Time to Short Energy Again, Long Miners Again

The blind spot for stock bulls was the idea that the Fed would pivot or pause because of a recession. My position has been that inflation will cause the recession and the Fed will have to hike to stop inflation and the recession. This means interest rates go up no matter what the economy is doing, until inflation comes down. This moment of recognition is slowly emerging now. The asset class most exposed for a shift in sentiment is the energy sector and other high-volatility areas of the market. Fertilizers are topped or in a topping process and look prime to drop too.

XLE has been a juggernaut, but the turn is where the big money can be made. When it reversed, it will be a blistering and relentless plunge. I bought montly puts that expire next week, the $89 strike.

I added some July 70 puts on USO. Those are way out of the money, but that's the scale of the move that could unfold. I will dump those early if crude doesn't rapidly collapse.

I also added more Sept $35 GDX calls this morning. I had trimmed the position down to a small lot, and built it back up today. More of a hunch than anything else. The charts aren't looking good frankly, and there could be one more plunge left. There is some similarity between 2016-2018 and 2020-now, and that ended with a big sell-off in August 2018 ahead of the broader market's plunge-o-rama during QT1. Therefore, it could be that gold miners also sell-off here, but if QT2 hits like a Mack truck immediately, then gold miners might already be through the worst of the macro.

Update: I saw another trader looking at gold and oil. It is right where it was in September/October 2018 when QT1 hit like a Mack truck.