Trade The Journey

Trade The Journey

Insight: April 29

Top of the Morning! After last week’s abysmal trading results, I was hesitant to write another post talking about trading. To be honest, I just felt like watching television and forgetting about the whole experience. No matter how much I tell myself this trading experience is a part of the tuition that you’re paying to learn about trading, it was discouraging.

As I watched the stock rise, and my position drift further into a sea of red, I felt helpless even though I had the power to end the pain. I could have closed the position at any point, but I remember thinking I can’t take this loss after taking my first big loss thirty minutes earlier. I felt this sentiment at the core of my being.

I couldn’t take a loss after I told myself that this past week would be the first week, I exceeded my salary with my trading profits. You can read more about my experience here.

I guarantee that you’ll learn about what trading is about and how my mindset contributed to the loss more than the market did as I learned while writing about the experience.

Economy

Reports concerning the health and future of the Consumer:

Consumer Confidence

Consumer confidence fell noticeably in April. The current level is 101.3, down 2.7 points from the previous month. Consumers seem to being growing pessimistic six months from now, with expectations for business conditions to worsen rising, and fewer jobs anticipated rising slightly. The current assessment of business and labor market conditions rose 2.2 points to 148.9. The expectations or short-term outlook (six-months) for business and labor market conditions fell 5.9 points to 68.1.

According to the report, consumers under the age of 55 and households earning $50,000 the outlook deteriorated sharply. Plans to purchase major items are also declining.

The final report for the University of Michigan consumer sentiment report showed that the Consumer sentiment index for April was unchanged from the preliminary report. The current economic conditions index fell 0.4 from the preliminary report to 68.2.  The consumer expectations index rose 0.2 points from the preliminary report to 60.5. The year-ahead inflation expectation remained at the same level from the preliminary report. The five-year ahead inflation expectation rose 0.1% from the preliminary report to 3%. All the index numbers improved from the March levels.

Prices

The PCE price index for March rose 0.1%, and the PCE price index excluding food and energy rose 0.3, unchanged from the previous month. Durable goods spending fell .22% and spending on nondurable goods fell .303%. Spending on services rose .23% and has risen 5.49% from a year ago. Household consumption expenditures rose close to 1% from the previous month and Health care services spending rose 0.46%. Spending on food services and accommodations rose 0.83%, falling for food services and rising for accommodations.

The PCE index changed from a year ago, fell to 4.2% from 5.1% last month for the PCE and fell 4.6% from 4.7% for the PCE excluding food and energy. Personal Income rose 0.3%, and disposable income rose 0.4% in current dollars. Adjusting for inflation, also known as chained dollars, disposable income rose 0.1% to 3%, and the PCE was flat. The current-dollar income rise was led by private wages and salaries. The personal savings rate rose 0.3% in March to 5.1%. Rental income rose 1.4% in March, increasing by the same amount as the previous month.

Employment Cost Index

Compensation costs for civilian workers rose 1.2%, wages and salaries rose 1.2% and benefits cost rose 1.2%. These percentages are measured in 3-month periods. Over the past year, compensation costs have risen 4.8%, wages and salaries have risen 5.1%, and benefits costs have risen 4.5% for civilian workers. For the private sector, compensation rose by the same amount, only falling 0.5% for benefits.

Adjusting for inflation, the twelve-month total is more telling. For civilian workers, compensation grew    -0.2%, wages and salaries were flat, and benefits grew -0.5%. For private workers, compensation grew -0.2%, wages and salaries rose 0.1%, and benefits grew -0.6%. For state and local government workers the story was about the same, only rising 0.2% for benefits.

Compensation for goods producing industries rose 0.4% to 1.3%. For the services industries, compensation rose 0.1% to 1.2%. For wages and salaries, goods producing industries rose 0.4% to 1.5%. Wages and Salaries for service-producing industries fell 0.1% to 1.1%.

Initial Claims

Initial claims came in below forecast, declining by 16,000 to 230,000. Continuing jobs claims decreased from the previous week by 3,000 bringing the total continued claims to $1.858 million. The job market remains resilient, as the four-week moving average fell by 4,000 to 236,000 claims.

