Irrational Fear

irrational fear

Ok, most fear is irrational, but right now it’s causing markets to sell off, even while stocks are on sale compared to forward earnings multiples. Sure, we have some hurdles ahead, but Traders Reserve is here to help guide you through so you can spend less time watching the markets and more time doing things you love.

This week has a full calendar of events, so let’s get started.

Tuesday’s market was all about the Composite Purchasing Managers’ Index (PMI), which provides an early estimate of private-sector output by obtaining surveys from about 10,000 manufacturing and service-sector companies. The consensus was 55.5 and the actual came in at 53.8. The Manufacturing index consensus number was 58.9, but the actual number came in at 57.5. All that means is that manufacturing is slowing and showing yet another sign of a looming recession.

But there’s some information that I found interesting in the report.

“Average prices levied for goods and services also rose markedly, albeit with the rate of inflation easing from April’s series-record high as some companies reported challenges passing further surges in costs on to customers.”

“Firms continued to raise employment levels midway through the second quarter, and at the fastest pace for 13 months. Manufacturers registered a steeper upturn in job creation, with service providers noting another sharp rise in workforce numbers just shy of April’s one-year peak.”

That’s why I don’t think the jobless claims are going to be skyrocketing any time soon. Despite inflation, companies are still hiring or at least trying to. The economy is still moving and people are still spending money. I still think we will see record numbers for travel this summer. My projection is that we’ll see a more dramatic cutback in consumer spending after the summer season.

We may see numbers that support inflation peaked in April, but the growing concern now is stagflation. We still have supply chain issues, a rapid increase in oil prices, and a job market that is short on workers.

I mentioned the 1970s a couple of articles ago, and I find the comparison from then to now interesting because we had a large rise in oil prices followed by central banks using excessive stimulative monetary policy to counteract a recession. Sound familiar?

Today we’re seeing that demand is still in expansion territory, but the cost of meeting that demand is high and companies are being beaten up on Wall Street if they don’t pass that cost on to their consumers.

All of this is resulting in earnings compression. Companies like Target (TGT) and Walmart (WMT) tried to stand up for the little guy and said they want to play the long game and not increase prices for short-term gains. Both retail giants said they are interested in long-term market share even at the expense of short-term profitability.

Investors are a fickle bunch and rewarded the two companies by selling hard. Target lost 25% in a single day. Did the company really change that much overnight? Yes, their bottom line will take a hit and earnings won’t look as nice, but Target isn’t going anywhere. They have the cash flow and will be fine.

There’s a lot more to the economic calendar this week that you don’t want to miss.

You certainly don’t want to miss the announcement coming out later TODAY. Keep reading below.

Today @ 2pm EST – We have the Fed meeting notes and we’ll find out more about their plans for 2023. Will the Fed have to cut rates in 2023 because they over-engineered the fight with inflation? Will they pause rate hikes in September?

Thursday – GDP, Jobless Claims, and pending home sales numbers are released.

Friday – Personal Income and Outlays report – if there’s any hint that inflation is softening, we could see a market rally. The report comes out at 8:30a.

I wrote about retail getting smacked around last week and I want to take a look at the Dollar General (DG) chart.

Here’s the weekly chart.

We’re now around a support level that goes back a couple of years and remember, DG fell last week because the entire retail industry was hurt by Target and Walmart. This wasn’t news about poor earnings or a scandal and yet Dollar General still lost over 15% in one week.

Let’s now take a look at the daily chart.

irrational fear

We’re now around a support level that goes back a couple of years and remember, DG fell last week because the entire retail industry was hurt by Target and Walmart. This wasn’t news about poor earnings or a scandal and yet Dollar General still lost over 15% in one week.

Let’s now take a look at the daily chart.

Dollar General gapped down to the support level as shown on the weekly chart. Gaps like to get filled and I’m looking for Dollar General to head up from $196 back up to at least $210 (the blue line). If we see any momentum beyond that, we could see DG march back up to $225 over the course of 2-3 months if not sooner.

