Trade The Journey

Trade The Journey

Short Post

┬áTop of the Afternoon! I hope everyone enjoyed the weekend. Monday is a holiday, the markets are closed, and I’ll still be working. The conflict in Ukraine has overtaken the market narrative, as tensions rise. Another concern is the Fed and how aggressive they will be in taming inflation.

 

Market Technicals

Indices

Russell 2000


Once the Russell broke through its year-long support line, any chance of a return to its support line which is now a resistance line decreased. 1969.39 is a reference below I’d look for the Russell to test. 2084.64 is where the Russell met some resistance above.

S&P 500

The S&P broke through the 4430.38 reference level to the downside. 4288.88 is the next reference level below that could serve as another test.

Dow Jones

The Dow broke through the 34519.19 level to the downside. Almost an identical pattern to the S&P 500. 33525.04 is the next reference level to the downside. Resistance will be the 34519.19 level above because support turns into resistance.

Nasdaq

The Nasdaq faltered on its way up to the 14177.98. The next reference below is 13243.70. Yields did drop on bonds across maturities, however, the Ukraine/Russia conflict is weighing heavily on markets as is inflation.

Sectors

 

Materials:
After a steep decline in January, a small upwards trend took place, however, prices weren’t able to break above the 200 sma. Around $86.15 is the upper part of a small window and can serve as possible resistance. $85.61 is the bottom part of the window and serves as resistance. Technology:
Technology broke below its 200 sma after a slight recovery from January’s decline. $151.33 is a support (reference) level to watch. Further below is the $146.49 reference level, which buyers stepped in to stage a slight recovery. Industrials:
Industrials has been a sideways trend since early January. $98.22 is a support level that the industrials have been teetering. It looks like the 20 sma is crossing the 200 sma, confirming more downwards action. Energy:
Energy backed off of its high of $67.06 to the downside. A bit of sideways action in Energy but a lot of the action is dependent on Russia/Ukraine conflict. Healthcare:
In February, healthcare reached the 50 sma gapping up and then falling below the 200 sma shortly afterward. This past week, it was unable to break through the 200 sma, and a reference level to watch where buyers stepped in is $124.96. Utilities:
After gapping down in early February and falling through the 200sma, utilities had some buyers step in at $65.84. A great test this coming week will be the 200 sma. Financials:
After reaching a high in January, financials in February tried to test the highs but fell even though yields have made a move lower. Financials closed below the 50 sma, and it may test the 200 sma in the week ahead. Consumer Discretionary:
In January, consumer discretionary fell below the 50 sma and then fell below the 200 sma and hasn’t been able to break above. Consumer discretionary is facing some headwinds due to record-setting inflation. There were some buyers on Friday, but I am skeptical if the consumer discretionary sector can break above 200 sma. Consumer Staples:
Consumer Staples remains in a strong trend closing slightly below its 50 sma. $77.14 is a reference level to watch to the upside before it tests its all-time high again. On the downside, $74.07 is a reference level to watch.

Bonds:


Across the maturities, there was bond buying due to the conflict in Russia/Ukraine and other issues. Yields across maturities fell, with the 10-year yield falling below 2.0%. Economic Story:
Russia is a major producer of Nickel, Petroleum, and Wheat, so if Russia invades Ukraine, it could pose a major problem for European economies. The US is in the process of possibly lifting sanctions on Iran, enabling them to resume their oil production and supply, which could help ease the fallout if Russia does invade.

Inflation remains a major concern for the US economy and consumers, as evidenced by the consumer sentiment report. The PPI report highlighted the increased cost companies have to navigate; however, the market did not react to the report as expected.

Existing home sales reached a year high, but supply dwindled, indicating that prices for homes will continue to rise. With rates continuing to rise, at what point will housing prices decline? Housing starts fell, and lumber prices are near last year’s high, reinforcing higher prices for the time being.

In contrast, building permits rose indicating the need for more homes. Markets await the next Fed meeting in March to determine the rate hike needed to cool down inflation. Most, if not all, favor a rate hike but differ on the increased level.

Industrial outputs increased. Business Inventories rose at retailers, merchant wholesalers, and manufacturers. Retail sales supported the increase in inventories, with the highest rise seen in non-store retailers, furniture stores, auto dealers, building materials, garden equipment, and general merchandise stores.

Earnings came in mostly above average, however, companies are concerned about the future. Supply chain challenges continue but should recover as consumer demand decreases due to higher prices. That hasn’t happened yet as evidenced by the retail sales report. Companies are paying both higher prices for their supply and higher wages to workers.

The next couple of weeks should be interesting, especially if Russia decides to invade Ukraine.


Cash flow management review:

I did a terrible job managing my finances this past week. I practically had no restraint on my spending due to the fact I earned a little more this week than in the previous weeks. Whenever I receive money whether earned or returned from investments, I always feel that I could afford the next purchase.

“I have enough money to cover this expense and still afford to pay for all my weekly necessities.”

I keep thinking this and spending money until I don’t have enough for necessities. For these actions, I deserve an F for cash flow management.

Grade: F

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