Stocks Hit Avg. Bear Market Rally

Aug 14, 2022 | Will stocks keep going up or is the bear market here to stay

Stocks Win for 4th Straight Week

Stocks ended last week with a mini-rally on Friday, pushing all indexes into green for the fourth straight week. Investors have already been showing signs of optimism that we may be moving past peak inflation.
S&P took home weekly gains of 3.26%, notching its longest winning streak since November 2021. The Dow jumped nearly 3%, while the Nasdaq gained 3.08%.

What’s Fueling The Rally?

Inflation has been the biggest detriment working against stocks for months. But after receiving the Consumer Price Index (CPI) report from June to July, inflation data has investors feeling confident. Inflation was flat from June to July mostly thanks to falling gas prices. The producer price index also showed a surprise decline, helping the overall price of imports also move lower.
The markets have been rallying since mid-June, with the S&P up over 15% since that time. The Dow has jumped 13% since its lows, while the Nasdaq has exploded up 22%. Technology continues to push higher after nearly a year of prolonged selling.

Key Earnings from Big Retailers

While the second quarter of earnings season is coming to a close, we still have several big players yet to report. New week, retail takes center stage as Walmart, Target, Home Depot, Bed Bath & Beyond, Lowes and Deere & Co all look to report earnings. 
These reports will be pivotal in assessing how consumer spending is holding up. While inflation has continued to make everything more expensive, we’ve learned that consumers aren’t saving as much as you’d expect. Consumer spending, and credit card balances have been continuously moving higher. A signal that consumers still have plenty of pent-up demand from the pandemic. 
So far, out of those companies that have already reported, 75% of companies have beat earnings estimates. That’s below the five-year average of 77% from years prior. 

What it Means: Investors have been feeling enthusiastic, after stocks closed out their 4th straight week of gains. The release of the July CPI loomed large last week, but it ended up adding to investors enthusiasm. Thanks to gas prices beginning to drop, inflation stayed flat while even showing signs of slowing down. This was amplified even further when the 10-year U.S. Treasury note also ticked lower to close out the week. Next week big-box retail will be on deck for earnings. Just a few weeks ago, Wal-Mart cautioned investors that profit margins could be shrinking, thanks to inflation. With investor sentiment so high, we’ll be watching to see how the retail sector reports, and how Wall Street reacts. 

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.

NYC Rent Hits All-Time High

Rent prices across the country have been moving higher for months. Currently, the national average for a rental costs nearly $2,000. This represents a jump of nearly 17% from a year-ago. The continued surge in rental prices is being driven by the variance in demand and the supply of rentals. As the price of buying a new home continues to surge, partially due to prospective homeowners opting to rent, for longer and longer. This continues to keep competition tight in a highly contested rental market. While the average price of a rental is rising, the rate of these increases have been slowing throughout the summer months. 

No city is seeing higher rent prices than New York City. Renting in NYC has never been cheap, but as prices rise across the country, they’ve now hit an all-time high. Rent across NYC hit an average of $3,500 in June, while Manhattan rent tops out at over $4,100, This represents a whooping 40% year-over-year increase. Brooklyn saw the second largest jump, with average rent of $4,000. Representing a 28% increase, their largest in history. 

NYC rent has been widening its gap as the most expensive city over the last couple years. For context, NY rent is more than double what you would pay for an apartment in Houston. While rent is over 6x more expensive than a rental in Wichita. These are obviously much smaller markets, but the contrast in price is only getting even more pronounced from NY and the rest of the country.

What it Means: Rent prices are increasing around the country, but no city is moving at a faster rate than NYC. New York has always been an expensive town, but now it’s putting itself in a class that many Americans will never be able to afford. NYC is increasing its gap as the most expensive city to live, and it’s doing so at an alarming rate. 

Institutional Investors in Crypto

Options trading volume has been steadily rising on crypto exchanges as large institutions and even miners look to profit during the uncertain environment. A number of key crypto exchanges have noted trading volume has been increasing after the crypto market hit bottom earlier in the year. 
Options strategies have figured prominently among institutions and even miners as they try to weather the volatility for quick gains. Ethereum has most notably seen its trading volume increasing over the last few months. 

Ethereum has talked extensively about a key update to the blockchain network, due out sometime in September. As crypto looks more attractive given its recent selloffs, and as macro events put the economy in a more positive light, it’s clear volume traders are looking to profit off of crypto and ETH. 
While trading contracts for Ethereum has been on the rise, currently, Bitcoin contracts account for only 2% of crypto volume.  For comparison, option trading for stocks accounts for about 20% of the total market cap. 

Additionally, we’ve seen a rise in option trading from crypto miners, as a way to hedge risk. As we’ve noted in the past, with the price of Bitcoin cratering and energy bills sky-high, many smaller mining firms have been forced to liquidate to cover costs. Now we’re seeing miners use more creative methods to help stay afloat. 
What it Means:
Crypto has been trading down for the better part of a year, as the entire market went into bear market territory. As the market begins to turn around, volume traders and crypto miners are looking for ways to recoup some of those early losses. With the price of crypto being so attractive right now, it's clear there are opportunities for quick profits through options. 

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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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