Peloton Is Down By 10%, Here Is Why

Key Insights

  • Peloton is reportedly searching for an investor that could buy a minority stake in the company. 
  • If confirmed, the report signals that the company is facing material problems. 
  • The current market environment is bearish for Peloton as investors rush out of unprofitable companies. 

Peloton Stock Declines After Report Indicates That It Is Searching For A Minority Investment

Shares of Peloton found themselves under pressure after a Wall Street Journal report indicated that the company was searching for investors who were willing to pay for 15% – 20% stake in the business.

Back in February, traders speculated that Amazon, Nike or Apple could buy the company. However, the potential deal never materialized, and Peloton stock has moved to yearly lows.

The WSJ report served as a negative catalyst for Peloton stock as it indicated that the company failed to sell itself and was trying to raise more cash to support the turnaround of its business. The company’s desire to sell a stake is certainly viewed as a sign of financial weakness.

What’s Next For Peloton Stock?

Currently, analysts expect that Peloton will report a loss of $3.92 per share in the current year and a loss of $1.1 per share in the next year, so the company is not expected to be profitable in the near term.

The market is worried that Peloton has already seen peak demand for its products, and that consumers’ preferences have already shifted after the end of the acute phase of the pandemic.

In additon, inflation and supply chain problems may put more pressure on the company’s bottom line. More, the rising interest rate environment is bearish for unprofitable companies like Peloton. In this light, it remains to be seen whether speculative traders will be ready to buy the stock after the current pullback.

For a look at all of today’s economic events, check out our economic calendar.

Market Volatility – Traders Must Adapt Or Risk Losing Their Shirts

Global money is continuing to flow into the US Dollar making it one of the primary safe-haven trades.  This may eventually trigger a broader and deeper selloff in U.S. stocks. As the USD continues to strengthen corporate profits for US multinationals will begin to disappear.

It’s imperative to assess your trading plan, portfolio holdings, and cash resources. Experienced traders know what their downside risk is and adapt as needed to the current market environment.

If you still have money invested in Amazon, Netflix, PayPal, or one of the many other stocks that are sinking fast there is no easy way out. Your options are:

  1. Hold tight and “hope” for a rally to recover part of your money.
  2. Reduce some of your position to “limit your downside” in case the bottom really falls out, and then sell the balance after a bounce of 5-8%.
  3. Move to cash, “bite the bullet”, get a good night’s sleep, take a break, reassess, and live to come back and trade another day.

NASDAQ Enters Bear Market Territory

The NASDAQ peaked at around 3.1618% of its Covid 2020 high-low range the week of November 21, 2021.

  • THEN – the QQQ ETF’s first swing down was -21% over a 16-week period (4 months).
  • THEN – a brief 3-week rally, retraced around 61.8%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: QQQ – 23.32% from its peak and -21.27% YTD is in a bear market.

QQQ • Invesco QQQ ETF Trust • NASDAQ • Weekly

market volatility - QQQ chart

AMAZON Breaking Down -35%

Amazon AMZN peaked at around 3.1618% of its Covid 2020 high-low range the week of July 12, 2021.

  • THEN – AMZN made a double top the week of November 15, 2021.
  • THEN – the first swing down was -28.91% over a 16-week period (4 months).
  • THEN – after a brief 4-week rally, retraced a little more than 61.8% of its initial downswing.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: AMZN -35.74% from its peak and -25.39% YTD is in a bear market.

AMZN • AMAZON.COM, INC. • NASDAQ • Weekly

market volatility - amazon chart

Netflix Plummets -72% In 5 Months

Netflix NFLX peaked at around 2.382% of its Covid 2020 high-low range the week of November 15, 2021.

  • THEN – NFLX’s first swing down was -17% over a 5-week period.
  • THEN – a brief 3-week rally, NFLX retraced only 25%.
  • THEN – the second swing down was -43% over a 4-week period.
  • THEN – only less than a 2-week rally retraced around 33%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: NFLX – 72% from its peak and -68.40% YTD is most definitely in a bear market.

NFLX • NETFLIX, INC. • NASDAQ • Weekly

market volatility - netflix chart

PAYPAL Drops -73% In 9 Months

PayPal PYPL peaked at around 5.1618% of its Covid 2020 high-low range the week of February 16, 2021.

  • THEN – PYPL put in a double top the week of July 26, 2021.
  • THEN – the first swing down was -14% over a 4-week period.
  • THEN – a brief 4-week rally, retraced about 61.8%.
  • THEN – the second swing down was -39% over a 14-week period (3.5 months).
  • THEN – a 6-week sideways rally retraced only around 10%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: PYPL – 73% from its peak and -53.39% YTD is most definitely in a bear market.

PYPL • Paypal Holdings, Inc. • NASDAQ • Weekly

market volatility - paypal chart

Drawdowns Have a Critical Impact

We need to remember the larger the loss the more difficult it is to make up. A loss of 10% requires an 11% gain to recover, however, a 50% loss requires a 100% gain to recover, and a 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or a few months while a 50% drawdown may take several years to recover. Depending on a trader’s age they may not have the time to wait on the recovery nor the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason as most of them this principle the hard way!

Prepare yourself for Market Volatility

Especially in times like these, traders must understand where opportunities are and how to turn this knowledge into profits. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list. Our core objective is to protect our valuable capital while identifying suitable risk vs reward opportunities for profits in new and emerging trends.

What Strategies Can Help You Navigate the Current Market Trends?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

Historically, bonds have served as one of these safe-havens, but that is not proving to be the case this time around. So if bonds are off the table, what bond alternatives are there and how can they be deployed in a bond replacement strategy?

We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Amazon Is Down By 12%, Here Is Why

Key Insights

  • Amazon’s Q1 2022 earnings fell short of analyst estimates. 
  • The company released disappointing guidance for Q2 2022. 
  • Analysts rushed to reduce their price targets, putting more pressure on Amazon stock. 

Amazon Stock Falls After Q1 2022 Report Misses Analyst Estimates

Shares of Amazon  found themselves under strong pressure after the company released its first-quarter results. Amazon reported revenue of $116.44 billion and a loss of $7.56 per share, meeting analyst estimates on revenue and missing them on earnings. The net loss includes a pre-tax valuation loss from Amazon’s investment in Rivian.

In the second quarter, Amazon expects to report revenue of $116 billion – $121 billion. At the lower end of this guidance range, Amazon’s forecast implies no growth on a quarter-over-quarter basis. Amazon also forecasts its second-quarter operating income at -$1.0 billion – $3.0 billion.

