Trade The Journey

Trade The Journey

Reflections: VIII

Top of the Morning! The NFL playoffs continue this weekend, with the divisional championship setting the stage for a Superbowl match two weeks from now. Go Rams, although I think the San Francisco 49ers are a formidable opponent. The 49ers came back from a deficit to defeat the Rams in their last matchup.

Tom Brady is set to retire after twenty-two years in the NFL. As a sixth-round pick, no one could have imagined that he would go down as the greatest quarterback of all time except him. I respect his discipline and commitment to his craft. I commend you if you can limit yourself to one dessert per year to maintain an edge healthwise.

Indices

RUT: The Russell fell 3.06%

S&P 500: The S&P rose 0.55% to end the week.

Dow Jones: The dow rose 1.12% to end the week.

Nasdaq: The Nasdaq fell 0.65%

Bonds

Fiver-year yields: Recovered to make a new high Friday but closed below the opening of a gap made a week ago. The trend for the five-year yield looks strong. 1.77% shows resistance on the weekly chart.

Ten-year yield:  The ten-year yield closed at 1.78%. The ten-year yield trend still looks strong. Resistance is at 1.98% and 2.15%.

Thirty-year yield The thirty-year yield is still in a sideways trend and closed at 2.08%. 2.78% area still served as resistance on the daily chart. Twenty-period simple moving averages crossed the fifty-period moving averages a couple of weeks ago. The twenty crossed the two-hundred moving averages this past week, signaling a sign of strength for yields.

Economic Review

Consumer sentiment showed continued concerns of rising inflation and an income not matching the upwards pace of rising prices. Personal Income missed expectations and decreased from the previous month. Core PCE (Personal Consumption Expenditures) was in line with market expectations and showed rising inflation. Goods and services prices increased, as did food and energy.

As business spending plans for durable orders fell, employers’ labor costs continued to rise. This was evidenced by companies reporting continued supply chain challenges among rising employee costs that pressure margins. Durable orders fell for transportation and communications equipment.

Pending home sales fell for a second month. A pending home sale is a contract that has been signed, but the transaction has not closed. Not all signed contracts result in closing sales. Prices for homes are expected to rise partly due to a decrease in the numbers of available homes to be sold.

GDP rose, showing a rise in personal consumption in services however residential investment continued to fall.

New unemployment claims fell this past week after rising the previous three weeks partly due to the Omicron variant.

Sector Review:

Remained Strong

Consumer Staples: Closed strong above the 50 sma.

Energy: Made a new high.

Semi-recovered

Technology: Crossed above the 200 sma decisively.

Industrials: Below the 200.

Materials: Below the 200.

Healthcare: Crossed above the 200.

Utilities: 200 sma held as support the 50 sma could be the next test.

Consumer-Discretionary: Still below the 200 sma.

Financial: Stayed above the 200 sma.

 

Earnings

Tesla beat earnings but cited supply chain challenges moving ahead.

Intel beat earnings forecast.

Visa beat earnings, highlighting a rise in its crypto-linked cards. Visa supports digital currency adoption, as does its competitors like Mastercard. Visa is growing its network of crypto-wallet partners.

Chevron missed its earnings forecast.

Caterpillar beat earnings forecast but gapped down after earnings. Cost of goods rose faster than sales, with the CEO citing rising freight costs and production inefficiencies. Sees headwinds decreasing in the later quarters.

Apple beat earnings forecasts decisively. Sales across their products rose, with the only exception being Ipad sales. Although chip supply is a concern, it didn’t hinder Apple’s sales.


Technical Picture

Russell 2000

The Russell ended the week in a tight trading range. The weekly chart shows an ensuing battle between the bears and bears. 1712 is a possible support level, as is the 200 moving average. 2139.13 is a significant resistance level for the Russell

SPX

The 4430 level served as resistance, with the 200 moving average at roughly the same level. The next possible resistance level would be 4481. The S&P looks like it could est this level this coming week.

Dow Jones

The dow broke through the 34519 level decisively, making its way to test the 200 moving average. It breaks through the 200; the next test would be the 35157 level.

Nasdaq

The Nasdaq closed Friday strong. Hard to call the direction of the Nasdaq. I think it could test the 14177 level, barring any unfortunate news events involving rates.


Reflections

The only skill I think improves with time is patience when trading. One thing I’ve noticed about paper trading is that patience trumps speed. Identifying a pattern or reference level and thinking about potential outcomes takes patience.

Not every signal should be acted upon. I used to only trade options on stocks I lost money on, trying to recoup some of my losses. I’m learning to look for opportunities instead of forcing them. If the pattern doesn’t illicit a favorable setup for me, I look for another stock to trade.

Before I’d trade the on the trading signal, I imagined I saw which would lead me into trouble. Some stocks have patterns that are hard to forecast, and I try to stay away from them. If you can’t decipher what’s happening with the stock, why would you waste your time on it?

Only you know which trading signals you have an edge in trading. That self-knowledge comes with time and journal keeping to see patterns in your trading. These details show up in your profit margins, and if you don’t know your tendencies, how can you make any adjustments?

Trading is a journey in the discovery of self. There’s an adage that states that you don’t trade the markets; you trade your perspectives on the market. I know I messed up that quote pretty bad, but I am sure you get the picture.


This past weeks’ cash-flow report:

I continued to pay down my credit card accounts and add any additional money to my savings. Managing my income has been challenging as it varied from week to week more than usual. Luckily, I had accumulated a savings amount that could weather a short-term cash-flow shortfall.

I returned to the habit of taking a percentage of my paycheck and placing it into my savings. Sometimes, I wonder if I’ll ever achieve financial freedom, but that doubt shouldn’t stop me from performing cost-effective purchases. I believe that taking a step forward each day is better than no step at all.

On days where I feel doubt creeping in, I remind myself that the only thing I need to worry about is completing my goals for the day. Time will take care of my doubt as the success of the money management plan materializes.

Grade: C

Reason: Continued improvement

Leave a Comment

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