A Different Kind of Earnings Season

Apr 10, 2022 | How Does the Latest move by the Fed Impact Markets?

Weekly Newsletter- Week of 4.10.2022

Assessing the Market After the Latest Move by the Fed

Stocks were facing some short-term volatility this week, as the ongoing rally was forced to take a breather after hearing the latest from the Fed. At the start of the week, all indexes were making gains before giving back all those profits. Stocks took a loss this week, for the first time in the three weeks. The Nasdaq was the biggest loser of the week, shedding nearly 4%. While the DOW dropped nearly a half a point, the S&P dropped more than 1.25% this week.

The Defensive Sector roared back this week, taking home some of the biggest gains in the market. We saw consumer staples like Costco and Wal-Mart all notch higher, while the Healthcare Sector also outperformed the market this week.

Fed Caps Rally

As we noted earlier, before last week, stocks had been on a comeback rally of late. After months of prolonged selling, it looked like investors were starting to recoup some of those losses. But as we noted in last week’s newsletter, the Fed is set to be a major driver of overall market sentiment for the remainder of the year. This week, the Fed released minutes from another key meeting regarding interest rates and their continued battle against inflation. From that meeting, we learned the Fed was planning to reduce trillions in bond holdings, with a consensus amount of around $95B.

Additionally, policymakers also noted that additional rate hikes of 50 points or more could also be warranted to help slow down inflation. This meeting continues to reinforce the narrative of increased urgency from the Fed. The Fed looks ready to lower its balance sheet even quicker than the market may have anticipated. At the March 15-16th meeting, the Fed approved the first-rate hike in more than three years. This 25-basis point rise (a quarter of a percent) lifted the short-term borrowing rate from nearly zero, where it had settled after the pandemic started in 2020. There is a growing sentiment within the market, that additional Fed meetings like the one in March will bring about additional rate hikes.

Earnings Season Kicks Off with Inflation Soaring & Rates Moving

This week kicks off the latest earnings season, with the banking and financial sector set to take center stage. This week we will hear from JP Morgan, Citigroup, Chase, Wells Fargo, Goldman Sachs, and many other key banks within the sector. We’ll also be watching new key inflationary reports, all while the war in Ukraine continues to rage on. As earnings season kicks off, companies will need to provide guidance on how they’ve handled soaring inflation and what their plans are for continued rate hikes. Though, as the Fed continues to tighten policy, we have begun to see signs of inflation peeking in certain areas of the market.

What It Means: We start a new season of earnings this week, albeit in a shortened trading week given the Easter holiday. Banks are always the first to report, and the data they provide can be vital in assessing overall market sentiment for the rest of the earnings season. We've seen the Fed implement rate hikes and we have no reason to think those are going to be slowing down anytime soon. While war rages on and inflation is still sky-high, we continue to stress the importance of holding profitable stocks and those that make money.

This Week’s Picks

EDR (Endeavor)

August 14, 2022

Entry Price:

24.50

Stop Price:

23.35

Target Price:

26.46

Time Frame:

3 Week Hold

EDR has been in a channel pattern over the last few weeks. As it approaches the bottom band, after a some mid-week volatility, look to make enter the trade off the rebound. As noted in KMX, keep a trailing stop loss and close the position quickly should the market turn.

KMX (Carmax)

August 14, 2022

Entry Price:

101.85

Stop Price:

96.45

Target Price:

109.15

Time Frame:

4 Week Hold

KMX, along with most of the market, has been rebounding off June lows. We've seen strong momentum and a crossover of our long-term MAs. Watch for a market pull-back and keep a trailing stop loss. We're riding strong tailwinds, so get in and out quickly

Musk Takes a Majority Stake in Twitter

Elon Musk, the polarizing billionaire entrepreneur once again made headlines this week. In shocking news, Musk took a major claim on the social media platform Twitter. At current, Musk now holds 9% equity in the company and has now become Twitter’s largest investor. One day after the move, Twitter announced that Musk was being appointed to its Board of Directors.