The market focused on the weak Q2 guidance, and analysts rushed to cut their price targets for the stock. The major boost from the pandemic is over for many companies, and even Amazon was not immune to the changes in consumer behavior and general economic situation.

What’s Next For Amazon Stock?

The current analyst consensus implies that Amazon will report earnings of $47.33 per share in the current year and earnings of $71.01 per share in the next year, so the stock is trading at 36 forward P/E.

Amazon shares have already pulled back by more than 30% from the all-time highs that were reached back in 2021, but the stock remains richly valued. While Amazon’s shopping business faces some headwinds due to supply chain issue and customer’s desire to shop offline after the pandemic, Amazon Web Services (AWS) delivers strong results.

However, it remains to be seen whether the strength of the AWS segment will be sufficient enough to provide support to Amazon stock. Analyst estimates have been moving lower in recent months, and this trend will be continued after the release of the Q1 2022 report, which is bearish for Amazon shares.

For a look at all of today’s economic events, check out our economic calendar.

Grim GDP Data May Trigger Reversal In Stocks

S&P 500 Fundamental Analysis

The broad stock market index gained 0.21% on Wednesday, after bouncing from the new local low of 4,162.90. The S&P 500 fell to its March local lows of around 4,160. It extended the downtrend despite quarterly corporate earnings releases. There’s still a lot of uncertainty concerning the Fed’s monetary policy tightening fears and Ukraine conflict. This morning the S&P 500 index is expected to open 1.1% higher following yesterday’s FB quarterly earnings release. However, the market retraced some of its overnight advance after much worse than expected quarterly Advance GDP data release (-1.4% vs. expectations of +1.1%).

Technical Indicators

The nearest important resistance level is now at around 4,200-4,250. On the other hand, the support level is at 4,100-4,150, marked by the previous lows. The S&P 500 index retraced the whole March advance, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Above 4,200 Again

Let’s take a look at the hourly chart of the S&P 500 futures contract. On Tuesday the market fell to its previous local lows of around 4,140, and yesterday it bounced back above the 4,200 level again.

The market is technically oversold and there are some positive trend exhaustion signals. Therefore, we are expecting an upward correction from the current levels (our premium Stock Trading Alert includes details of our trading positions along with the stop-loss and profit target levels). (chart by courtesy of http://tradingview.com):

Conclusion

On Wednesday, the S&P 500 index fluctuated following its recent declines. The market closed higher, but it was still below the 4,200 level. Today, the important Advance GDP release was much worse than expected. However, we may see a “sell the rumor, buy the news” action here. Investors will also wait for today’s important quarterly earnings releases from AAPL and AMZN.

Here’s the breakdown:

  • The S&P 500 index remained below the 4,200 level yesterday; it may be counterintuitive, but today’s worse than expected Advance GDP release may trigger an upward reversal.
  • We are expecting an upward correction from the current levels.

Like what you’ve read? Subscribe for our daily newsletter today, and you’ll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

* * * * *

The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Bitcoin Slides Into Support

Ethereum has lost 2.5% in the last 24 hours, and other leading altcoins from the top ten are predominantly declining, from -1% (BNB) to -7.3% (Terra). The exception was XRP, which added 5.4% during this time.

BTC Can Develop a Reversal

According to CoinMarketCap, the total capitalization of the crypto market decreased by 2.8% per day, to $1.87 trillion. The Bitcoin dominance index fell by 0.3% to 40.7%.

By Friday, the cryptocurrency fear and greed index returned to the extreme fear territory, losing 6 points to 22. US stocks failed to build on the offensive, losing all of the previous day’s gains, leading to a stronger selloff for bitcoin compared to alternative cryptocurrencies.

Graphical user interface, chart Description automatically generated

From the technical side, Bitcoin is trading near the support level, which runs through the lows of January, February and March. A formal signal to break the support will be considered a failure under the previous lows in the $38K area. The ability to develop a reversal to the offensive from these levels, on the contrary, will reinforce the importance of this moderate uptrend line.

Crypto News

The head of Ripple noted that the court with the SEC is going “much better than expected,” which provoked a wave of XRP growth, allowing the coin to resist gravity.

BlackRock CEO Larry Fink said that the largest asset management company continues to study the cryptocurrency sector.

Amazon CEO Andy Jassy said that the company has no plans to introduce payments in cryptocurrency in the near future, although it is exploring the possibilities of digital assets. At the same time, he looks to the future of cryptocurrencies and NFTs with interest and optimism.

The Bank of Canada is exploring scenarios for the coexistence of digital and fiat currencies, the first regulator to decide to use quantum computing for this study.

Bank of Japan chief executive Shinichi Uchida said the upcoming digital yen will not be used to achieve a negative interest rate. The second stage of the launch of the digital yen started on March 24th this year.

by FxPro’s Senior Market Analyst Alex Kuptsikevich.

Dogecoin Takes a 7.4% Hit As Elon Musk Refuses To Join Twitter Board

Key Insights:

  • Twitter’s CEO, Paras Agrawal, announced Elon’s turndown for the BOD position.
  • Musk has been polling the community about random changes to Twitter.
  • In the midst of all this, Twitter and Dogecoin’s prices were knocked down.

Elon Musk joining Twitter was a big deal for both the crypto and the stock market as Musk’s influence in both spaces is pretty significant.

However, the most recent update on that front makes it seem like the hype was for nothing, as Twitter might not see the ‘Elon touch’ to its ecosystem.

Elon Leaves Twitter’s Board

Less than a week ago, the CEO of Twitter, Paras Agrawal, announced Elon Musk’s 9.2% ownership of Twitter.

This made him the single largest shareholder in the entire company, and in doing so, it was also announced that Musk would be joining the Board of Directors.

Consequently, Twitter’s share prices witnessed the highest single-day rise since the beginning of 2021 as TWTR shot up by 27.12% to trade at $49.97.

However, today Agrawal, in a note to the company and the Twitter community, announced that Musk would not be joining the board.

The reason behind this decision was not revealed, but Agrawal stated that Elon was supposed to join the board effective April 9, but that morning itself, Musk said no to the company’s offer.

However, Paras Agrawal has stated that the company will always remain open to his input.

Adding to the same, he said,

“There will be distractions ahead, but out goals and priorities remain unchanged. The decisions we make and how we execute is in our hands and no one else’s. Let’s tune out the noise and stay focused on the work and what we’re building.”

The Tesla CEO recently was on a poll rampage, feeling the community about what changes to Twitter they would prefer.

