Trade The Journey

Trade The Journey

Reflection Viiii

Top of the Morning! March Madness begins next week, and I’m excited to see college hoops take center stage. Maybe the tournament will provide some relief to the concerning developments of the Ukraine/Russia conflict. As the United States announced that it would halt imports of Russian products, including oil, the price of the crude oils spiked to $130 a barrel.

Instead of engaging in the traditional war with troops on the ground, this new form of war is now economic. As the Russian Ruble continues to decline and the chances of an economic recovery in Russia in the years ahead dwindle, I wonder how far Putin will take this war.

Europe, which relies heavily on Russia’s energy resources, vowed to develop alternatives; Putin reacted by threatening to halt energy imports. As the bombings continue in Ukraine, the chances of resolving this conflict are now close to zero.

Gasoline prices continue to rise to uncomfortable levels for consumers. As prices continue to rise and growth shows signs of slowing, could we be in the beginning stages of stagflation?


Indices

Nasdaq

The Nasdaq is making its way to test the 12587.88 low made a couple of weeks ago. The reference level above is 13835.88, with a quick test of 13288.16 in the short term. If the Nasdaq continues to fall, the 11914.46 could be a reference level below.

Conclusion: The Nasdaq is now in bear market territory.

Dow Jones

The dow had another down week and stayed within a short sideways trend this past week. The 33535.04 level was tested on Monday and Friday of the previous week but failed on both days. The immediate test below is the low of the week at 32643.06. The 50 crossed the 200 sma this past week, confirming more downwards action. It also looks like the Dow completed a head and shoulders pattern.

Conclusion: The Dow may test the reference level above but looks weak in the week ahead.

S&P 500

The S&P tested the 4300 level on Friday and failed after the level held as support the week before. 4300 is now a resistance level moving ahead. The 50 sma is making its way to cross the 200 sma in the weeks ahead. A quick test is a low of the last couple of weeks at 4121.

Conclusion: Low chances of recovery.

Russell 2000

The Russell is in another sideways trend. It looks like the 50 sma will act as resistance moving forward. The 200 sma looks like it’s starting to turn downwards. It doesn’t feel like the Russell will be resuming a trend anytime soon. If it does, the chart indicates more downward is to follow.

Conclusion: The possibility of another downward move is increasing.

Bonds

Bonds sold off across maturities helping the ten-year yield resume its move above 2.0%. The 30-year yield gapped up, and the five-year yield made its way towards its February high of 1.97%. The yield curve is close to inverting, signaling a recession may occur in the near term. This week the Fed will meet announce its first hike for the year ahead as the Fed pivots from its accommodative stance on monetary policy.

Sectors

Energy is still in a bullish trend, buoyed by high prices for crude oil. Even though crude fell from its high made at the beginning of the week, its bull run could resume shortly depending on developments out of Ukraine/Russia, as economies around the World shun Russian resources.

The materials, Consumer Discretionary, Technology, Financials, and Healthcare sectors charts all show that either the 50 sma crossed the 200 sma or is in the processing of crossing.

Utilities recovered somewhat during the week, and consumer staples fell through its 200 sma. Industrials settled into a sideways trend, although the 50 sma crossed the 200 sma last month.

Economy

Mortgage rates declined slightly as investors rushed into safe havens like bonds which lowered yields as crude oil and commodities increased. The purchase and refinance index increased for the previous week, although it’s still lower than the last year. Loan sizes remained high, as the more affluent continued to dominate loan application growth.

January’s job openings decreased in the following sectors: Accommodation/ food services, transportation, warehousing, and utilities. Openings grew in services and durable goods manufacturing. Layoffs increased in the retail and information for January.

Below is a summation of the net change:

Large numbers of hires and separations occur every month throughout the business cycle. Net employment change results from the relationship between hires and separations. When the number of hires exceeds the number of separations, employment rises, even if the hires level is steady or declining. 

Conversely, when the number of hires is less than the number of separations, employment declines, even if the hires level is steady or rising.

Over the 12 months ending in January 2022, hires totaled 76.4 million, and separations totaled 70.0 million, yielding a net employment gain of 6.4 million. 

Wholesale Inventories growth in January slowed to 0.8% from 2.3% in December. Retail Inventories decreased, as did wholesale inventories. Business Inventories increased. Durable/Nondurable goods sales increased across sectors. Durable goods inventories fell most for the automotive industry. Inventories rose for apparel, groceries, chemicals, and petroleum for nondurables.

Definitions for retail and wholesalers:

Retail: Sale of goods directly to end-user

Wholesalers: Sells products to businesses or other outlets who are not the end user.

Inflation for February reached a forty-year high, notably for energy and energy commodities, including gasoline. Food at home cost also increased but fell slightly for food away from home. Fruits and vegetables posted the largest increase although the food at home index increased on the whole.

Used Cars & trucks posted a notable increase, followed by new vehicles and airline fees.

Consumer Sentiment continues to fall, down almost 30% from the previous year. The top worries of consumers are inflation-adjusted incomes, rising fuel prices, and the conflict in Ukraine.

US weekly jobless claims posted an increase this past week.

We are heading into a period of heightened volatility both in markets and the economy. With the ongoing Ukraine/Russia conflict, it’s hard to tell the end result. With so many variables in play, it’s best to play it safe in the weeks ahead. Market conditions can change rapidly so be careful. Utilities and Energy could be possible offensive plays in the weeks ahead. 


Cash-flow management for the past week:

I think I did pretty well managing my expenditures, although gas continues to be a sore point. This past week, I spent double the amount filling up my tank. As prices continue to rise, I’ll have to be more diligent than ever to ensure I have enough money to add weekly to my savings account.

Grade: C

Reason: Continued Improvement.

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