Trade The Journey

Trade The Journey

The War Continues

Top of the Morning! The war continues in Ukraine as Russia intensifies its attack. This past week, Russia hit a nuclear plant, bringing increased concern to governments worldwide. The President of Ukraine has stood firm and criticized NATO for being weak as it shuns involvement in the war except for sanctions.

Over one million people have fled Ukraine. Russia has been preparing for this war as it decreased its budget and lowered its reliance on the US dollar as a reserve currency. It seems like Putin continues to push the line, testing how far he can go without NATO becoming directly involved.

Russia does have nuclear weapons, and its commodities exports are essential to the World, especially Europe. Although sanctions have been levied against Russia, causing the Ruple to fall and its stock markets to close, Russia has continued its invasion.

We feel the effects of this invasion, with the rise in gas prices with some gas stations listing prices at $6 per gallon. The president has signaled that oil reserves will be released, but there is doubt that will slow the rise in gas prices. Also in the news is the negotiations to bring Iran back online in terms of oil production.

Although this is good news, it shadows the production limits that some OPEC countries face meeting demand. Chairman Powell has signaled that the quarter-point increase in rates is most like the FED’s increase at the following meeting. The Ukraine/Russia conflict has added to the complexity of managing inflation moving forward.

As gas and food prices continue to rise, how long will companies be able to pass on rising input costs to consumers?

Another story of note involves a WNBA player, Brittney Griner, who was arrested at a Russian airport for drugs. The drugs cited were vape pens used to smoke marijuana. Although she’s been detained for three weeks, news of her arrest is just now hitting news outlets. It looks like Putin could be holding Griner in hopes of using her as a bargaining chip. She’s facing ten years in Russia.


Economic Picture:

ISM Manufacturing

Respondents said supply chain issues are still a mess. Demand continues to be strong, and business conditions are still strong as manufacturing inventories continue to increase. Electronic and Transportation supply chains still have challenges as demand rises. Most commodities are up in price with the exception of steel. Electronic components and semiconductors are some of the notable commodities in short supply. Imports slowed citing container shortages and transportation labor issues. Manufacturing continues to expand with an average of 60.3 for the last twelve months.

ISM Service

PMI respondents cited supply chain challenges, raw materials increase, labor shortages, employee turnover, and inflation for the services report. Backlog of Order and New Export Orders posted the biggest percentage change month over month, coming in above 6%. Employment is contracting and supplier deliveries slowed, while new orders and business activity/production growth are slowing quickly. Prices are increasing, and Inventories and New Export orders both are rebounding. Commodities across the sectors are increasing in price except for Personal Protective Equipment which decreased. Construction contractors showed short supply for the last two months.

Construction Spending

For January, total construction spending increased by 21.4 billion with both private and public construction increasing. For private construction, residential spending increased for both newly single and multifamily construction, manufacturing-led private construction. Office construction showed a notable decrease as did construction for education and amusement & recreation. For public construction, spending decreased on residential construction. Most nonresidential industries decreased except power, highway and street, sewage and waste disposal, water supply, and health care.

Crude Inventory

Crude Oil inventories are 12% below the five-year average for this time of year – Crude Inventories report.

Weekly Mortgage Report

Applications decreased for the fourth consecutive week. Mortgage rates increased to 4.15% from 4.06%. Home prices are still rising, and the more expensive or higher-end homes continue to see demand.

Private sector employment increased overall with a decrease in small businesses. Midsize businesses continue to add jobs, with large companies posting the highest increase. The goods-producing sector added the most in manufacturing and construction. The service-producing sector added the most in leisure & Hospitality and professional & business. Total employment decreased from the previous month, adding its lowest total since September 2021.

Weekly jobless claims decreased for initial claims, and the unemployment rate was nearly 3.9%. The US added close to 400,000 jobs for February.

Trade good deficit widened with imports rising for capital goods, industrial supplies, consumer goods, and vehicles. Exports fell most for consumer goods.

Indices

Russell 2000
The Russell looks to be entering into another sideways trend. It reached a new low about two weeks ago and stayed above the low this past week. 2084.25 is a nice test above and 1943.13 below. It looks like the Russell will at least test 1943 this coming week although buyers stepping in at 1995 level stopping the Russell from closing on its low last Friday. While the 50 sma turned downwards last month, the 200 sma has yet to turn markedly downwards.

S&P 500
The S&P stayed above the 4286.81 support level as buyers stepped in throughout the week to prevent the S&P from falling below. This support level has held strong since July of last year and has been tested multiple times. The next level above is 4429.72. The S&P attempted to make a move up but could not sustain the move. If the S&P breaks the support level the next level would be the low of the year to date. The 50 sma seems to be making its way towards the 200 sma.

Dow Jones
The Dow drifted below support at 33514.99 but was able to end the week above the level. The dow gapped down last Friday but buyers quickly brought on the whole helping it close above support. This support level has been in place since April of last year. 34060.88 looks like a nice test for the Dow moving forward.

Nasdaq
The 13248 level has held as minor support as the Nasdaq remains volatile. Two weeks ago, the Nasdaq gapped down but quickly recovered. However, the gap down on Friday showed some weakness. The week ahead should be interesting. 13839 is a nice test above for the Nasdaq. While the 200 sma continues to be sideways, the 50 sma crossed the 200 sma and continues to move downwards.

Bonds:
Across the maturities, bond-buying continues pushing yields lower. The thirty-year bond showed the highest increase in buying, with the rest of maturities showing an increase albeit not nearly as much. At the moment, I’m reading the “Strategic Bond Investor” which is helping me understand why bond prices and yields move the way they do. I look forward to providing a better-detailed analysis of the bond market as the weeks move ahead.

Sectors:
The strongest sectors where Energy and Utilities. The utility sector broke through its 50 sma this past week towards its all-time high. This coming week, it should be able to make a new all-time high. The energy sector made a new high buoyed by the soaring prices of crude oil as it made a new high at $116. The consumer discretionary sector looks like it will continue to weaken as the 50 sma should cross the 200 sma this coming week. Consumer Staples on the other hand look poised to break through its 50 sma, as the 50 sma served as resistance this past week.

The technology and Finance sectors both weakened while industrials and healthcare both strengthened.


Cash flow past week:

I decided to leave out a reflection for this week as I continue to change the format of these blog posts. I will resume next week.

This past week was challenging in terms of managing my cash flow. I felt I over-extended myself in some areas of my spending. Many of my significant expenses are fixed; however, they still seem to surprise me. It might be best for me to update my calendar listing all of my bills and their due dates.

Unfortunately, I had to withdraw most of the money I saved to cover my expenses. This saddens me because it took me close to a month to reach the amount I saved. I am confident I’ll replace the amount spent from my savings account, I hope that I don’t have to do it too often.

Grade: D-
Reason: Tapping into savings to cover expenses.

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