This ranged from adding an “edit” button for tweets to making Dogecoin a payment method for Twitter Blue and even turning the Twitter headquarters into a homeless shelter which received support from Amazon’s Jeff Bezos.

However, since the announcement, these tweets have been deleted.

The Twitter Ticker Tragedy

The last time the market was active, Twitter was at $46.23, and as of the time of writing, the NYSE is still in pre-market, so it cannot be said which direction the price might head into.

However, Elon’s favorite, Dogecoin, did not react well to his refusal to join the Twitter board. DOGE has been posting just red candles for the last four sessions on the 4-hour chart, resulting in the meme coin losing its 25.47% rally earlier this month.

Dogecoin’s rally has been invalidated in the last week

EU’s Crypto Regulation Would Be a Dire Breach of Privacy

According to reports, the European Union (EU) will vote on anti-money laundering (AML) legislation. If approved, this revised legislation will introduce an array of new rules to deter illicit financial activity from taking place within its borders. Although the proposals may seem rather straightforward, the legislation in question is rather innocuous when protecting individual privacy.

To elaborate, the new “Transfer of Funds Regulation” is designed to impose an entirely new brand of surveillance concerning cryptocurrency trading platforms. As a result, exchanges will be required to share sensitive data related to their customer’s anonymous transactions. In its draft report, EU lawmakers are looking to completely alter how unhosted digital wallets can be utilized by individuals living within the region.

In this regard, unhosted wallets such as MyEtherWallet, MetaMask, which have up until now been able to operate independently, will potentially be forced to adhere to the guidelines put forth by the EU’s Financial Action Task Force (FATF). Not only that, but they will also have to follow the regulatory body’s definition of what a licensed virtual asset service provider (VASP) is.

Hypocritical Much?

The EU touts itself as a leader in individual data privacy and security. Its General Data Protection Regulation (GDPR) is hailed as one of the strictest privacy laws in the world. Although, the aforementioned move goes against the union’s principles.

In fact, over the past decade, the EU has repeatedly fined several major multinationals who have violated its GDPR ruleset. For instance, in its July 2021 earnings report, Amazon, the world’s largest e-commerce retailer, revealed that it paid a mammoth $877 million fine for illegally procuring ‘cookie consent’ from its users. Similarly, the social media messaging app WhatsApp was also hit with a $255 million fine recently for failing to elucidate its data processing practices, resulting in the private information of many customers being misused.

Major Backlash Against the Proposed Law Change Surfaces

As soon as the EU’s aforementioned rule changes came to light, members of the global crypto community came forth to criticize the proposed amendments. For example, Coinbase’s Chief Legal Officer Paul Grewal pointed out that the changes are extremely uninformed, misguided, and have been based on outdated facts and data, adding:

“If adopted, this revision would unleash an entire surveillance regime on exchanges like Coinbase, stifle innovation, and undermine the self-hosted wallets that individuals use to securely protect their digital assets,”

A similar point of view is also shared by DeFi Wallet Unstoppable Finance’s Head of Strategy and Business Development, Patrick Hansen.

He noted that for every crypto transaction emanating from an unhosted wallet, over a thousand European companies are obliged to inform AML authorities, even if there is no sign/suspicion of money laundering. “This is an absolute violation of privacy rights,” he opined.

Tesla Price Update: Amazon Correlation Supports Collapse into Mid-April

In full disclosure, I’ve been bearish on Tesla for over a year – I think prices are grossly overvalued. Nevertheless, the trend is resilient, as TSLA stays above $800.

AMAZON POST TECH BUBBLE COLLAPSE: In the first quarter of 2000, Amazon shares declined into late January, bounced into early February, declined into Mid-March, rallied into late March, and from that late-March high, prices collapsed over 40% by mid-April.

Diagram, schematic

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If Tesla peaks in the coming days and collapses into mid-April, I think the rest of the chart could play out, implying a year-end target for Tesla around $200.

I’m long-term bullish on Tesla and will accumulate aggressively when I feel prices bottomed, likely in 2023.

TESLA TODAY: If Tesla follows the post-tech collapse of Amazon in 2000, then we could see an important top in the next few trading days, followed by a collapse to around $550 by mid-April.

With prices soaring, the odds for a 45% decline within the next 3-weeks seems improbable. Nevertheless, it may be worth watching.

Chart

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AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For regular updates, please visit here.

 

Best Growth Stocks to Buy Now for March 2022

At MAPsignals, we follow the Big Money. Oftentimes, that can be institutional activity. We follow Big Money because it tends to produce outlier stocks and drive markets. As of late, Big Money is selling. In fact, March 7, 2022, was the biggest selling day since the pandemic lows:

Chart, histogram

Description automatically generated

The best outlier stocks (regardless of market cap) have three common traits: strong fundamentals, great technicals, and a history of Big Money activity in the shares. At MAPsignals, we believe Big Money trading can alert you to the forward fundamental picture of a stock. And we want the odds on our side when looking for the highest quality stocks.

Focusing on quality is critical when markets are under pressure. Using the MAPsignals database, we’ve filtered for various quality metrics to identify five ideas for potential long-term investment: AMZN, ALGN, V, DPZ, & NVDA.

Up first is Amazon.com, Inc. (AMZN), the online retail and technology behemoth.

Even though great stocks can be volatile, like AMZN this year, these companies are worthy of attention, especially when they have huge growing business segments, like Amazon Web Services. Check out AMZN:

  • 1-month performance (-15.7%)
  • Historical Big Money signals

Just to show you what our Big Money signal looks like, have a look at the top buy signals AMZN has made over time in the chart below. Blue bars are showing it was likely being bought by a Big Money player according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:

Source: www.MAPsignals.com

But, what about fundamentals? As you can see, AMZN’s sales and earnings have been strong, and its earnings growth estimate is looking good:

  • 1-year sales growth rate (+21.7%)
  • 3-year EPS growth rate (+50.0%)
  • 2-year vs. 1-year EPS growth estimate (+47.9%)

Next up is Align Technology, Inc. (ALGN), the makers of the popular Invisalign tooth straightening system.

Check out these technicals for ALGN:

  • 1-month performance (-19.5%)
  • Historical Big Money signals

Let’s look long-term. These are the top buy signals Align Technology has made since 2016. The Big Money love is abundant, which makes this stock an outlier:

Source: www.MAPsignals.com

Now let’s dive deeper. As you can see, Align Technology has had double-digit growth in sales and earnings:

  • 3-year sales growth rate (+28.3%)
  • 3-year EPS growth rate (+86.4%)

The third growth stock idea is Visa Inc. (V), the credit card and payments technology company.

