Technically Speaking – February

March 3, 2022

Technically Speaking:

Long Term Support: SP500 4280 then 4120 – 4160

Long Term Resistance: SP500 4481- 4587

Markets started off the month of February in a positive matter. The Olympics were a mess, but at least held off Russia from invading Ukraine. As the Russian forces built up on the Ukrainian border the Markets began to tumble. The SP500 fell to a low for the month that was 12% off the highs, but then moved higher to month’s end. The big technical gaps in the markets both up and down have created a volatile environment. The markets continue to have huge daily swings from support to resistance. It appears easy to trade but it’s not. The momentum moves are very short lived, which means only short-term traders can benefit. The technical support and resistance levels having been fairly accurate daily, but each time the market sells off the fear factor stops many investors from buying. Conversely, as the markets have big rallies investors that buy hoping for momentum to continue are disappointed as the markets reverse and fall again.

The Russia invasion of Ukraine has turned out to be a bad move for Putin. The world has turned against Russia in a big way and the sanctions will make Russia weaker. However, the global economy will suffer as it feels the effects of oil spiking to over $100 per barrel. The Federal reserve, wanting to combat inflation, is in a quandary. They want to stop prices from their meteoric rise but don’t want to start a recession. Eventually. Something will need to give. We are either going to have runaway inflation and a strong economy or prices are going to get too high and consumers are going to pull back on spending which will cause a slowdown.  The critical question is, if we have a slowdown in consumer buying will we also see inflation abate.  If inflation does not slow but the economy does, we will be in trouble with something called Stagflation. Hopefully, history is not about to repeat itself. Remember the 70’s under President Carter. Oil shortages caused oil prices to rise, US was dependent on foreign oil, inflation was rising faster than interest rates and the economy was slowing causing stagflation. Short term interest had to get to 20% to stop the inflation and the residual effects of Stagflation took years to reverse. In my opinion, stay patient and look to buy at support levels and reduce risk exposure on rallies to resistance levels.

 

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