Why is Musk So Interested in Twitter?

This week we learned, that Musk has been buying up shares of Twitter almost daily, since January. The filing he submitted to the SEC indicated he had spent early $2.6B on Twitter stock recently. Musk immediately took to Twitter to ask his millions of followers if they would like to see an “edit button” on Twitter, something that has been discussed and requested for years. 74% of his followers voted yes. Musk also went on to tweet “Free Speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle??” He also went on to suggest Musk may form his own social network if his followers believed was needed. All of this news breaks at a time when Musk has been especially critical of the platform. While he sees the importance of Twitter, it’s obvious he has some concerns over how the widely impactful platform is managed.

What It Means: Only time will tell what Musk has in mind for Twitter over the long haul. But there’s no denying Musk has been one of the most outspoken and polarizing figures on the platform.

Musk has consistently used his Twitter account to ramp up interest in other ventures and pump up low-value cryptocurrencies like Dogecoin, all while influencing millions of his followers and fanatics. Twitter is an impactful tool, but there’s no denying additional regulation may be needed. Musk would not have made such a sizable investment if he didn’t intend to make a large profit from the move. Twitter shares jumped as high as 30% this week alone, following the news.

Bitcoin 2022 Conference

This week, the annual Bitcoin Conference took place in Miami Florida. While generally considered to be an event for all things Bitcoin and crypto, this year’s conference focused heavily on Bitcoin mining. Throughout the event, new mining rigs were unveiled, as dozens of leaders in the mining space unveiled their new ideas for the coming year.

A Buzz Around Mining

Last year, “it wasn’t that mining was an afterthought, but it didn’t have nearly the pull or the promotional backing of the entire conference,” said one of the analysts on site. This year, Bitcoin mining was heavily promoted with numerous
presentations from miners having the largest crowds at the entire event.

Some of the key topics discussed within the crypto mining space include: I
1. Immersion cooling capabilities
2. Environmentally-friendly solutions
3. And some of the newest clients, looking to expand into crypto mining

What It Means: Widespread crypto acceptance is coming, it’s not a matter of if but when. We’ve reported extensively on the battle for mining crypto in an environmentally friendly way. This year’s Bitcoin 2022 Conference focused heavily on the advancement of safely mining Bitcoin. This is an extremely competitive space with tons of players trying to carve out a niche in this rapidly growing space. We’ll be watching closely to see which players in the environmentally friendly mining space begin to separate themselves from the rest of the pack.

Upcoming Economic Reports

Market Performance- Week of 08.14.2022

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Weekly Review

Market Performance- Week of 08.14.2022

Recent Winners

CF (CF Industries)

CF (CF Industries)

Entry Price:

87.40

August 14, 2022

Price at High:

105.10

Return for Members:

16.84%

Timeline:

4 Week Hold

CF is a manufacturer of fertilizer and other farming products. Similar to our thesis on oil last week, we're expecting more global tensions to arise over the coming months. Although not directly related, CF should appreciate if adverse events occur. Technically speaking, we're seeing a bounce off the 180MA. However, there is negative momentum so be careful with entering too early.

MRNA (Moderna)

MRNA (Moderna)

Entry Price:

168.85

August 7, 2022

Price at High:

197.33

Return for Members:

16.86%

Timeline:

1 Week Hold

We're starting to see a reversal take place. Watching the 50 day moving average cross over the 100 day. Saw some weakness to close this week, so wait for upward momentum before jumping in.

X (US Steel)

X (US Steel)

Entry Price:

20.15

July 31, 2022

Price at High:

23.75

Return for Members:

17.86%

Timeline:

1 Week Hold

Stark momentum shift from the lows on this one. Tracking our moving averages on the 2-hour time chart. Looking for an early entry and quick trade.

Recent Watchlist Winners

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