Strong candidates for growth usually have Big Money buying the shares. Visa has that. Also, the stock has fallen recently:

  • 1-month performance (-15.9%)
  • Historical Big Money signals

Below are the Big Money signals Visa has made since 2016. That’s the JUICE!

Source: www.MAPsignals.com

Now let’s look under the hood. Visa’s sales growth is solid. And given its strong market presence, growth prospects, and profitability, I expect more growth in the coming years:

  • 1-year sales growth rate (+10.3%)
  • 2-year vs. 1-year EPS growth estimate (+18.3%)
  • Profit margin (+49.8%)

Number four on the list is a long-time Big Money favorite, Domino’s Pizza, Inc. (DPZ), which is the largest pizza company in the world.

Here are the technicals important to me:

  • YTD performance (-30.0%)
  • Historical Big Money signals

It’s one of the most successful stocks out there. Below are the Top 20 Big Money buy signals for DPZ since 2011:

Source: www.MAPsignals.com

Let’s examine a bit more. Domino’s has been growing earnings nicely and expects that to continue, likely due to its profit margin:

  • 3-year EPS growth rate (+16.9%)
  • 2-year vs. 1-year EPS growth estimate (+15.4%)
  • Profit margin (+11.7%)

Our last growth candidate is in the semiconductor industry, NVDIA Corporation (NVDA). Its chips focus on graphics and networking, both of which are resource-intensive activities.

Check out these technicals:

  • YTD performance (-27.0%)
  • Historical Big Money signals

NVDIA is more than 100 days from its 52-week high, but believe me, it’s still a high-quality stock. It’s made the MAPsignals Top 20 report many times since 2015:

Source: www.MAPsignals.com

Now look under the hood. NVDIA has been growing sales and earnings at big rates, and its profitability is quite good too:

  • 1-year sales growth rate (+61.4%)
  • 3-year EPS growth rate (+47.6%)
  • Profit margin (+36.2%)

The Bottom Line

AMZN, ALGN, V, DPZ, & NVDA represent top growth stocks to buy now for March 2022. Strong fundamentals and historical Big Money buy signals make these stocks worthy of extra attention for long-term investors, despite recent dips.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in V and DPZ in managed accounts.

Contact:

https://mapsignals.com/contact/

Just Say No to Amazon Split

Amazon.com Inc. (AMZN) is trading higher by 5% in Thursday’s pre-market after announcing a 20-for-1 stock split, effective on June 6th. The retail juggernaut also increased buyback share authorization by $5 billion, doubling the current $5 billion program, even though it’s repurchased just $2.12 billion of those shares so far. The stock rallied above the psychological 3,000 level after the news but drifted lower overnight, failing to mount a single resistance level.

Questionable Timing

The announcement raises two questions about an otherwise bullish decision. First, the House Judiciary Committee referred Amazon to the Department of Justice earlier in the day to examine potential criminal conduct by “senior executives”. The referral alleges the company engaged in a “pattern and practice of misleading conduct that appeared designed to influence, obstruct, or impede the Committee’s 16-month investigation into competition in digital markets”. There’s little doubt that CEO Jeff Bezos will be a prime target in this investigation.

Second, why did Amazon pick this moment to announce a split when investors have been begging for cheaper shares for years? For starters, the company has been pummeled by inflation and Ukraine so far in 2022, dropping to a 20-month low on Wednesday, and executives may feel a split is the only way to prop up price. It’s also sleight of hand because it adds nothing to valuation, especially in a fintech-driven market in which small investors can buy exposure by the dollar, not share.

Wall Street and Technical Outlook

Wall Street consensus remains euphoric despite more than a year of sub-par performance, yielding a ‘Buy’ rating based upon 42 ‘Buy’, 7 ‘Overweight’, and 3 ‘Hold’ recommendations. Price targets currently range from a low of $3,472 to a Street-high $5,000 while the stock is set to open Thursday’s session more than $500 below the low target. This dismal placement signals a major disconnect with skeptical Main Street investors, who see a wall of headwinds dead ahead for the retailer.

Amazon broke out above 2018 resistance above 2,000 in April 2020 and entered a powerful uptrend that stalled at 3,550 in September 2020. Five breakout attempts failed into November 2021, ahead of a major decline that fractured range support near 3,200 in January 2022. It tested new resistance and sold off in February, adding to losses that have now relinquished 23% of the stock’s value. Long-term support around 2,500 still hasn’t come into play but bearish momentum is likely to pick up when split enthusiasts run out of buying power.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Aligned Secures $34M Funding To Grow DeFi and Web3 Infrastructure

Key Insights

  • Web3 infrastructure startup, founded by former Chief Strategy Officer of ConsenSys, emerged from stealth with $34 million in funding
  • Aligned aims use the funding to grow its core products for Ethereum-compatible blockchains like layer-2 networks
  • Web 3 infrastructure provider aims to the Amazon Web Services of web3

Web 3 infrastructure provider, Aligned Capital, has secured $34 million in a funding round, the company announced on Thursday.

Aligned Banking on DeFi Growth

Founded by the former Chief Strategy Officer of ConsenSys, Sam Cassatt, the Web 3 infrastructure provider has emerged from stealth with a $34 million funding round at an undisclosed valuation.

Several investors have backed the funding, including GSR, Altium Capital, Cavalry Fund, and Ninja4.

As per reports, there was no lead investor. Angel investors included ConsenSys alum and Darma Capital founder Andrew Keys, Gryphon Digital Mining executive Chris Ensey, entrepreneur Steve Wiggins, former ConsenSys, and PayPal employee Ron Patiro. The funding round was primarily used to expand Aligned Capital’s high-performance computing footprint.

This equity funding round was aimed to help Aligned expand its web3 infrastructure. Aligned currently offers computing hardware for mining cryptocurrencies such as Ethereum (ETH) and other activities. Interestingly, Aligned eventually hopes to become the Amazon Web Services for web3.

Shedding light on the recent funding, Cassatt said:

“We are buying silicon, manufacturing and installing the custom hardware that we produce with that silicon, as well as expanding our HPC (high-performance computing) team. Most of this hardware will go into our primary data center and will be expanding to more soon.”

Furthermore, Cassatt noted that the startup’s hardware and infrastructure allow it to build services similar to cloud services business; its benefits are designed for the needs of web3 projects.

Crypto and DeFi Growth Attracting VCs

Aligned’s founder believes that the growth in DeFi would continue as demand continues to grow. Data from Defilama highlighted that demand for DeFi has skyrocketed over the last year, with total value locked in DeFi protocols rising by over 230% from $55.36 billion to $186.55 billion.

