FED Stuck Between a Rock & a Hard Place

Mar 13, 2022 | What will the FED do to ease market worries?

Weekly Newsletter- Week of 3.13.2022

Stocks are Down and Rate Hikes are Coming

Stocks were once again down across the board this week as the war in Ukraine rages on. As we highlighted during last week’s free newsletter, this global crisis has been sending rippling effects throughout the economies of several nations, not just Russia and Ukraine. It was another tough week for the technology-heavy Nasdaq, the biggest loser of the week. The Nasdaq took more losses, down nearly 4%. Meanwhile, the small-cap Russell 2000 actually outperformed all three major indexes. It led the way while still dropping 1%. The surging price of oil had investors shell shocked, as crude oil spiked to over $130 a barrel this week before pulling back to a still overpriced value of $110 / barrel. All major indexes were red this week except for the Energy Sector. Energy stocks were positive this week up nearly 2%. Energy has been an outperformer as gas prices continue to climb to historical levels.

Don't Look Now- The Fed's Here Too

We’ve reported extensively on the Fed’s plan to raise interest rates by a quarter of a percentage. The Fed has an important two-day meeting this week, and we expect to hear a formal announcement for the rate hike by the end of the sessions. We’ll also be watching to see what the central banks say regarding interest rates, inflation, and the rest of the economy. As Russian sanctions continue to mount, we’ve been monitoring the impact the war has been having on the commodities market. Without any clarity on what’s next for this war, we expect volatility to remain high. The VIX volatility index spiked nearly 15% to start the week before cooling off. Investors should also be listening to hear what the Fed says it will do with its nearly $9 trillion balance sheet. Officials have said they would like to scale back this year after the rate hikes begin. If the Fed is unable to raise rates as expected, this could delay shrinking the balance sheet, which could lead to a looser fiscal policy.

Impacting Commodities

Russia has become a key player in the commodities market and its attack on Ukraine has sent shockwaves throughout the commodities sector. All while inflation continues to hit consumers harder and harder in their wallets while approaching 30-year highs. Gas prices continue to be pumped higher. The national average price for gas jumped by .50 cents this week alone! This now brings the national average to a whopping $4.33 per gallon. Whether we like it or not, surging inflation has become the key catalyst for the expected rate hike by the Fed.

What It Means: Investors have been seeing red as the global crisis in Ukraine continues to get worse. As we noted last week, even if you haven’t been deeply vested in the ongoing war, you’ve certainly felt the impacts of war while filling up your tank. Stocks have been in a tough spot as we continue to assess the far-reaching impacts of war. With expected rate hikes on the way, it’s going to get worse before it gets better, especially in the technology sector.

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.

Single Stock ETFs are Coming, But is that a Good Thing?

In a surprise move, Direxion recently filed for 24 new ETFs, and they are all focused exclusively on the following stocks: Amazon, Meta Platforms, Alphabet, Netflix, Microsoft, Nvidia, Tesla & Apple. As you can see, the previously dominant FAANG stocks have gotten some company when it comes to big tech. But first, what's an ETF??

What's an ETF?

ETF stands for exchange-traded fund, and it’s a type of fund that grants the investor access to numerous stocks at once. ETFs are often considered a ‘basket of stocks’ as a single ETF may grant exposure to multiple stocks at once. Like trading individual stocks, ETF shares can be traded throughout the day as the price fluctuates. ETFs are considered lower-risk investments because they are lower in cost, and their share price is tied to multiple stocks and not just one.

FAANG Inspired ETFs

The newly filed ETFs mark a growing trend to leverage top-rated growth stock into ETFs. If approved, these would be the first single stock ETFs to trade in the United States. Potential traders should do their research before committing to any single stock ETFs. For starters, the funds will reset on a daily basis. Most of the new ETFs are heavily considered to be ‘tools for traders’, and the new ETFs will likely not be for everyone. As a fund that resets daily, these are clearly investment tools for active traders, not passive ones. These ETFs are built for people who manage their own portfolios daily. For traders who make daily decisions on whether to amplify or hedge against other risks within their own portfolio. For those willing to trade in these riskier types of ETFs, position sizing will be critical, especially if you’re considering using these as a hedge.

What It Means: ETFs have always been a popular tool for trading or owning more expensive stocks. ETFs allow you to gain exposure to stock without having to pay the full share price, while still providing the investor with part ownership of the underlying business. We're now moving to a single company ETF model. These new FAANG inspired ETFs are intriguing, but they also come with the additional risk that any potential investor should clearly understand.

Buying Crypto Comes Under Fire During War Times

Crypto enthusiasts have promoted buying Bitcoin as a safe haven against cratering currencies due to international unrest. In recent newsletters, we’ve talked extensively about how crypto is being used during the ongoing war. As an example, crypto has been used as a method for providing support and donations to Ukraine. Those donations have now topped the $100M mark.

Global Crisis Creates More Uncertainty

Crypto has struggled to gain significant traction lately as the Russian invasion, sky-high commodity prices, raging inflation, and the pandemic have all contributed to sideways trading from the sector. While lawmakers struggle to define, is it a currency? An Asset? An inflationary hedge? Or something else altogether. Additionally, as we see the amount of Bitcoin use cases expand, there’s a growing concern that any nation could begin hitting cryptocurrencies with tighter regulation. We saw that in the Fall when China moved to make crypto trading illegal.

Additionally, as more and more sanctions are levied against Russia’s economy, the warring nation may be forced to become more reliant on cryptocurrency. Thus, adding more weight to the ever-present fear of a cyber security attack. As global anxiety has been increasing, Bitcoin has also been caught up in the selling. Bitcoin has been down with the broader market. When the Russian invasion started, many investors flocked to safe havens such as gold and bonds, not crypto. But in the days that followed, Russia's crumbling economy, soaring gas prices, and inflations all helped change the narrative. More money has been steadily piling into crypto as of late.

What It Means: Russia’s initial invasion helped fuel a crypto selloff as uncertainty filled the markets. But now, we’ve been seeing money pour back into Bitcoin. The landscape of how Bitcoin can be used is changing every day, thanks to the ongoing war in Ukraine. As sanctions continue to be passed on to Russia, we’ll be watching to see how the crypto sector reacts to much of the world blocking Russia from their networks.

Upcoming Economic Reports

Market Performance- Week of 09.25.2022

Recent Stories

Global Risk Continues to Rise

Oct 02, 2022 | A strong dollar keeps all swing traders on edge with market headwinds stronger than ever ...read more

FedEx Says Recession is Coming

Sep 25, 2022 | What FedEx said about a potential recession and how can Swing Traders make money off it ...read more

Dollar Weakness Gives Stocks a Rebound

Sep 11, 2022 | Stocks have a slight rebound as the dollar comes down, but what does it mean going forward? ...read more

Bond Market Signals More Trouble to Come

Sep 04, 2022 | What is the Bond Market Telling Us About the Market? ...read more

Weekly Watchlists

Community Access

The whole is greater than the sum of its parts”- Aristotle

Our Stock Trading Club is home to like-minded Investors, Bankers, Accountants, Financial Advisors, Economists, Finance Majors, Small Business Owners & aspiring Entrepreneurs who network with each other, learn and discuss stocks, and update each other on emerging stock market news every single day.

Especially for new investors, having a collaborative learning environment is crucial for long term success. In The Swing Trading Club there are NO paywalls or segmented discussions. Each and every member will have access to 500+ like-minded investors just a keyboard’s length away. So after signing up, please introduce yourself.

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

Join the Club