Trade The Journey

Trade The Journey

Ongoing Conflict- What’s happening?

Top of the Morning! A lot is going on globally, with the world’s focus on the Ukrainian/Russian conflict. This conflict seems unreal and can transform into a full-scale war if it continues to escalate. No one knows the end result and how far Putin is willing to take this invasion of Ukraine. With the list of sanctions increasing against Russia as the conflict in Ukraine continues, Putin may decide that he has nothing to lose.

Russia possesses nuclear weapons, and I fear that Putin is not against using them if his legacy is at risk. The Ukrainian people are determined to defend their country. The Ukrainian president has stayed in his country, shunning offers to evacuate.

Here are some of the sanctions levied against Russia:

Some of Russia’s banks have been blocked from the SWIFT international system. SWIFT is a “Vast messaging network used by banks and other financial institutions to send and receive information such as money transfer instructions.

Europe froze the European assets of Putin and foreign minister.

Japan halts exports of military use goods and sanctioned financial institutions.

The U.K. targeted Putin’s wealthy circle and froze assets on major Russian banks.

Canada took some of the same measures.

Germany declared that it would send military weapons to assist Ukraine, determining Russia’s aggression as an act of war. Germany also halted the opening of the second Nord Stream pipeline.

The Czech Republic banned Russian airlines from flying to the country.

Taiwan will limit exports to Russia, especially semiconductors.

Ukraine is rich in natural resources, but Putin seems more interested in reclaiming the territory to rebuild the Soviet Union. The sanctions list above is a summary and does not include all the sanctions levied against Russia. Russia saw its currency and stock market drop in response to the sanctions, and its road ahead will consist of suffering both economically and politically.

If SWIFT removal is approved, Russia may see bank runs this coming week.

Markets reacted to the invasion as expected, dropping across the indices. However, markets surprisingly recovered during the end of the week, perhaps due to sanctions on Russia.

Markets

Russell 2000

Increased volatility but recovered at the end of the week to the tune of 6.33%. The Russell reached a new low, slightly below January’s lows but recovered half of its value from its drop at the onset of the Ukraine invasion. 2082.89 is the following reference above. The lows will serve as support.

S&P 500

Increased volatility but ended the week 1.86% higher. The S&P broke through the 4288 level after recovering from its downside action. The next test above is the 4430 level.

Dow Jones

Increased volatility but finished the week 0.33% higher. The dow broke through the 33,525 level after recovering. The 34,519 level is the next test above. The 50 and 200 sma seem to be close to converging. It looks like the Dow will remain in a sideways trend for the foreseeable future.

Nasdaq

Increased volatility but ended the week 3.68% higher. After falling and opening close to the low of March, the Nasdaq staged a quick recovery. 14177 is the next test above; however, the 50 sma crossed the 200 sma to the downside, indicating more downside action may follow.

Bonds

Yields across maturities displayed volatility, with bond-buying taking center stage at the beginning of the Ukrainian/Russian conflict. Towards the end of the week, yields recovered, with the ten-yield resuming its march toward 2%.

Sectors

All of the sectors rebounded from the fall earlier in the week. Energy and consumer staples resumed their upward trends for the most part.

Economic Story

New home sales fell close to 5% from a year earlier. Mortgage applications sank 13.1%. The last time I covered mortgage rates, they were at 3.96% but have increased to 4.06%, further deterring potential home buyers. Refinancing declined, and rates for both 15 and 30-year mortgage rates rose. Purchasing applications also declined.

GDP rose 7%. Private Inventory Investment rose led by retail and wholesale trade industries, led explicitly by motor vehicle dealers. Exports increased for goods and services. Export goods grew for consumer goods, food, feeds, beverages, industrial supplies, and materials. For services, travel led the increase. Federal government spending decreased.

There was an increase in imports led by non-food and automotive goods and capital goods. Private domestic investment increased led by intellectual property, which includes software and research.

Durable goods increased, led by recreational goods and vehicles. Weekly jobless claims for unemployment decreased.

While personal spending continues to increase, personal income remains unchanged. Consumer sentiment continues to fall due primarily to inflation concerns. The report was released before the Ukrainian/Russian conflict began.

As expected, core personal consumption expenditures (PCE) increased, led by motor vehicles and parts. The most significant increase in services was led by housing and utilities. PCE increased a total of 6.11% from the prior year.

It looks like the Fed will move ahead with its planned rate hike amid the Ukrainian crisis. One factor that may affect its decision is the possibility of sanctions against Russia’s energy sector. Europe is heavily dependent on Russia’s energy exports, importing close to 40% from Russia.

A sanction against Russia’s energy sector would reverberate across the globe, hence the resistance to sanction.

As the world recovers from the Coronavirus, a new and more dangerous threat has arisen. As if the markets weren’t volatile enough, a war further increases volatility in markets moving ahead. Although the markets staged a recovery towards the end of the week, I would continue to be cautious as Markets remain fragile.


Paper Trading Journal Update

A few posts ago, I wrote about the excel spreadsheet I created to track my paper trading results. This past week, I completed 100 trades and decided to review my results. 60% of my trades were profitable; however, I finished with an overall loss indicating that I have trouble limiting my losses on losing trades.

My results show that I relied on “Hope” a little too much instead of cutting my losses at a predetermined stop level. All of my trades involved options. With my following 100 trades, I will keep my losses to 5-10% per trade. Once I can do this, I will feel comfortable taking on positions with money on the line.


Cash flow review for the past week:

I feel good about some of the cuts I made to my discretionary spending. I added money to my savings account and further paid down my credit accounts. I now have enough in my savings account to cover an emergency without withdrawing from my investment accounts.

Grade: B

Reason: Improved in managing my daily expenses.

Leave a Comment

Your email address will not be published. Required fields are marked *