Furthermore, the growth of proof-of-stake blockchains has increased the demand for staking and validators. Notably, some of the top PoS blockchains include Cardano, Polkadot, Solana, and VeChain.

Where Will Algorand’s Ties with Amazon Web Services Take ALGO?

Recently, amid the global crypto market’s choppy price action, cloud solutions provider Guardrail announced the availability of the Algorand Blockchain on Amazon Web Services (AWS).

This strategic move could push the narrative for the 29th ranked coin by market cap, but for now, price implications as the global crypto market consolidates aren’t visible.

Boosting the Algorand Blockchain

The release of the Algorand Blockchain on the AWS marketplace will allow users to deploy and operate nodes securely. Algorand arrived on AWS through Guardrails, a clouds solution provider that drives rapid cloud adoption in Small & Medium Business Enterprises (MSME).

The release marks the deployment of Algorand’s nodes on the AWS network. Notably, up to 1,000 Algorand nodes can be operated across 24 regions within 30 minutes with its arrival on AWS.

That said, Guardrail is set to boost the capacity of the Algorand blockchain for building applications in its network by acting as an alternative to API aggregators.

Furthermore, Algorand’s ecosystem continues to grow at a decent pace. Notably, the platform’s Algofi DEX also went live today, which is called the DeFi Hub of Algorand. The blockchain’s trajectory in the NFT space has also been adequate, and recently, Vesta Equity launched a real estate-backed NFT platform on Algorand.

While the platform seemed to progress on the ecosystem front, its price action was largely bearish, much like the top coins such as Cardano, XRP, and even Ethereum.

ALGO Price Still Down

Bitcoin’s volatile move over the last week has caused the global market cap to dip down to the $1.70 Trillion mark at press time. Alongside Bitcoin and Ethereum, most of the large-cap and mid-cap altcoins, too, were making lower price lows.

At press time, Algorand traded at $0.8014, noting 3.26% daily and 15.03% weekly losses. ALGO was currently sitting at the six-month low price level, down 75.33% from its all-time high price.

FXempire, ALGO, Crypto, Algorand
Source: FXEmpire

While ALGO trading at this low price level gives massive upside to the traders and investors in the mid-short term, it is to be noted that further downside could push the altcoin to the $0.65 level, which currently serves as the next significant support.

Best ETFs to Buy for March 2022

When there’s huge buying and selling in the market, it’s usually unsustainable and coincides with peaks and troughs, especially over the past two years. It reminds me of investor overexuberance. There’s just too much excitement (either of the buying or selling variety), for such movements to be anything that will last.

Chart, histogram Description automatically generated
Source: www.mapsignals.com

Opportunistic investors can take advantage of these movements, especially when there’s deep selling. Those times have proven to be when stocks and ETFs are on sale. When zooming in to the last three months (below), we see lots of unsustainable selling. This could set up well for some discount buying that may serve long-term investors well.

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Source: www.mapsignals.com

Given these conditions, we’ve identified some ETFs we think have long-term potential, a few of which are priced nicely right now: RDVY, QUAL, IGV, IHI, and FDN.

Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best ETF opportunities for March 2022.

#1 First Trust Rising Dividend Achievers ETF (RDVY)

This is a market rotation play as growth stocks are shed in favor of more predictable value-oriented companies that pay dividends. And while dividends are great and rising dividends are even better. RDVY holds some great companies that have histories of raising dividends. It’s likely why Big Money has been buying RDVY in chunks over the past year:

RDVY holds several solid stocks, including some big technology companies; one example is Activision Blizzard Inc. (ATVI), which has a 3-year EPS growth rate of 16.6%, but is still getting sold a lot. Here are Big Money signals for ATVI:

#2 iShares MSCI USA Quality Factor ETF (QUAL)

This one is all about quality. QUAL holds a basket of stocks with excellent fundamentals, many of which are household names. So, it’s not surprising that an ETF all about quality has performed well over the past few years. There were dips around October and February (red bars), but big dips have typically preceded big rises in this ETF:

One great stock QUAL holds is Nike, Inc. Class B (NKE). It’s a long-time Big Money favorite with fantastic fundamentals (3-year EPS growth of 67.2%). As the multi-year chart below shows, it’s been a growing giant for a while:

#3 iShares Expanded Tech-Software Sector ETF (IGV)

This high-flying ETF has seen Big Money buys for a long time, and it’s performed well. It holds some phenomenal stocks, many of which are outliers – the kind that of stocks that produce HUGE gains. But with the recent pullbacks, IGV can be considered a discount buy right now:

One of many big winners within IGV is Adobe Inc. (ADBE). It’s an outlier stock – it’s 3-year sales growth is an impressive 20.8% – and has been a Top 20 Big Money buy for years:

#4 iShares U.S. Medical Devices ETF (IHI)

This one is another on our hunt for bargains. By identifying weaker ETFs holding stocks with strong fundamentals, we can buy in a good spot. IHI was destroyed in January 2022, but not long before that was at peaks, likely because its stocks are phenomenal and medical devices markets remain strong:

One standout within this ETF is Thermo Fisher Scientific Inc. (TMO), a giant healthcare company high huge earnings growth (3-year EPS growth of 40.8%). The multi-year chart below shows lots of Big Money buying. And notice how sells appear to be discounts:

#5 First Trust Dow Jones Internet Index Fund (FDN)

This is another “bargain bin” pick, but that’s because this ETF is getting killed recently (unfairly in my opinion). FDN has seen Big Money buying in the past, but it’s dropped significant value since around last Still, it holds fantastic technology stocks, which makes the current price appetizing:

One great stock in FDN is Amazon.com Inc. (AMZN). It’s been stagnant lately, but Big Money has leaned on AMZN for a long time. Given the firm’s ubiquitous nature, growth vision, and huge performance (26.6% 3-year sales growth and 50% 3-year EPS growth). It wouldn’t surprise to see this one rise high again:

Here’s a Big Money recap:

  • When Big Money buying pours in, stocks tend to go up
  • Red selling on great quality can be a great opportunity
  • Repeated buying usually means outsized gains

Let’s summarize here:

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RDVY and QUAL rank high. IGV, IHI, and FDN, however, rank lower on our list, due to weaker technicals. That’s why I think these weaker ETFs represent great potential bargains.

The Bottom Line

RDVY, QUAL, IGV, IHI, and FDN are my top ETFs for March 2022. These picks can rise higher, in my opinion, largely because they each hold great stocks. Some of them are discounted right now because of selling pressures. But as we know, deep red days often prove to be big opportunities over time.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in RDVY, QUAL, IGV, IHI, FDN, ATVI, ADBE, TMO, or AMZN in managed or personal accounts at the time of publication; he holds long positions in NKE in managed accounts.

