Trade The Journey

Trade The Journey

Visualization

Top of the Morning! I hope everyone is doing well and managing their portfolio during these times of heightened volatility.

 

 

Market Story

Towards the end of the week, the Market calmed a bit to the Omicron news, amid reports that it may not be as severe as the Delta Variant. The Omicron variant is here in the United States and has made its way around the world.

The jobs report showed a continued improving outlook with the only ding being the number of jobs created, which came in below expectations. The November report was important because it was supposed to show support for the Fed maintaining its hawkish stance. Reports say the Fed will not change its current stance on monetary policy.

Most of the indices continued to fall for a second week. The S&P 500 and Russell 2000 were the two indices that paused their downtrend. It could be some buying the dip going on but is this situation the same as the previous?

I think most of the action is determined by how severe the Omicron variant is and how it will affect countries around the world. With supply chains still recovering, could the Omicron through a wrench in the recovery. Fed officials are in unison about ending the supportive stance of the FED, and the market has increased its probability of the FED increasing rates sooner rather than later. Powell has acknowledged that inflation is no longer “Transitory.”

The thirty and ten-year bonds spent the entire week trending higher, pushing yields to their lowest levels in weeks. While watching Real Yields on Bloomberg television, one of the correspondents mentioned the ten-year bond is the best to watch because its value is mostly determined by supply and demand.

Crude fell to its lowest in weeks, as Gas prices continue to rise. In my area, gas is close to five dollars a gallon. After holding a meeting to determine the production path amid new variant fears, Opec has decided to go forward with its forecasted production levels.

Due to higher wages and fuel and material costs, firms are looking to further pass their higher costs to the customer. For the time being, the customer is absorbing the higher prices in stride. Retail sales will be a little lighter this holiday season since customers completed their shopping farther in advance fearing delivery issues.

Cryptocurrency fell alongside the market. There is still a looming feeling that some sort of regulation will be coming. While China has continued to crack down on its usage, some countries have adopted the new digital currency as a form of payment. Slowly but surely you can see the rising comfortability of people accepting bitcoin as a new form of money with mayors and sports players accepting their salaries in the digital currency form.

Because crypto is a volatile asset, people tend to dump the currency as an investment when things look uncertain.

One economic release, I found interesting was the US Mortgage Application rate dropping. As interest rates continue to rise, and the construction of single-family and multi-family slows, how will house prices fare in the future?

Homes are already becoming unaffordable to income levels below the middle class. The housing and automobile sector should be closely monitored as their health indicates the economies’ health.


Technical Story:

The VIX gapped up last week amid the variant fears and continued its trend higher. The VIX almost revisited the high volatility in January, reaching a high of 35.

Russell 2000

The weekly chart showed a continued downtrend towards the Support level. This rangebound action has been in effect since January. The daily chart showed a pause near support. I think the Russell 2000 will venture lower, breaking the support line heading towards the 200 sma.

 

S&P 500

The downtrend on the weekly chart lost steam as the 4481 reference level provided support. On the daily chart, the S&P  closed slightly higher than the 50 sma. Can the S&P rise above the 20 sma? Will it set another all-time high anytime soon?

DJI

The dow drifted below the 200 sma and somewhat rebounded. The dow is still below the 20 and 50 sma. The dow is not close to resuming any bullish trend anytime soon. The weekly shows another down week to end the month; sentiment is definitely bearish.

Nasdaq

Last week the Nasdaq fell from its high decisively. Nasdaq crashed through the 50 Sma to the 14948 reference level. Doesn’t look like it will be touching its All-time high anytime soon.

In my opinion, I see a week ahead full of sideways actions as more information about the new variant becomes available. Watch your positions due to the increase in volatility. I still believe that the market is in shakey territory.


Visualization

I decided to center this post around the importance of visualization. Visualization, I believe, is a skill, especially when it comes to forecasting. Being able to see what isn’t apparent is more critical than the pattern displayed on the chart.

This skill can take time to develop and comes from spending hours looking at different chart patterns. These are nuances that the market experts speak of, I believe.

You can also say that visualization is vital in developing goals for your account. Before your account can grow in size, you have to see it in your minds’ eye. This past week, I listened to a seminar on developing a trading business plan development by Linda Raschke.

She spoke about the power of visualization, seeing your account growing by using positive affirmations. As you may know, your subconscious does not know the difference between reality and fantasy.

I use affirmations by writing them down every day in my food and spending journal. Yes, I keep track of what I eat and what I spend. I track my spending and eating to help me remain conscious throughout the day of what I’m doing.

I’ve heard it said many times that habits determine your future. So, I work on programming my subconscious with habits I find beneficial to me achieving my goals. I want my habits to be a natural expression of who I am.

This mindset applies to my trading. Visualization helps me remain centered on a single-minded purpose because I see myself with the trading account size goal. I am essentially working backward on my accomplishments.

As you begin to see the market move according to your forecast, you’ll begin to develop confidence in what you see. Trading with confidence means trusting yourself and your forecast. It also means cutting your losses quickly because you have confidence in finding a profitable position. Your trading capital is an asset, by respecting your reference levels and stop losses you increase your chances of becoming and remaining a profitable trader.

You’d be surprised at what you can do if you believe you can do it.


Cash flow in Review:

This past week, I did a lot better managing my spending by returning to buying items I frequently consume from Costco. I also saved a bit more than usual. I still have membership accounts open at different websites that I haven’t closed yet.

This week I will close membership accounts that I seldom use.

Grade: C

Reason: Continued Improvement.

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