market where most auto manufacturer stocks have also lost more than -30% from their price peaks.

PLATINUM USD • XPTUSD • OANDA • WEEKLY

VALUABLE INSIGHTS FROM SUCCESSFUL TRADERS

Market Wizards by Jack D Schwager (www.Amazon.com) is packed with insights from successful traders who have shared their wisdom based on firsthand trading experiences. Here are a few of our favorites:

Jim Rogers:

  • “There is no such thing as a paper loss.” “A paper loss is a very real loss.”
  • “When government measures are implemented to counteract a trend, you should sell the rally after the government action.”
  • “The markets are the same, they go up and down.”

Mark Weinstein:

  • “Knowing when to stay out of the markets is as important as knowing when to be in them.”
  • “Limit losses quickly.”
  • “When institutions and specialists sell out, they don’t sell out at one price level, they scale out as the markets go up.”

Brian Gelber:

  • “It doesn’t matter if my opinion is right or wrong.”
  • “All that matters is whether I make money.”
  • “It is a good habit to wipe the slate clean and start fresh.”

WHAT STRATEGIES CAN HELP YOU NAVIGATE THE CURRENT MARKET TRENDS?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors. Also, learn how we identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market. The markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

Historically, bonds have served as one of these safe-havens. This is not proving to be the case this time around. So if bonds are off the table, what bond alternatives are there? How can they be deployed in a bond replacement strategy?

HOW WE CAN HELP YOU LEARN TO INVEST CONSERVATIVELY

At TheTechnicalTraders.com, my team and I can do these things:

  • Safely navigate the commodity and crude oil trend.
  • Reduce your FOMO and manage your emotions.
  • Have proven trading strategies for bull and bear markets.
  • Provide quality trades for investing conservatively.
  • Tell you when to take profits and exit trades.
  • Save you time with our research.
  • Proved above-average returns/growth over the long run.
  • Have consistent growth with low volatility/risks.
  • Make trading and investing safer, more profitable, and educational.

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We invite you to join our group of active traders who invest conservatively together. They learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com