Global Tension Pegs Markets

Feb 13, 2022 | What can swing traders do in a choppy week?

Weekly Newsletter- Week of 2.13.2022

Inflation, Oil & Global Conflicts all Look Bearish for Wall Street

The markets ended last week in the red after a see-saw week of trading. A rally appeared to be forming earlier in the week before giving back all of those gains through heavy selling to end the week. The initial rally did look promising after strong earnings from DOW leaders such as Disney and Coca-Cola and surprisingly upbeat job data. Though the market started hot last week, Thursday and Friday bled red. Red- hot inflation appears to once again be cooling off any signs of a sustained rally within the market. While gas prices inch toward all-time highs, the price of a gallon of milk could now cost you more than $4. We received new inflation data this week that added to the uncertainty while oil prices jumped to $90 a barrel. Rounding out the wave of negative news for stocks is a growing threat rising in Russia. The whole world is watching as Russia threatens to invade Ukraine. All of these factors pushed stocks into the red last week and may add continued selling pressure for the weeks ahead.

Inflation, Still on the Rise

By Friday’s closing bell, the S&P had dropped nearly 2%. While the Nasdaq netted losses of 2.2% and the DOW took a 1% decline. Despite another positive report for jobs and unemployment, and with many key stocks already well into oversold territory, these factors weren’t enough to change overall sentiment in the market. Once again, inflationary data continues to reign above all.

The Consumer Price Index (CPI) jumped another 0.6% in January, sending the yearly total to nearly 8%. While these numbers may seem minor, they have been compounding for over a year and causing ripples throughout the economy that everyone has surely felt. Whether it's gas, flights, milk, supplies, wood, or anything else, we've all felt the price increases this year. For additional context, inflationary numbers are now topping levels not seen in over 40 years. This nearly 8% jump in the cost of living was the largest jump since 1982.

Fed Must Respond

The Fed is primed to raise interest rates for the first time in four years. As inflation continues to soar, the hope is a gradual rise in rates may help battle soaring prices. Though this effort may battle inflation, it will continue to spell bad news for the Technology sector and other growth stocks. January’s CPI data may force the Fed’s hand and speed up the urgency to intervene. This could lead the central bank to consider an unusual half-percentage point increase over its benchmark short-term interest rate. Higher interests could potentially slow down consumer demand which could affect the earnings potential for stocks. Another bearish indicator for stocks.

What it means: Rising inflation may force the Fed's hand. As prices continue to rise, the effect this is having on consumers, businesses, and our economy has been widespread. This has caused problems ranging from limited supplies to staffing shortages. As a result, Americans can expect to pay even more for goods and services in 2022.

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

Automakers Feud with Car Dealers

Inflation has been impacting all levels of our economy. Automakers have felt the impacts as they’ve been unable to get the parts needed for their vehicles. This has especially impacted chipmakers who provide the technology needed to power new automobiles. Soaring car prices have set off a battle between automakers and independent dealers. This has resulted in consumers routinely paying hundreds, if not thousands more than the listed price for a car due to supply shortages.

Up Charging your Vehicle

Ford and General Motors have both recently lambasted manufacturers for ignoring the manufacturer's suggested retail price or MSRP. A move that has left GM calling its own manufacturers unethical for their consistent price hikes. Ford has even threatened to withhold deliveries of some of its most popular rides, including their F-150 Lightning pickup truck as well as some of their other upcoming electric models. But data shows consumers are paying more for their vehicles across the industry.

Did you know that more than 80% of all U.S. car purchases made in January were above the MSRP price? That number was merely 2.8%, one year ago. This premium upcharge set consumers back on an additional $800 when purchasing a car last month. Some car shoppers reported paying nearly $10,000 more for sought-after EVs and hybrids. Both are currently in very low supply. Ford and GM's warnings expose a tense relationship between legacy carmakers and their dealerships. This explains why so many new EV car manufacturers have elected for a direct-to-consumer model in recent memory. Carmakers such as Tesla, Rivian, and Lucid have all adopted such models.

Could this Stall EV Adoption in the States?

There is a growing concern in the automotive industry that excessive price hikes could impact electric vehicle adoption within the United States. This has even caused climate scientists to step up and explain the impacts slowing EV adoption has had on the battle against carbon emissions. While sticker prices for EVs and hybrids have fallen sharply over the last decade, today’s pricing pressure has many of these vehicles still out of reach for the average American. Last summer, the Biden administration proclaimed their plan to make half of all new car batteries are electrically powered by 2030. In Q2 of 2021, EV sales accounted for just 3.6% of all U.S. car sales. Though, as many legacies car makers pivot toward an electric future, they are unable to simply ditch current partnerships with car dealerships.

What it means: Covid and the EV market have drastically changed the way consumers buy vehicles as buying online has become increasingly normal. During earnings season, many car dealers noted they were often only able to maintain a week or two of additional inventory. Much of their car inventory was being sold online before even reaching the lot. This has caused legacy automakers to investigate new ways to sell and distribute directly to consumers. As car prices continue to climb along with everything else, a direct-to-consumer model may be one of the only ways to relieve some of the additional costs being added onto the customer.

Intel Launches Crypto Mining Division

The chipmaking behemoth is evolving with the times and ramping up its crypto mining offerings with a lineup of energy-efficient accelerators. This week, Intel announced a crypto mining initiative while noting that Argo Blockchain and Jack Dorsey-led Black (formerly Square) will receive the chipmaker's first mining chips later this year.

Energy Efficient Accelerators

Intel announced it will be contributing to the expansion of blockchain technology through a roadmap of "energy-efficient accelerators." We've discussed at length the cryptos energy consumption problem, and it looks like Intel is attempting to position itself as one of the leaders within the energy-efficient crypto space. What it means: I think we can all agree that crypto is here to stay. It appears that the next great battle within the space will surround who can develop and produce stable coins with minimal environmental impacts. With Square/Block already investing healthy into environmentally friendly crypto, Intel has shown an ability to be forward-looking as they attempt to gain an early share of the market.

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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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