Investment Research Disclaimer

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Dogecoin Core Developer Steps Down as Director Due to Google Job

The meme coin that blessed life into a myriad of other similar cryptocurrencies has also been the subject of a lot of criticism.

Regardless the altcoin maintained its rise owing to its strong development team, a significant member of which has decided to step away from his position.

Ross Takes a Break

Dogecoin’s Core Developer Ross Nicoll in an announcement yesterday declared his resignation owing to multiple reasons.

Although he clarified that since finding his replacement as a Director will be a difficult and lengthy process, he’ll be continuing in his position for the next 4-8 weeks.

Stating his reasons for the departure from the Foundation, Ross stated:

“Primarily the stress involved is overwhelming and I need to step back to focus on myself for a period. There is a further complication that my employer for my day job is moving into the blockchain space, leading to a risk of conflict of interest if I remain as a Director.”

The ‘day job’ mentioned here is his responsibilities as an SRE – SWE at Google where he has been employed for 9 months now.

Ross became a part of Dogecoin 8 years ago in 2014 where he volunteered to contribute code, handle testing as well as review code and interface with the Dogecoin community.

Before that Ross had been a part of multiple organizations such as Amazon, Dapper Labs, Oracle, as well as New York-based enterprise technology provider R3 where we worked as a developer, software engineer, and distributed systems manager.

Although Ross Nicoll did announce he will be stepping away from his current position, he will continue to remain an advisor to the Dogecoin Foundation.

The Foundation recently also onboarded Ethereum co-founder Vitalik Buterin as an advisor who is currently guiding Dogecoin towards a Proof of Stake consensus from Proof of Work.

In regard to the cause of the Foundation’s formation and its current conditions, Ross said:

“The Foundation is operating in an extremely challenging environment, where every step of the way simple processes are significantly more complex than they should be, but it is moving forward… The alternative is returning to a situation where source contributors are exposed to legal risk with no entity to shield them, and I do not see that ending well.”

Dogecoin Continues On

The memecoin has kept is yet to find a consistent rhythm as right now the price action is losing all the gains made in the first week of February.

In the last 10 days, DOGE has dropped by 12.35%, still keeping itself restricted under the critical resistance of $0.1920. Although the altcoin was down by 2.69%, it certainly was not due to Ross Nicoll’s announcement. 

Dogecoin is still far away from reclaiming $0.1920 – Source: FXEMPIRE

Bitcoin Outperforms Tech Stocks by 12%, But Can It Continue to?

Bitcoin’s numerous comparisons with the traditional market assets have stemmed from the former’s relatively high ROIs through the years, and rightly so.

Recently, a Finbold report presented that as of 13 February 2022, Bitcoin had outperformed the top six tech stocks by an average return on investment (ROI) of 12.24%. 

Bitcoin Leading the ROI Race

Bitcoin is down 38.57% from its all-time high price of $69K made in November 2021, however, the top cryptocurrency seemed to steal the show, still. Data highlighted that BTC significantly outperformed Meta by 46.74%, followed by Tesla at 18.37%. Furthermore, the top coin also outperformed Amazon by 3.78%, followed by Alphabet at 1.84%. 

FXempire, BTC, Crypto, Bitcoin
Source: Finbold

In comparison to the American multinational technology corporation, Microsoft Bitcoin’s ROI was 1.95% higher. Additionally, the king crypto’s ROI almost matched Apple’s surpassing the stock by 0.76%.

That said, at press time BTC’s yearly ROI vs USD was -13.19%, notably Bitcoin’s price drawdown after the fall from ATH has affected Bitcoin’s generally high ROI track.

But that isn’t all, another factor that seemed to worry Bitcoiners was the top coin’s rising correlation with the two major indices—the S&P 500 and Nasdaq. Historically, Bitcoin has had a relatively low correlation to traditional asset classes, however, since last year, the same has been on the rise. 

Rising Correlation, Diminishing Returns

Bitcoin’s trajectory after the September-November recovery last year made the top cryptocurrency one of the leading investment products with returns of about 60%.

While BTC’s ROI over the longer time frame has been higher than tech stocks, the two investment products have moved in tandem over the last year. 

It can be argued that the higher correlation points to the impact of interest rates and inflation concerns that have affected both the stocks and the crypto market. That said, the maturing Bitcoin market and BTC’s developing narrative as an asset class could have also propelled the higher correlation.

Despite the relatively higher ROI, BTC’s ROI vas USD over the last year has diminished. Furthermore, higher volatility and increased correlation with traditional assets could play a spoilsport for the top coin. 

Notably, over the last couple of months, volatility has affected both Bitcoin and traditional assets equally, amid worries of a potential interest hike and tapering measures by the Federal Reserve. 

At press time, Bitcoin traded at $42,047.10 noting 0.87% price losses in 24-hours while the coin was down 1.31% by the week.

Why Peloton Stock Is Up By 20% Today

Peloton Stock Rallies On Takeover Reports

Shares of Peloton  rallied after a WSJ report indicated that Amazon was thinking about buying the company, while a FT report highlighted Nike as another potential bidder. Apple has also been mentioned by analysts as a potential suitor.

Peloton stock is down by more than 80% from its highs that were reached back in 2022, and a potential deal looks like a way out of the current situation.

The market doubts whether the company will be able to grow at a healthy pace after its initial success. The potential acquisition makes strategic sense for Peloton as support from one of the world’s leading companies can boost its business.

What’s Next For Peloton Stock?

Analysts expect that Petloton will report a loss of $2.91 per share in the current fiscal year and a loss of $1.03 per share in the next fiscal year, but traders will likely ignore financial forecasts in the upcoming trading sessions and focus on the potential competition between suitors.

Adding to volatility, Peloton is set to release its second quarter fiscal 2022 results on February 8, after the market close. In case the company fails to reach a deal before the release of the earnings report, it will not provide commentary on the recent rumors.

The key question for traders is whether potential suitors are ready to pay a material premium for Peloton stock. Sometimes, this premium is not that big, as higlighted by today’s deal between Frontier and Spirit Airlines (SPR is up by just 14% in today’s trading session).

In case the big companies are highly interested in buying Peloton, the company’s stock may move higher as competition between bidders intensifies and more rumors emerge. However, traders should be careful as no deal is guaranteed, and suitors may have the intention to grab Peloton on the cheap due to the company’s recent problems.

