Fed's Hawkish Pivot

Aug 28, 2022 | How will the latest fed talk impact markets?

Stocks Slide After Powell's Hawkish Pivot

Stocks again ended red, as all indexes lost for the second straight week. Equities were flat till Thursday, as markets anticipated Jackson Hole on Friday. Low volatility turned into a significant selloff after Powell's 8 min speech.

Chairman Powell's Latest

Going into the week, there was cautious optimism among traders that perhaps we'd seen inflation start to peak. Any positive momentum the stock market might've had was put to rest after we heard the latest from the Fed and Chairman Powell.

Last week, Powell reiterated the tough stance the Fed would continue to take in hopes of slowing inflation. This had investors again weigh the implications of further rate hikes being issued. Powell noted, "Restoring price stability will likely require maintaining a restrictive policy stance for quite some time. The historical record cautions strongly against prematurely loosening policy", he noted.

As we noted, this led to heavy selling within the markets. The struggles we've been seeing over the last 10 days of trading now look to erase any gains realized for August.

Energy Leads the Weekly Gains

The energy sector was the lone bright spot in the markets this week. Higher oil prices have once again helped propel the industry, with many of the key players in gas, oil, and mining all seeing weekly gains. This was the only sector able to rally over 5% this week.

Some of the sector leaders included West Texas, which gained 2.0%. APA Corp was one of the most prominent leaders throughout the market, jumping 11%. Exxon Mobile also enjoyed a mini-rally within the energy sector. That stock gained 4% as well.

Biggest Laggards in the S&P 500

Technology was one of the worst performing sectors of the week, taking losses of over 5%. Communication Services didn't fare much better, shedding 4.5% of the market-cap. As we've seen in the past, tech and internet-based stocks have been the most heavily affected by rising interest rates. After hearing the latest from Powell, these sectors all saw heavy red as investors were once again forced to assess the implications from the Fed.

What it Means: July was a record month for stocks, thanks to critical data received around inflation. While inflation has begun to slow down, prices are still much higher than they should be. The Fed feels compelled to implement more rate hikes despite slowing inflation. This led to safe havens like Energy and Utilities, being some of the lone bright spots within the market.

Despite slowing inflation, it's clear we're still not where we need to be. Chairman Powell has laid out his plans to raise interest rates again, which sent stocks reeling for the second week.

Is Brick-And-Mortar Retail Dead?

E-Commerce has exploded over the last decade, as programs like Amazon Prime have made it more accessible and easier to do your shopping at home. When the global pandemic hit in 2020, this only sped up the transition from brick-and-mortar retail to online eCommerce. As in-store shopping came to a screeching halt, businesses were forced to implement procedures for online transactions.

Since pandemic-related restrictions have eased, analysts have been assessing whether this would bring consumers back into the stores. Some effects from the pandemic may be here to stay, but is the death of brick and mortar one of them?

Return of Retail

The Retail & E-Commerce association seems to think the death of retail is 'extraordinarily exaggerated'. In fact, since 2021, about 80% of retail still happens within physical stores. Surprisingly, more stores opened in 2021 than closed.

More than 4,000 new stores have opened since 2021—more than double the total number of retail store closures during the same timeframe. Additionally, the retail sector reported 37% more openings than 2020, with discount stores leading the momentum. Discount stores have accounted for 40% of total store openings.

Additional analysis has shown that many consumers still prefer seeing and feeling a product before making a purchase. More than two-thirds of consumers say they like shopping in stores for home furnishing, appliances, and beauty and personal care products.

Meanwhile, only one-third prefer shopping online for apparel, shoes, and accessories. Mastercard reported another survey that showed a nearly 12% rise in in-store purchasing over the last year.
Conversely, while eCommerce sales continue to expand, its growth rate has slowed after the initial surge caused by the pandemic.  

What it Means: While Amazon sets new records annually, that does not mean the retail sector is officially dead. Analysis shows that many consumers prefer to shop in person, especially for items they want to touch and feel. Even during the pandemic, retail stores were expanding, though many of those stores were discount stores.

Meaning that consumers still enjoy going in-store for some of their more common household items as well. While an online eCommerce presence is almost a must nowadays, don't overlook that many consumers still enjoy the in-person experience.

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.

Ethereum Merge

The long-awaited upgrade to Ethereum to make the platform more environmentally friendly could finally be near. With the entire crypto market losing close to $1 Trillion due to the recent bear market, everyone is eyeing 'the merge' as a new reason to be bullish on ETH again.

Ethereum, known for being the backbone and platform for thousands of crypto projects, has been discussing this upgrade for years. But if all goes according to plan, the Merge is expected to be released on Sept 15 (more than 8 years after it was initially discussed). The upgrade looks to move ETH to a more energy-efficient infrastructure, addressing the widespread concerns that crypto's energy consumption and impacts on the climate may outweigh the benefits.

The Merge is seen as the future of crypto, making the asset more scalable and environmentally friendly.

What it Means: The entire crypto market has been under immense selling pressure for months, thanks to the constant threat of rising rates. Ethereum has been trading down with the rest of the market, but there could be a reason for newfound crypto enthusiasm.

One of the biggest knocks against crypto centers around its extremely high energy consumption. If ETH can finally release its long-awaited environmentally friendly upgrade, there could be several reasons to once again be bullish on Ethereum and crypto.

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Market Performance- Week of 09.25.2022

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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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