D&D Note (6.22.2022) ~ Stock Rally Fades to End Slightly Down ~ #stockmarket

D&D Note (6.22.2022) ~ Stock Rally Fades to End Slightly Down ~

Markets gapped down to open then attempted to rally into the day to only fade at the close to end the session slightly in the red.

FED Chair J. Powell testified in front of the Senate today and reiterated that the FED is “strongly committed” to bringing down inflation. That means the FED is willing to see a higher unemployment rate if that’s what it takes to tame inflation. A 5% unemployment rate could be the new normal for years to come according to Larry Summers.

President Joe Biden calls for a 3-month gas tax suspension but there does not seem to be enough support in Congress. The House Speaker Nancy Pelosi is on record being against it and surely won’t be receiving enough votes in the Senate.

Oil pulls back today putting pressure on the Energy sector which is creating some price discovery in energy stocks that D&D is tracking closely.

The raw materials cost to make EV’s has doubled during the pandemic led by cobalt, nickel and lithium.

Another stablecoin USDD breaks the $1 peg. It is another algorithmic based stablecoin but not expected to become another Terra fiasco.

The UK finds polio virus in London sewage samples, the first re-emergence of the virus in the UK since 2003.

Stock Specific News:

Nike downgraded to neutral by Seaport due to rising inflation and supply chain disruptions.

Altria Group fell after Wall Street Journal reported the FDA is preparing to take Juul off the US market.

Coinbase stock fell after competitor Binance drops spot Bitcoin trading fees.

Revlon soars 35% after rallying 62% yesterday post filing for Chapter 11 bankruptcy.

Airbnb dropped after downgraded to market perform at JPM Securities siting post-pandemic travel demand increase is already baked into current stock price.

D&D bought more DVN today taking advantage of price discovery in the energy sector. Instead of using our last staged buy in DVN at once we have split that final stage up to better dollar cost average our cost basis.

Market Knowledge Tip:

Trade to Investment.

A trade is not an investment and an investment is not a trade.

For an investment you should have a longer time horizon of 1-5 years. For a trade you should have a set time period on a shorter basis of hours/days/weeks.

It’s ok and expected to go underwater in an investment when you first start buying (want to buy a stock as it falls) and add to investment position to lower your cost basis (average amount you paid per shares owned)

For trades you need to stop out immediately when things go south and exit trade. Don’t turn a bad trade into an even worse investment.

Closing Markets (as of 1:15pm PST)

DOW down -0.15%

S&P 500 down -0.13% (3,759.89)

NASDAQ down -0.15%

VIX down -4.01% to 28.98

2 Year Note down -14.56bp to 3.05%

10 Year Note down -12.64bp to 3.15%

Oil down -3.826% to $105.33 a barrel.

Gold up 0.06% to $1839.90 an ounce.

Bitcoin down -3.78% to $20,017.85

Ethereum down -4.74% to $1,064.17

~ Dave James / Principal Trader and Market Strategist