My idea is simple. We are going long retailers (AMZN, TGT, WMT, COSTCO, etc..) and we are going to short energy (USOIL).
Hear me out before you cringe at this unusual trading pair. The US econ has felt some serious effects from inflation. Oil prices are ridiculously high due to the war and it has caused the price of gas to go up. When gas goes up, it costs more to travel (hopefully you see where this is heading already). When it costs more to travel, people start saving more and spending less (recession behavior). When that happens, AMZN TGT and friends are stuck with inventory on their shelves and it costs a ton to deliver what they do have. Customers arent splurging anymore and its hurting profits.
Now, lets imagine that the sanctions being placed on Russia were to actually work. Russia cant fund the war anymore so they back out. Sanctions are lifted and everything goes "back to normal". The cost of oil will drop dramatically. Countries could begin shipping, flying, railing, hauling and xxxing their products around the world for much cheaper prices than we have now. Cheaper transports means cheaper product, means "I can add more to my cart", means more space for new inventory, means more products being sold, means a happy earnings sheet.
Do ya see??? When oil drops, inflation should go away and people will splurge again! We seem to be a long way away from actually getting this war to end so keep your eye on the news and just bide your time. Ive outlined some current patterns and ranges on the chart above.
Hear me out before you cringe at this unusual trading pair. The US econ has felt some serious effects from inflation. Oil prices are ridiculously high due to the war and it has caused the price of gas to go up. When gas goes up, it costs more to travel (hopefully you see where this is heading already). When it costs more to travel, people start saving more and spending less (recession behavior). When that happens, AMZN TGT and friends are stuck with inventory on their shelves and it costs a ton to deliver what they do have. Customers arent splurging anymore and its hurting profits.
Now, lets imagine that the sanctions being placed on Russia were to actually work. Russia cant fund the war anymore so they back out. Sanctions are lifted and everything goes "back to normal". The cost of oil will drop dramatically. Countries could begin shipping, flying, railing, hauling and xxxing their products around the world for much cheaper prices than we have now. Cheaper transports means cheaper product, means "I can add more to my cart", means more space for new inventory, means more products being sold, means a happy earnings sheet.
Do ya see??? When oil drops, inflation should go away and people will splurge again! We seem to be a long way away from actually getting this war to end so keep your eye on the news and just bide your time. Ive outlined some current patterns and ranges on the chart above.
Comment:
USOIL just got crushed today over fears of a looming recession. The Big Box retailers are up a couple percent. By no means am I saying that I am right. In fact, both trends could completely reverse before market close today! I just want to highlight the importance of keeping an open mind in the market and not falling victim to herd mentality. Do your own analysis, welcome different perspectives, and then execute. Thank you all for your comments and support.