Debt Ceiling Expands & Lackluster Jobs Report

Oct 10, 2021 | Does debt and macroeconomic events impact Swing Traders?

Weekly Newsletter- Week of 10.10.2021 

Debt Ceiling on the Rise 

This week Congress agreed to a short-term increase of the U.S. debt ceiling, avoiding a default and potentially additional economic pressure. Congress was able to temporarily agree on a debt limit extension that will run into December. 

Federal Debt 

The federal debt is the amount of money the government owes for spending on its payments. Some of the payments include social security, Medicare, military salaries, and tax refunds. The debt limit allows the government to finance those obligations. Unfortunately, raising the country’s debt ceiling is effectively the same as raising the credit card balance. This does not put a plan in place to further pay down the debt. Rather, we just agreed we can go into further debt as a country. 

Kicking the Can 

While able to avoid a government shutdown, kicking the can out to December will continue to put pressure on consumers. Without a resolution, the federal government could default on some of its obligations, including social security and military salaries & benefits. This means, without a resolution, social security checks could be delayed for several weeks- millions of Americans rely on these checks every month. The same pressures would also be applicable for Medicare, as well as many other programs. 

A potential downgrade of the United States’ credit rating would also have a very negative effect on U.S. Treasury. Treasury bonds may appear attractive to investors given their safety as a reliable investment asset. Should demand decrease, we could expect another rise in interest rates. And as we’ve seen over the last 12 months, when interest rates rise, high-flying stocks get hammered. All of this would apply additional pressure to future borrowing costs like car payments or credit cards. 

Going Forward 

Uncertainty regarding the debt ceiling will continue to be a major driving force in the market until an actual resolution has been put in place. This goes beyond an extension, but rather a full plan to tackle rising debt. Market uncertainly alone can send rippling effects throughout the stock market. Since World War II, Congress has changed the debt ceiling no less than 100 times. In 2019, Congress voted to suspend the debt limit until July 2021. Now, Treasury is using ‘temporary emergency measures’ to buy more time and allow the government to keep paying its obligations.

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

Job Report Underwhelms 

This week we received another key point of economic data. The non-payroll jobs report showed our economy added 194,000 new jobs in September. This number came in far below expectations of nearly 500,000 new jobs to be created. Though, the overall unemployment rate continues to slowly tick down despite how sluggish hiring has remained. 

Workers Remain on the Sidelines 

The biggest concern continues to be how workers aren't coming back to the workforce quickly enough. Labor force participation actually dropped lower in September, despite the end of pandemic jobless benefits. Despite all of this, wage increases continue to increase. The average hourly wage has increased nearly 5% this year. All of this continues to point to an ongoing continuation of inflation. Inflation concerns continue to be a major force driving the stock market. 

Where are new jobs? 

Hospitality and the leisure sectors led the way with 74,000 new jobs in September. A stark rise from August, when 38,000 new jobs were added in the sector. Factory employment also increased by 26,000. While retail jobs added 56,100. 

Texas, the next great crypto hub? 

We've talked extensively about how Chinese regulations affect the entire crypto market. On the 9/19 newsletter found here, we reported how China was now banning all crypto mining and crypto transactions. This sent Bitcoin and crypto into a spiral. This is leading to a void in the crypto mining space. Texas is now attempting to position itself as a hub for crypto and blockchain. Texas has been openly welcoming new Chinese miners looking to continue their operations outside of China. Texas also recently announced they are increasing the state's Blockchain Council as well. Texas is also looking to implement new crypto-friendly regulations as a way to entice more crypto miners to the state.

Upcoming Economic Reports

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Weekly Watchlists

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

Recent Watchlist Winners

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