For a look at all of today’s economic events, check out our economic calendar.

Bitcoin Fear & Greed Index Sends First Bullish Signal of the Year

After a choppy first half of the week, support from the NASDAQ 100 delivered Bitcoin (BTC) and the broader crypto market a much-needed boost late Thursday. Another Tech stock rally on Friday saw Bitcoin recover from $36,200 levels on Thursday to wrap up Friday at $41,000 levels.

On Friday, Bitcoin rallied by 11.41% to end the day at $41,590.

Elsewhere, Solana (SOL) rallied by 10.56%, with Ethereum (ETH) returning to $3,000 levels off the back of an 11.14% gain on Friday.

The broad-based crypto rally drove the total crypto market cap back to $1,850bn levels after having fallen to $1,489bn back on 24th January.

The Bitcoin Fear & Greed Index

Friday’s Bitcoin rally led to a jump in the Bitcoin Fear & Greed Index from 20/100 to 33/100. It was the first move out of the red zone since the Index had stood at 41/100 back on 28th December. Bitcoin’s selloff from November’s ATH $68,979 to sub-$33,000 levels had left the Index down at a January low 8/100. The move back through to the orange zone is a Bitcoin buying signal.

Bitcoin Fear & Greed Index 050222

Corporate Earnings Delivers a NASDAQ Bounce Back

On Thursday, the NASDAQ 100 tumbled by 3.74% before a Friday rebound. Tracking the NASDAQ 100 through Thursday and Friday, Bitcoin had also been in the deep red on Thursday before an afterhours rally for the NASDAQ 100. Amazon.com earnings delivered the afterhours bounce back, which supported a Bitcoin rebound on Thursday and a breakout session on Friday.

Through much of the week, IMF concerns over the interconnectedness between cryptos and the U.S equity markets remained justified. There was no real evidence, however, of the crypto markets providing the U.S equity markets with direction.

Bitcoin Price Action

With the U.S markets closed for the weekend, technicals will likely be key for the day ahead.

At the time of writing, Bitcoin was down by 0.29% to $41,470. Avoiding a fall through the day’s $40,130 pivot would bring the first major resistance level at $43,199 into play. Bitcoin would need plenty of support, however, to breakdown resistance at $42,000. In the event of another extended breakout, the second major resistance level at $44,800 and resistance at $45,000 would likely be tested.

A fall through the $40,130 pivot would bring the first major resistance level at $38,520 into play. Barring an extended sell-off, Bitcoin should steer clear of sub-$40,000 levels, however.

Looking at the EMAs and daily candlesticks, the signal remains bearish. The 50-day EMA has pulled back from the 100-day and 200-day EMAs, with the 100-day EMA also pulling back from the 200-day EMA. Bitcoin remains below the 50-day EMA at $42,650 in spite of Friday’s breakout session.

Bitcoin will need to break through the 50-day EMA and move back through to $46,000 levels to support a near-term bearish trend reversal. At the time of writing, the 100-day EMA stood at the $46,100 level.

BTCUSD 050222 Daily

Coinbase Welcomes Former Netflix Employee Brian Rocha

As crypto adoption increases, many people are tempted to join the crypto business because of its mainstreaming and non-stop growth. Who knows if joining a big crypto firm now is like joining Google or Amazon in the 90s?

Brian Rocha, a veteran employee that comes from the entertainment and media business, has recently joined Coinbase as the new Head of Content Strategy, according to his following Linkedin post comment:

“I’m excited to share that today I will be joining Coinbase! After having spent the past 15 years working with both legacy and new media and entertainment companies, I’m excited to take on a new opportunity building content strategy for the #crypto, #blockchain, and #web3 world”

About Brian Rocha

Brian Rocha has been working for media and entertainment companies during his professional career. Netflix was his most recent experience before joining Coinbase, where he worked nearly five and a half years as a Content Strategy & Analysis manager and director.

He studied Economics at UCLA. Graduated in 2009 while he was working as a financial analyst at The Walt Disney Company.

After The Walt Disney Company, he joined Warner Bros. Entertainment Group of Companies to work as an International Digital Development Manager until he joined Netflix.

The Crypto Industry Continues To Grow With Coinbase

Brian Rocha isn’t the only one who has recently joined the Coinbase team. The CEO and founder of Shopify, Tobias Lütke joined earlier this week Coinbase’s Board of Directors.

Tobias Lütke commented:

 “The concepts of decentralized finance and entrepreneurship exemplify the promise of Web3 where opportunity exists for the many, not the few,”

Last month, Coinbase partnered with Mastercard so the users could buy NFTs with credit and debit cards in their upcoming NFT marketplace platform.

Coinbase became a publicly-traded company in April 2021, marking a major milestone. Also last year, Shalin Pei, a former Facebook Senior Product Manager joined Coinbase in September 2021.

As crypto becomes more popular, there is no doubt more Web2 employees will follow Brian Rocha’s path.

Top 4 Things Traders Have to Know Today

What is happening with Meta, Paypal and Spotify?

Spotify didn’t actually issue annual guidance, which seems to have exacerbated worries about potential subscriber growth potential. All three were down by double-digits in after hours trading at one point last night.

Competition is clearly much more fierce as larger players are starting to dial it in and use the latest technology to gain better traction i.e. Visa, Mastercard, etc. I also read reports this week that Apple is diving deeper into the payment and banking space and will soon be able to offer all kinds of options via the smartphone.

In simple terms, I wonder if PayPal executives could see they had a “growth” problem and that’s why they took a look at Pinterest a few months back. I heard rumors yesterday perhaps they might be looking at Robinhood.

At the moment the stock market just doesn’t seem real forgiving to those who swing and miss. On a somewhat positive note, Facebook disclosed they purchased back +$20 billion of their own stock in the last quarter.

Bulls are hoping for solid results from Amazon and Snap today to help prevent sentiment in the tech sector from creating more fallout. I’m not holding my breath!

Data to watch

Results are also due from Activision Blizzard, Biogen, Carlyle Group, Check Point, Cigna, Clorox, ConocoPhillips, Deckers Outdoors, Eli Lilly, Estee Lauder, Ford, Hanesbrands, Hershey, Honeywell, Ingredion, Merck, Pinterest, Quest Diagnostics, Royal Dutch Shell, SnapOn, Wynn Resorts, and Xylem.

On the economic data front, Factory Orders, the ISM Non-Manufacturing Index, and Productivity and Costs are due today. Productivity and Costs has become a more closely watched report as worries about climbing wages have grown. In the third quarter, productivity fell -5.2% (the most since 1960) and labor costs rose +9.6%.

