February 20, 2024

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Hey Trendsters! Hope you enjoyed the extended Presidents Day weekend. Ready to get back in the swing of things? Because the markets sure are!

We've got a juicy one for you today. The mighty US dollar – is it on life support, or poised for another surge? Turns out, there's a strange contradiction at play: a booming US economy should boost the dollar, right?  But some experts think a strong US can actually hurt the buck's global grip. It's a total dollar dilemma! Keep your minds open, because we're unpacking this paradox.

Get ready for a wild ride today: We'll dissect this dollar drama, throw in Microsoft's ($MSFT) pullback potential for Chart of the Day, sprinkle in the latest market-moving news, and maybe even a pinch of trivia to keep you on your toes.

Let's do this!

Today's Market Mood: EXTREMELY BULLISH!

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Alright folks, looks like the party's on pause after another bout of inflation jitters. Last week, the spotlight was on the Producer Price Index (PPI), which shot a curveball by beating expectations.  Investors had hoped for a cooler number, a clear sign that price pressures were easing off and the Fed could slow their rate hikes. But that hotter-than-expected PPI? Yep, it threw a wrench in those plans.

Naturally, bond yields, especially on those 2-year Treasuries, shot up – they always get anxious when rate expectations shift. It's like watching a nervous chihuahua react to every little noise. Stocks, after some early optimism, eventually wilted under the pressure, erasing a five-week winning streak for the S&P 500.

This inflation drama has traders rethinking just how dovish the Fed is likely to get. It's not despair time, though. Don't forget, even with the recent stumble, markets are comfortably near record highs. Earnings seem to be cushioning the blow...for now.

Strategy Check:

• Eyes on the Long Game: Sure, recent data's unsettling, but inflation WILL wane, it just might not be at the pace we want. Focus on quality companies positioned for sustained growth.
• Hedging Havens: If nerves won't settle, explore sectors like consumer staples or health care – typically less volatile when markets swing.
• Cash Cushion: A small cash reserve isn't a bad idea; allows pouncing on dips if things get oversold.

Let's see what next week brings – inflation numbers always keep things interesting!

Closing Bell Friday Recap:

S&P 500: -0.5% for the day, -0.4% for the week

Dow Jones Industrial Average: -0.4% for the day, -0.1% for the week

Nasdaq Composite: -0.8% for the day, -1.3% for the week

10-year Treasury note yield: Rose over 4 basis points to 4.285%.

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Remember when investors hoped inflation was like that awkward ex, quietly fading away? Yeah, about that...  Turns out, inflation is more like that clingy friend who just won't take a hint.

First, we got the CPI, popping in hotter than expected. Then, like the surprise guest at a bad party, along comes the PPI, topping expectations too. This one-two punch has everyone asking, "Seriously, inflation...again?"

It's like a bad sequel nobody asked for: "Inflation Strikes Back."  Sure, stocks haven't totally thrown in the towel.  But you can practically hear investors groaning, "Ugh, do we have to deal with this again?"

On the bright side, at least it gives the bond market something to obsess over. Think of the 2-year Treasury like that anxious kid glued to the news. Every little inflation whisper sends yields on a rollercoaster ride.

Will it be another year of the inflation battle? Time, and of course, more economic data, will tell...

$MSFT Takes a Breather... Where's the Microsoft Buying Zone?

Even tech giants need a time-out. After a solid run, Microsoft ($MSFT) looks poised for a little cooldown.  Let's be real, no stock climbs in a straight line forever. It's like gravity for charts. What goes up, often wants a breather before resuming its climb.

Now, before you panic-sell, remember: pullbacks in a healthy uptrend are like dips on sale!  Knowing those potential zones in advance is investing with intention, not emotion. Here's the breakdown:

Support Break = Watch Out : Those red dotted lines (the 35EMA weekly and daily) have acted like springboards during the rally. Break those, and things get interesting!

Juicy Buy Targets: If you believe in MSFT's story long-term, those lower levels scream opportunity. Ever wish you'd bought on a dip? This COULD be your chance.

Trader's Radar : If you're more swing-trade focused, look out! Those targets become zones of potential volatility – buyers and sellers might duke it out, creating potential entry/exit points.

No guarantees, this is the market after all! But being ready instead of reactive has its perks... 😉

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Forget foreign rivals – the dollar's worst adversary might be hiding in plain sight.  

