Daily Alert – Thursday 14th October 2021: US gets ready to end the party

Mark NugentDaily Alert, Oct 2021

Daily Alert – Thursday 14th October 2021: US gets ready to end the party

Yesterday saw Headline US CPI (inflation) coming in higher than expectation. Core CPI (excluding all the nasty expensive stuff like fuel) was in line with expectation. The USD rose as you’d expect. In fact, it rose for the 30 minutes before the announcement, but I am not going to rant about that. However, the USD appreciation did not last. It began to fall for reasons that are not fully apparent. The US 2-year yield rose as the 10-year yield sank. The former is more influenced by inflation and the latter by growth prospects. So, the bonds moved as expected. The recalcitrant USD endangered my EURUSD short and I got out, before the stop was hit, for a loss of 1.9 percent. Ouch. Never mind.

The Fed’s minutes revealed that most members saw bond purchases tapering in Min-November or mid-December. It now seems certain that the FOMC will decide to do this formally at their next meeting in early November.

I went long on the S&P500 as I felt the underlying sentiment was positive and the index had just had a nice bullish day. So, what I am doing here is buying the dip after it showed some signs of reversal. Some people think it is not very sophisticated to “buy the dip”. The reality is it is the best way into an upwards trending asset. You can’t buy a loaf of bread with your sophistication. Jeez.

I will lick my USD-inflicted wounds and manage my so-far profitable S&P500 long. Tomorrow I will have a video of the horror EURUSD trade and the S&P500 long if it has closed by then. In any event, I’ll be back on Monday. Have a great weekend when it comes.

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