Obviously, weakening productivity and rising costs is a bad combo for corporate profits so reversing this trend is a high priority. It may be tough to find much relief in the near-term with the labor market expected to remain extremely tight.

The shortage of workers has also been exacerbated by the latest Covid wave. ADP’s private payrolls report yesterday showed a decline of -301,000 jobs for January versus the estimate for a +200,000 gain, the first reported net job less since December 2020 according ADP.

Covid issue

Most analysts blame last month’s Covid surge for the decline and expect it is just temporary. The official January Employment Report on Friday is expected to show a gain of around +150,000 jobs, though the government has warned that the data won’t be reliable due to Covid-related reporting problems. Hopefully we’ll soon stop hearing that excuse as the Omicron Covid wave does seem to be burning itself out in the U.S. Case numbers across the country are about half of what they were in mid-January.

Hospitalizations have finally started to come down, too, which experts say is a more reliable measure. I hate to mention it but health officials are currently monitoring a mutated strain of Omicron known as “BA.2″… when does it end?

The standoff between Ukraine and Russia

Also still on the radar is the standoff between Russia and Ukraine. The U.S. is now readying to send more than +3,000 troops to bases in Eastern Europe as new satellite images appeared to show an even further increase in Russian troop buildup on Ukraine’s borders. Whether or not war is a realistic threat or not, the climbing tensions continue to stoke the flames in the energy markets.

Brent crude futures are trading near $90 as OPEC struggles to meet production targets and global physical supplies continue to tighten. The 19 OPEC+ countries with quotas underperformed their production targets by -832,000 b/d in December. Russia is currently the top OPEC+ producer, so any disruption to those supplies runs the risk of shooting oil prices even higher. Take note the front-end of the natural gas market is up over +50% in the first month of the new year. It’s certainly going to be a wild ride in 2022!

 

Brace Yourself For Another Wild Month In Stock Markets

For the year, the Dow is down -6%, the S&P 500 is down just over -9%, and the Nasdaq has lost -14.7%. The previous record-holder is January 2009, an ugly moment for the economy, when the stock market fell -8.6%. In addition, the VIX – aka the CBOE Volatility Index – has actually dropped back to around 31 after topping 37 earlier this week, its highest point since November 2020.

Keep in mind, the index isn’t registering anywhere close to levels reached during other periods of “extreme” volatility. For example, the index, which is measured between zero and 100, hit its highest point of almost 83 during the financial crisis in 2008. Its most extreme point during the pandemic was around 66 in March 2020. So, by comparison, this week’s volatility has been rather mild.

Federal Reserve

Some insiders equate the wild swings in stock prices to investors, particularly “big money,” trying to establish a new baseline for stock valuations minus the Fed’s easy money policies that have driven a massive amount of cash into markets since the pandemic began in 2020.

At its height, the Fed was pumping as much as +$120 billion per month into the system via its asset purchase program, ballooning its balance sheet to now nearly $9 trillion.

At the same time, the Fed has held its benchmark rate at near-zero and, before that, hadn’t even attempted to raise rates since 2018, and then only briefly. The last full-cycle of rate hikes was 2015. What’s more, investors haven’t really had to factor for inflation since the early 90s and it hasn’t been this high since the 80s.

Bottom line, whatever the new “normal” ends up looking like, it will be dramatically different from the pre-pandemic investing landscape. I’ve heard several large stock traders saying it seems to be the return of Alpha instead of the race to levered Beta. I hear others on Wall Street referencing it to a bit of league recreational youth baseball team where everybody now gets an award simply for participation, but then kids run into a rude awakening when performance really starts to matter.

It feels like we are there in the stock market; every business that was coming into the market was simply being rewarded with participation points, now people are starting to keep a real scorebook and counting the strikeouts and runs scored.

Economy still roars

The good news is that the U.S. economy continues to roar. Historically, a combination of moderate inflation and moderate interest rates has led to some of the biggest boom times for U.S. Last week, the Commerce Department said Q4 Gross Domestic Product (GDP) grew at an annualized rate of +6.9%, stronger than Q3’s +2.3% and well above Wall Street expectations of around +5.7% growth.

Consumer spending climbed at a +3.3% annual pace led by a +4.7% increase in services spending. But the real stand out was private investment which rocketed +32% higher, boosted by a surge in business inventories as companies stocked up to meet higher customer demand. Rising inventories, in fact, contributed nearly +5% to Q4 GDP growth.

On the one hand, the inventory build is positive because it indicates an easing of supply chain dislocations that should in turn help with inflation pressures. On the other hand, many economists note that the big boost from retailer and wholesaler restocking is not likely to be repeated.

Companies will also likely start to unwind at least some of that inventory in the quarters ahead, which could drag overall 2022 GDP, especially if consumer spending also drops off. And investors are more closely tracking consumer behavior as inflation continues to rise.

With consumer spending accounting for about 70% of the U.S. economy, any signs that belts are tightening or moods are getting overly pessimistic will likely set off some alarm bells.

Data to watch

Turning to next week, it will be another busy one for both key economic data as well as earnings. The main economic data highlight will be the January Employment Situation on Friday. Other key data includes ISM Manufacturing, Construction Spending, and the JOLTS report on Tuesday; ADP’s private payrolls report on Wednesday; Productivity & Costs, Factory Orders, and the ISM Non-Manufacturing Index on Thursday.

Earnings wise, results are due from NXP Semiconductor and Trane on Monday; Advanced Micro Devices, Alphabet, Amgen, Chubb, Electronic Arts, Exxon, General Motors, Gilead Sciences, Match Group, PayPal, Sirius XM, Starbucks, and UPS on Tuesday; AbbVie, Aflac, Allstate, Boston Scientific, CNH, Corteva, D.R. Horton, Ferrari, Humana, Johnson Controls, Meta (Facebook), MetLife, Novartis, Novo Nordisk, Qualcomm, Siemens, Thermo Fisher, TMobile, and Waste Management on Wednesday; Activision Blizzard, Amazon, Biogen, Carlyle Group, Check Point, Cigna, Clorox, ConocoPhillips, Deckers Outdoors, Eli Lilly, Estee Lauder, Ford, Hanesbrands, Hershey, Honeywell, Ingredion, Merck, Pinterest, Quest Diagnostics, Royal Dutch Shell, Snap, SnapOn, Wynn Resorts, and Xylem on Thursday; and BristolMyersSquibb, CBOE, Phillips 66, Regeneron, and Sanofi on Friday.

Bottom line, brace for another huge week of extreme volatility.