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S&P's Best Week Since 2020

Stocks ended the week hot, with the Dow notching its first weekly win since May. All major indexes were seeing green this week, with the S&P 500 jumping nearly 7%. Meanwhile, the tech-heavy Nasdaq took home weekly gains of 7.5%, and the Dow also rose 5.4%. These gains come just weeks after officially hitting ‘Bear Market’ territory, as defined by at least a 20% drop from recent highs.

This week’s positive run for stocks helped snap a 3-week losing streak for equities. Discussion between investors intensified this week as we look for signs to assess whether stocks have truly hit a bottom. With so many stocks still trading close to 50% off their all-time highs, many traders believe a lot of the risk of owning high-multiple growth stocks has already been included in the share price.


Still in Bear Market Territory

One major catalyst that helped fuel last week's rally for stocks was the release of a consumer sentiment report that demonstrated a slight easing of inflationary expectations. This comes just a couple of weeks after consumer sentiment hit a record low in early June. This week’s report was far from a glowing endorsement of our economy, but it may have represented a slight decrease in 12-month inflation projections. In a Bear Market, any positive news has the potential of being overblown, but this report helped fuel big gains last week.

Others around the industry are less bullish on last week’s rally. Fearing this was a minor Bear Market rally for stocks currently trading in deeply oversold territory. Many believe the intermediate outlook for our economy will continue to be driven by fears of a recession.


Paying Up for Experiences

Despite decreasing numbers in overall consumer sentiment, consumers are still spending at record levels. As we reported in last week’s newsletter, the Fed is hoping any future rate increases may incentivize consumers to spend less.

As we’ve noted in the past, consumers are choosing to spend their money on experiences over high-priced products. This thesis continues to hold true as the travel and leisure sectors continue to be some of the highest performing sectors in the market. This was especially true for the Cruise Industry. Cruise line stocks took home some of the biggest gains within the S&P last week after Carnival noted booking volume was nearly double. This sparked gains across the entire industry.

What it Means: Stocks surged last week, reversing 3 straight weeks of losses. Stocks have been under heavy pressure for months, with many key indicators showing equities having moved well into oversold territory. Analysts continue to look for signs of a bottoming out process, which may represent the start of a new Bull Market.

Unfortunately, there are still many economic factors working against stocks, even when so many have seen their market cap and total valuations cut in half. As stocks look to rebound, we recommend looking to industries that have been less hampered by inflation, or to luxury sectors like travel, where consumers are likely to pay up even with prices rising.

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

Twitter Partners with Shopify

Ever since Elon Musk decided to take over Twitter, we’ve been anxiously waiting to hear about how the platform would continue to evolve and grow. This week we got big news from Twitter as part of its ongoing effort to expand into e-commerce. In a new partnership with Shopify, Twitter will be launching a sales channel app that will be available to all Shopify merchants through its app store.

The app will allow merchants to onboard themselves with Twitter’s Shopping Manager, a dashboard offered where sellers can access product catalog tools and enable additional shopping features into their profiles.


Twitter Continues to Make Moves

This is just the latest in a slew of shopping-related product updates from Twitter as Musk continues to look for opportunities to properly monetize the platform. Some of the new updates include "Product Drops" as well as mobile storefronts and Livestream shopping capabilities.

For Shopify, they noted how orders placed through integrations from partners like Twitter have quadrupled in the first quarter of 2022. Merchants have been using the new sales channel app to connect their Twitter accounts to their Shopify storefronts as Twitter continues to roll out new products.

Twitter is also working hard to sync its product catalogs with its Twitter accounts. As their Shopify catalog changes, those will be synced to Twitter’s Shopping Manager as well. This new deal is also a win-win for Shopify, as they have prioritized reaching customers on the platforms their customers use the most. This new partnership will allow merchants to seamlessly bring e-commerce to the conversations that are already happening on the platform.

What it Means: It’s clear that Musk and Twitter see the benefit of bringing more e-commerce brands to Twitter, as they make up a sizable portion of Twitter’s advertising base. Twitter believes there is a massive opportunity to monetize on their platform, as over 6 billion tweets have mentioned a business since 2021. Allowing customers to engage directly with those businesses on the Twitter platform seems like the logical next step for monetization. We'll be watching for any other major updates from Twitter now that Musk is driving many of its key growth decisions. 

Crypto Miners Continue to Sell as Energy Costs Soar

We all know the cost of energy has been soaring, which has made electricity even more expensive. Mining Bitcoin is still an extremely energy-intensive process, which has forced numerous key miners to sell at discounts to cover their own rising costs.

Companies with bitcoin-backed loans are at risk of collapsing as individual miners continue to be squeezed out.  Miners have been struggling to maintain any level of profitability as energy prices soar for natural gas and coal. Coupled with crypto prices tanking downward, and miners are feeling the pain. There's a growing fear that many companies in the struggling crypto mining sector may be forced to liquidate as a final resort to pay off debt.

Bitcoin now hovers around $20,000, a far cry from its all-time high of $64K. The steep drop in price continues to hamper miners. Rising costs and declining revenue are a clear recipe for disaster. Companies with variable electrical costs are likely to have to power off their mining machines during peak pricing periods. This could last hours or several days. Yet another catalyst working against the mining sector. As an example, public mining company Riot Blockchain had to sell over 250 of the 466 coins mined in May. This was needed to help pay down over $7.5M in debt.

What it Means: Many crypto miners took out high-interest loans to get their mining operations off the ground as they hoped the crypto craze of 2021 would continue to explode. As the entire crypto sector continues to trade at 1-year lows, this has been extremely impactful on a miner's profitability. When you add in the ever-increasing cost of energy consumption, there's a growing fear many key players in the mining sector may be forced to liquidate to pay off debt.

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Market Performance- Week of 08.14.2022

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Weekly Watchlists

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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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