Outlook for consumers:

While the consumer remains resilient, wages and salaries when inflation adjusted are decreasing and the outlook for the near-term future is growing more pessimistic. While inflation is cooling, and the FED rate hikes seem to be working, credit conditions are tightening amidst a consumer pullback in purchases of big-ticket items. Can the consumer continue to prop up the economy?

Reports Concerning the Housing Sector:

Pending homes sales fell 5.2% in March. The report forecast sales in the second half of this year, with rates heading lower and housing starts to increase in 2024. The median new home price is expected to be 1.9% lower in 2023 before rising to 4.2% in 2024 according to the report. Housing inventory was listed as a major barrier to higher home sales.

Mortgage applications rose 3.7% from the week prior. The refinance index rose 2% and the seasonally adjusted purchase index rose 5%. The 30-year fixed rate for conforming loans rose 0.12% to 6.55%. The 30-year fixed rate for jumbo loans also rose 0.12% to 6.40%.

New home sales for single-family homes rose 9.6% in March. The average sales price was $562,400 and median sales price of houses sold was $449,800. The current supply at the current sales rate is 7.6 months. Homes sold for $200,000 to $299,999, $300,000 to $399,999, and $400,000 to $499,999 and $750,000 and over ranges all rose. The $500,000 to $749,000 range was unchanged from the previous month. New houses sold during the period, rose sharply for the not started stage of construction and fell slightly for the under construction and completed stage. For sale at the end of the period, houses for the not started and completed stage of construction rose slightly while falling for the under-construction stage.

Inventories and Durable goods reports:

New orders for manufactured durable goods rose 3.2% in March. Without transportation included, new orders rose 0.3% and excluding defense, new orders rose 3.5%. Shipments of durable goods rose 1.1%, unfilled orders for durable goods rose 0.4%, and inventories rose 0.9%.

Nondefense new orders for capital goods, a proxy for business spending, rose over 10%. Shipments of capital goods rose 3.6%, unfilled orders rose 0.6%, and inventories fell 1.7%. New orders for transportation equipment also contributed to the improvement in new orders, rising 9.4%.

Wholesale inventories rose 0.1%, and retail inventories rose 0.7% in March. The international trade deficit fell to $84.6 billion, falling a total of 8.1%. Inventories didn’t change much for Merchant wholesale trade, falling 0.1% for durable goods and rising 0.4% for nondurable goods. Retail inventories rose 0.7%. For US international trade in goods, exports rose 2.9% and imports fell by 1%.

GDP

The advanced estimate for the first quarter GDP rose 1.1%, slowing from the increase of 2.6% in the fourth quarter. The GDP price deflator rose 4%, which was above the forecast. Although growth is slowing, consumer spending increased on both goods and services. Spending on goods was led by motor vehicles and parts, specifically in new light trucks and used light trucks. Spending on services was led by health care and food services & accommodation as mentioned earlier, specifically, outpatient services, hospital & nursing home services.

Private inventory investment and residential fixed investment fell. The decrease in private inventory investment was led by wholesale trade and manufacturing. The decrease in residential investment was led by single-family construction. Nonresidential fixed investment rose in structures and intellectual property products but fell in equipment. For structures, an increase was seen in manufacturing structures. For intellectual property products, an increase was seen in research and development. Aircraft led the decrease in equipment.

Current-dollar personal income fell 30% from the fourth quarter, $398.8 billion in the fourth quarter and $278.9 billion in the first quarter. Disposable personal income rose 12.5% and real disposable income rose by 8% in the first quarter. The personal savings rate rose 0.8% to 4.8% in the first quarter.

This past week’s cash flow in Review:

This past week spending was unchanged as I pretty much stayed within my spending plan limits. I still think that improvements can be made to my discretionary spending. Recently, I began redirecting my spending from items to trades. After taking such a huge loss, I feel that I need to focus on gaining trading experience to become the Master Trader, I envision myself becoming.

Grade: C

Reason: Some improvement

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