Inflation hits 3-year high, rate hike fears rising — short the broad market on t
Thesis
When inflation runs hot and the Fed is forced to consider raising interest rates, borrowing becomes more expensive for companies, which tends to hurt stock market valuations. The ongoing Iran war is specifically driving up energy prices, which keeps upward pressure on overall inflation. Because the core data is also sticky, the market is now pricing in higher rates for longer, creating a tough environment for equities in the near term.
Strategy approach
Build a mean-reversion short strategy on QQQ using the 60-minute timeframe. Enter a short position when the price crosses below the 20-period moving average and the RSI(14) is between 40 and 50, indicating bearish momentum is building but not yet oversold. Exit the position on an RSI(14) drop below 30 or if the price crosses back above the 20-period moving average. Include a 1.5% stop loss.