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Tackle Today: Inflation Scares

November 11, 2021

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« Highest CPI in 30 years. »


Coach Tyler here.

I happen to believe the market would have pulled back this week regardless of how hot the CPI print was. The overbought conditions demanded as much. Moreover, despite the spotlight’s sudden turn to inflationary data, I don’t think Wednesday’s 6.2% jump in prices told the market anything it didn’t already know.

If you missed the response, the two most important moves came from bond yields (aka interest rates) and the U.S. Dollar. The 10-year yield (TNX) surged 9%. Simultaneously, the greenback strengthened considerably.

From an intermarket analysis perspective, this makes total sense. Inflation puts upward pressure on interest rates which then strengthen the dollar. On the sector front, rising rates are bullish for financials. Perhaps that’s why the financial sector (XLF) was the best performing sector on Wednesday after all the defensive ones (XLU, XLP, XLV). XLF was down only 0.17%, compared to the S&P 500’s -0.80% loss. If yields keep rising, look for more outperformance from banks.


Chart of the Day: U.S. CPI Data

Chart of the Day: U.S. CPI Data

Here’s the breakdown for Wednesday’s scorching CPI number showing 6.2% in year-over-year inflation. Energy, food, goods, services – you name it. Up, all up.

Video of the day: How to use the Options Strategy Matrix – Jedi Options

Coach Tyler teaches how to effectively use the Options Strategy Matrix at Tackle Trading to identify which options strategy to use when you’re bullish, bearish, or neutral.

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