Its Not Inflation, It's a Lack of Information

With a lack of certainty comes a lack of confidence and markets that move lower.

We all know what happens when you go to Las Vegas and gamble.  More times than not, you lose.

If you think about it, the casinos have all of the information and you do not.

You're pulling on a slot machine and only they know how it is programmed and what the odds are while the rest of us are left in the dark.

And our accounts decline almost every time we try our luck, which is no fun.

Conversely, making sound decisions based on having the right information is a great feeling.

You can move forward with confidence as a trader and will likely have a clear understanding of what to expect which allows you to double down when your plan starts to play out.

Having the right information also allows you to cut your losses quickly when things deviate and go another direction because you know what you are expecting and if it does not come through, you can move on.

I try to gather (and share) as much information as I can for every trade idea for these very reasons.

There is no sense in entering a trade with little information or shaky confidence. If you do you are either speculating or probably more accurately put, gambling.

So, what does all of this mean?

Markets are like people.  They gain confidence and move more quickly and efficiently when there is more certainty and information to lean on.

As a trader it is important to recognize this.

Big moves can be traded if you are able to recognize when markets either gain or lose confidence.

Market confidence comes from having certainty and certainty comes from having enough information to make decisions.

Why is this important?

We have a market that has been confident that inflation was coming down, rates would see continuous cuts in 2024, and markets would react accordingly.

But sentiment is shifting.

Confidence in rates being cut has fallen off significantly, signaling that market participants are not sure what to expect from inflation numbers.

We just got an increase in inflation expectations in the UK which was followed by selling in the FTSE because of, you guessed it, uncertainty.

We no longer have consensus that inflation has been defeated and rates will be cut.

It is easy to say "inflation moving higher is causing markets to drop" but at this stage it is actually more about declining confidence that inflation has been handled.

In other words, markets are unsure of what to expect so rather than sticking around to find out you will see selling and movement out of stocks.

And that makes complete sense.

Why would you leave your money at risk when it is easy to take some off of the table and wait for confidence to return?

As a trader, it is important to recognize these facts so you can begin to look for signs in the charts and act off of what you see.

I expect more downside in the near term and with that comes opportunities for making money both on the way down as well as with the set ups at support for a trade higher.

To that end, Friday I will be dropping two new short ideas for upgraded subscribers and if they work out like the TTD puts (+159%) and the OXY short (+71%) we can all make money!

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Have yourself a profitable day!

-Nate

@tradernatehere

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This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.

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