Turns out, the greenback's biggest enemy might not be some foreign rival, but America's own dysfunction. That's the bombshell dropped by former Fed and Treasury bigwigs, Kamin and Sobel.

Think of the dollar as that reigning champ with decades under its belt. Rivals like BRICS or even a "new" global currency scheme?  Sure, they make headlines, but they're like rookie upstarts against a seasoned pro. The real knockout punch might come from within.

Picture this: America's political gridlock spirals out of control, debt balloons uncontrollably, and the economy coughs and sputters. Suddenly, the dollar's not such a rock-solid safe haven anymore. Inflation eats away at its value, investors get jittery, and global markets feel the pinch.  Kamin and Sobel say it bluntly: if this plays out, losing dollar dominance will be the LEAST of our problems.

Why should you care? Because a weaker dollar isn't just Wall Street's headache. It ripples through your portfolio. Think pricier imports, hedging strategies changing, and perhaps a need to rethink that emerging market exposure. And, in a worst-case scenario,  if economies start fragmenting due to dollar instability,  international tensions might be next.

Bottom line:  The dollar's a powerhouse, no doubt. But its greatest risk isn't overseas, it's that old saying: "A house divided against itself cannot stand."  Let's hope Washington figures that out before the economic fallout hits global markets, and everyone's portfolio.

Eyes were on a mix of surprise earnings, analyst action, and tech buzz this week. Here's a quick rundown of the market's major movers:

Winners:

Applied Materials (AMAT): Record highs on impressive quarterly figures.

Coinbase Global (COIN): Unexpected profit sends shares soaring.

Trade Desk (TTD): Stellar guidance fuels upward surge.

Losers:

DoorDash (DASH): Revenue beat can't offset hefty loss.

Dropbox (DBX): Investors flee on disappointing revenue forecast.

Roku (ROKU): Fourth-quarter loss exceeds expectations.

Yelp (YELP): Weak full-year guidance sparks a rout.

Next Week's Radar

Retail giants Home Depot (HD) and Walmart (WMT) kick off an unofficial retail earnings season. With consumer spending in focus after weak retail sales data, keep a close ear on management's outlook for clues on shopper resilience.  And don't forget AI leader Nvidia (NVDA) reporting Wednesday – expect fireworks there given the frenzy surrounding the sector.

Inflation Check: Not So Smooth Sailing

This week's economic data delivered a dose of reality to investors hoping for quick, painless progress on inflation. While there were pockets of cooling, services prices remain stubbornly high and the Producer Price Index (PPI) exceeded expectations. Don't hold your breath for immediate rate cuts; the Fed's battle against inflation isn't over yet.

Random Musings:

Is a strong US economy like an overbearing friend? Sure, it's comforting …until it starts dictating everyone's plans.

"Dollar dominance is here to stay." Famous last words throughout history? Nothing reigns unchallenged forever.

Markets love certainty, even if it's unpleasant. Better a harsh truth than constant economic whiplash.

Politicians arguing over budgets feels like watching your parents bicker over finances as a kid. Stressful, and you end up wanting ice cream, not economic lectures.

Inflation: That stubborn guest who overstays their welcome, eats your food, and STILL manages to leave the place messy.

On this day in history, February 20

1792: The Postal Service Act is signed, giving Congress the power to establish mail routes. Talk about slow delivery in a pre-Amazon world!

1935: Caroline Mikkelsen of Norway becomes the first woman to set foot on Antarctica. Talk about breaking into a male-dominated space...that takes guts.

1962 : John Glenn becomes the first American to orbit Earth. A reminder that even with "domestic" economic dominance, it's the bold who explore new frontiers.

1986: Soviet space station Mir launches. International cooperation seems ambitious now, but maybe a weak dollar revives odd alliances?

2003: A fire during a Great White concert kills 100 in Rhode Island. Tragedy underscores that good economic times don't mean complacency on risks.

Think your love life is complicated? Try being an investor this week! Stocks swing from highs to lows, the dollar channels its inner soap opera star, and inflation keeps popping up like an unwanted ex.

Just when you thought it was safe to breathe easy, along comes something – an earnings report, a rogue economic number, or maybe just a case of the Mondays –  with enough shock value to turn your portfolio into a mini-thriller.  But guess what? That's what makes markets  interesting...in a stressful kind of way.

So here's a quote for our times, courtesy of legendary trader Paul Tudor Jones:

"Every day I assume every position I have is wrong.”  Wise words,  because humility in the face of market madness is always a good strategy.

Until next time, Trendsters!

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