Another Volatile Week Ahead...

Welcome back all of you and thank you for faithfully following my rantings. :)

This is going to be another very volatile week with focus on the Producer Price Index on Tuesday and Consumer Price Index on Wednesday for indications of inflation as well as the jobless claims numbers on Thursday. Friday's options expiration is also certain to add volatility to an already volatile week (see economic calendar).

The market has priced in another 50 basis points cut this time round and that really is forcing the Fed's hands. Uncle Ben, being one of the most repectable economist in the US, knows that recession is cyclical and easy to handle and get out off but hyper inflation is something that will completely destroy the economy. In ancient times, almost every single dynasty and empire collasped due to inflation, not recession. In recent times, severe inflation has forced dramatic changes to the extend of revising the entire currency system. Recessions never have such an impact. Furthermore, the economy looks more like it is going into a STAGFLATION instead of a mere recession or inflation! If the CPI this week continues to turn in higher along with higher jobless claims, the case for a Stagflation will strengthen. What we do know now is that the Goldilock economy that we have enjoyed over the past 7 years is clearly over. A Goldilock economy is an economy that is growing at a healthy rate along with very moderate inflation. Kinda like the ideal case.

On the technical front, the Dow continue to struggle around the August lows over the past few days and does continue to display a lot of bearishness. Under such pessimism, any rally from this point is likely to be a dead cat bounce or what is known more commonly as a bull trap or a fake rally, especially with the breaking of the neckline that I mentioned on Friday. This is the time to be extremely nimble and to trade short term swings using both call options and put options in order to leverage returns on those very small moves. Don't know how to trade options? Let me teach you options trading personally over a 30-day mentoring course!