Volatility Up, Biden's UAE Trip, & Sri Lanka Collapse

Jul 17, 2022 | How will earnings season play out over the next month?

Volatility Spikes

Stocks saw a mini-rally last Friday to close out another volatile week for the markets. Decent enough Q2 reporting from the banking sector had investors feeling optimistic to close out the week. All major indexes saw big gains on Friday, but the rally wasn't enough to erase the losses accrued earlier in the week. In summary the Dow dropped 0.2%, while the S&P and Nasdaq each netted losses of 1.0% and 1.6% respectively.

For context, the S&P is currently trading 20% off its all-time highs. Once again, fears over more rate hikes from the Fed had investors feeling whiplash as heavy selling turned into buying. Early week trading was dominated by fear of another large 0.75-point rate hike potentially looming as the Fed battles to curtail inflation. This came after a surprise 9.1% year-over-year jump in June inflation which fueled further speculation of another possible rate hike. 

Banks Provide Positive Start to Earnings

Earnings season for Q2 officially kicked off last week, with 17 companies within the S&P all reporting. In typical fashion, banks and financials started off this quarter's earnings. 

Despite early losses in the trading week, positive reporting from the banking sector helped turn around the entire market. The entire banking sector rose by 2% last week. While overall profits were mixed, it's clear banks have been benefitting from the ever-increasing rise in interest rates. Net interest margin (NIM) the spread a bank earned in interest on loans, compared to the amount it paid in interest, rose substantially for all major banks. 

We also saw decent information regarding consumer spending. Despite the increase in prices due to inflation, we all continue to spend healthy amounts. We expect earnings seasons and projected profitability to be a key driver in overall market sentiment for the coming weeks. With inflation making it costlier to do business and the rise of interest rates set to eat into company profits, only three sectors look poised to outperform during earnings. 

Energy, health care, and consumer staples all look primed to beat earnings estimates this season. With energy prices set to record a year-over-year increase of over 200%, it's no surprise that 2022 has been a strong one for the energy sector. Consumer staples should continue to outperform, as consumers have prioritized home goods into their spending habits, regardless of inflation. And healthcare should continue to benefit as long as we don't see any more major COVID scares. 

On top of earnings, we're also set to receive key data around housing. The National Home Builders Index and other extensive homebuying data will all release key info this week. 

What it Means: Q2 earnings season has officially begun as banks will continue to report out this week. While projections for profitability have been lowered across the board with stocks, investors are looking for any sign of optimism this earnings season. With most stocks already trading at steep discounts, there may be a low bar for success during this earning season. We'll be watching closely to see how the Fed reacts if earnings continue to stay favorable.  

The Dollar is Strong!

The euro is hovering close to the U.S. dollar in value for the first time in nearly 20 years, while even briefly touching a one-to-one exchange rate with the U.S. currency this week. The euro has been especially beaten down ever since Russia began its invasion of Ukraine. The 19 countries that currently use the euro have seen its value tick lower as they all struggle to deal with the impacts of war on the energy market.  

Euro and Dollar Parity

As previously noted, the euro and the dollar are worth virtually the same amount right now. This is especially important when considering exchange rates.

A currency's exchange rate reflects its future economic prospects, and Europe's economic outlook has been steadily declining. Initially, predictions for Europe began to fall with the rest of the globe thanks to the pandemic. But now, growth projections continue to trickle lower thanks to the effects war has had on Europe. Much like here in the states, talks of a recession continue to intensify throughout Europe.

Effects of War on the Euro

Europe is significantly more dependent than the U.S. on Russian oil and natural gas. Fears that the war in Ukraine will lead to a loss of Russian oil on global markets have helped push oil prices even higher. Additionally, Russia has been cutting back its natural gas supplies to countries within the European Union. This is seen as a direct retaliation to the many sanctions levied against Russia for its attack on Ukraine. The energy crisis within Europe has driven inflation to a record-level 8.6% in June. Much like here in the U.S., Europeans are feeling the pain of inflation in all of their spending, from their groceries to the gas pump.

What it Means:  The euro hasn't been valued below the $1 mark since 2002. It's now below $1.01. Meanwhile, the U.S. dollar continues to be viewed as the world's dominant currency for trade and the dollar has been hitting 20-year highs against other currencies, not just the euro.

Additionally, as the Fed continues to raise interest rates here in the states, this has attracted more investments from euros into dollar-denominated holdings. Further pushing the euro down and the dollar up. A strong dollar and weaker euro may mean lower prices on imported goods, things like cars, computers, and devices. American tourists may also find this a more advantageous time to travel, as restaurants and hotels are certain to be cheaper across Europe these days. 

Weekly Swing Trades

Stock 2

December 18, 2022

Entry Price:

74.20

Stop Price:

72.65

Target Price:

77.20

Time Frame:

3 Week Hold

Caught a key support level last week. Monitor your 5 & 9 day moving average to ensure we don't lose momentum for this swing trade. Full info for our premium members.

Stock 1

December 18, 2022

Entry Price:

118.09

Stop Price:

114.24

Target Price:

125.08

Time Frame:

4 Week Hold

Classic moving average play here, looking for support off the 50 day MA. Closing last week, there was a slight uptick. If momentum holds, should make for a nice swing trade. Full info for our premium members.

Record Day for Amazon

Amazon's annual sales event known as "Prime Day" has once again broken the record for total sales over two days. Smashing its own record set last year in 2021. Amazon sold over 300 million items, a steep increase from last year's then-record of 250 million purchased items. 

Over the two-day event, household essentials were purchased at the highest rate. Second and third on the list were luxury beauty items and consumer electronics. Amazon noted some of its top sellers included Fire TV sticks, Alexa speakers, and cameras. Amazon predicted that its members saved a total of $1.7B over the two days. 

The growing success of Amazon's prime day has seen many competitors follow suit with their own mega-savings flash events. Wal-Mart, Best Buy, and Target have all noted huge sales through similar initiatives. 

Upcoming Economic Reports

Market Performance- Week of 12.18.2022

Recent Stories

Using an RSI in Swing Trading

Jul 27, 2022 | Using an RSI to identify Swing Trading Opportunities ...read more

Channel Pattern in Swing Trading

Aug 03, 2022 | How to find resistance and support levels in Swing Trading ...read more

Pattern Finding in Swing Trading

Aug 10, 2022 | Finding patterns and sectors to monitor is what successful traders do to build long term profits ...read more

Using a Simple Moving Average For Swing Trading

Aug 17, 2022 | Simple Moving Averages can be a great way for Swing Traders to track markets and identify an entry point ...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 12.18.2022

Recent Winners

BLDR (Builders Firstsource)

BLDR (Builders Firstsource)

Entry Price:

62.30

December 18, 2022

Price at High:

70.00

Return for Members:

11.00%

Timeline:

3 Week Hold

Simple moving average play here. Anticipating a 3-4 week swing trade as momentum has been growing for a move up.

EVI (EVI Industries)

EVI (EVI Industries)

Entry Price:

18.11

December 11, 2022

Price at High:

26.92

Return for Members:

48.64%

Timeline:

3 Week Hold

We're tracking EVI on its 4-hour chart, specifically looking at the 50MA as a level of support. If we can bounce, there is enough momentum for a quick swing trade.

FMC (FMC Corp.)

FMC (FMC Corp.)

Entry Price:

128.14

December 4, 2022

Price at High:

134.38

Return for Members:

4.90%

Timeline:

1 Week Hold

FMC has been on a bull run over the last month. As Swing Traders, we'll look to take advantage of the momentum and get in for a quick trade. Wait for a brief pull-back before entering.

Recent Watchlist Winners

Join the Club