The June 3rd $190 puts are going for $6.95. That’s about a 3.5% return in 10 days if DG stays above $190.

If you have any questions, comments, or anything we can help with, reach us at any time.

 

Jeff

Guest Writer, Filthy Rich, Dirt Poor
Editor, Wealthy Investor Society

Is The Stock Market Cycle Pointing To A New Bull Market Already?

Is The Stock Market Cycle Pointing To A New Bull Market Already?

memberswis
On February 6, 2023

February 7th, 2023Is The Stock Market Cycle Pointing To A New Bull Market Already?Are we in another bear market rally or the start of something new? That’s what everyone wants to know, especially as we

Job Creation Shocks The Market

Job Creation Shocks The Market

jeffwood
On February 5, 2023

February 6th, 2023Job Creation Shocks The MarketIf we’re heading into a recession, how were we met with better-than-expected job growth numbers last week? Unemployment dropped, despite the headlines of tech companies planning to lay off

Job Cuts And Stock Buybacks Keys To Success In 2023

Job Cuts And Stock Buybacks Keys To Success In 2023

memberswis
On February 2, 2023

February 3rd, 2023Job Cuts And Stock Buybacks Keys To Success In 2023 The thing I’ve learned from this earnings season is that a company can have consecutive quarterly drops in revenue and provide a lower

Fed Raises Rates But Bulls Are Still In Control

Fed Raises Rates But Bulls Are Still In Control

memberswis
On February 1, 2023

February 2nd, 2023Fed Raises Rates But Bulls Are Still In ControlOk, bulls. You win.  I will start lifting my bearish stance on the market.  Despite the final 10-minute market sell-off and a Dow that finished

What Past Fed Announcements Tell Us The Market Will Do Today

What Past Fed Announcements Tell Us The Market Will Do Today

jeffwood
On January 31, 2023

February 1st, 2023What Past Fed Announcements Tell Us The Market Will Do TodayWatch out - this article is going to have some math.Here we are once again on Fed Announcement day. Most of the folks

The Hidden Profits Of 2023

The Hidden Profits Of 2023

jeffwood
On January 30, 2023

January 31st, 2022The Hidden Profits Of 2023There is still one more trading day left in January, but if the adage “as the S&P 500 goes in January, so goes the year” holds true, the markets

The Fed Goes Up Against Earnings This Week

The Fed Goes Up Against Earnings This Week

jeffwood
On January 29, 2023

January 30th, 2022 The Fed Goes Up Against Earnings This Week We are in peak earnings season with some heavy hitters like Pfizer (PFE), Snap (SNAP), Meta Platforms (META), Amazon (AMZN), Alphabet (GOOGL), and Apple

Smoother Sailing in 2023

Smoother Sailing in 2023

user
On January 18, 2023

January 17th, 2022Smoother Sailing in 2023 Nothing has changed since the end of 2022, yet traders have already decided that this year won’t be as bad as the last. Bulls have been piling into stocks

The Rise Of Bing Over Google – That’s No Joke

The Rise Of Bing Over Google – That’s No Joke

jeffwood
On January 12, 2023

January 12, 2023 The Rise Of Bing Over Google - That’s No Joke Before we talk about two tech giants getting ready to battle it out once again, let’s look at the overall market. The

Why I Ignore Most Of The News

Why I Ignore Most Of The News

jeffwood
On January 8, 2023

January 9th, 2022 Why I Ignore Most Of The News It’s easy to get caught up in the financial headlines. I’ve certainly done it. Last week shows why I ignore most day-to-day stories. I know

PREV NEXT
Receive the latest news

Subscribe To Our Daily Newsletter

Get notified about new articles, special events, training, and much more

Like What You See?

Leave your info below to get more options and trading ideas to your inbox

Yes, send me news to my inbox.