To The Moon

This past week, we focused on three major market events, the Federal Reserve's interest rate meeting, the quadruple witching day settlement and the drop of high oil price. Of course, we were not only focusing on these three events, but also natural gas price, visits by European leaders to Ukraine, long-term inflation expectations of American households, the Yen exchange rate and other macro events need to be closely tracked. This is the macro level. The micro level needs more attention. The fundamental and technical analysis of the industry and individual stocks is discussed every day.

Let's first review the inflation situation in the United States and the Federal Reserve's interest rate meeting. The US CPI index rose 8.6% year-on-year in May, not only exceeding market expectations, but also hitting a new high since the 1980s. Inflation in the euro zone is also not optimistic. Inflation in the euro zone rose to 8.1% in May from 7.4% in April, well above market expectations of 7.7%, the highest since the establishment of the euro zone in 1999. Even Germany's inflation has risen to 7.9%.

At the Federal Reserve FOMC meeting on Wednesday, June 15, the Federal Reserve issued its latest interest rate meeting statement. The Fed decided to raise the federal funds rate by 75 basis points. The increase of 75 basis points is the largest increase since 1994. What's more, the Fed sharply raised its expectations for interest rates to peak next year, and also raised its unemployment forecast for 2024 from 3.6% to 4.1%.

In the Fed's rate decision statement, there are some points that we think are more important to pay attention to. In the decision statement, the Fed removed the part that "the Federal Reserve Board expects inflation to return to its 2% target and expects the labor market to remain strong". In the future economic forecast of the United States, the GDP growth forecast of 22 years, 23 years and 24 years was lowered. The PCE inflation forecast for this year and next is raised. In the interest rate dot plot of the Federal Reserve, the interest rate path of the three years of 22, 23 and 24 has been sharply raised. Among them, the median interest rate that Fed officials think is appropriate at the end of 2022, which is the most concerned by the market, is 3.375%, which is much higher than the forecast earlier this year. We believe that historically, when unemployment is below 4% and inflation is above 4%, recessions will inevitably occur in the next two years. As far as the stock market is concerned, everyone should have experienced this year's volatility. In the fourth quarter of last year and the beginning of January this year, we have continuously warned our members that in the next few years, the strategy of buying and holding will not be effective. On the contrary, the strategy of holding in the past two years may be counterproductive this year. This year, the long-short strategy of swing trading will be particularly important. This is true for both the indices and individual stocks.

On June 17th, it was also the quadruple witching day settlement of index and stock options futures in the second quarter of the US stock market. After trading sideways for several consecutive days at the beginning of June, the SPX had a larger downward range, and finally settled at a relatively low level which was basically in line with our prediction at the end of May and the beginning of June. Many people have mentioned the term "Quadruple Witching Day" recently, and more and more people have known it in the past two years. However, from our observation, it seems that most people only realize that there will be a large number of options and futures positions to be settled on the quadruple witching day, but they do not know the institutional intentions behind it and the intention to adjust positions. This may not be explained in a few paragraphs. Simply put, in the short term, the SPX is a good short-term entry opportunity below 3700. The SPX lows on last Thursday and Friday are in the 3630-3640 range, which is the position of short-term rebound after the sharp reaction of the market after the Fed's sharp interest rate hike is relatively calm, while the short-term performance of Nasdaq is relatively stronger, and the market may be dominated by rebound and ups and downs in the coming weeks. However, the medium and long term market will still face many challenges, and we still maintain the long-short swing trading strategy. 

This week, crude oil prices have also fallen from high levels, basically in line with our judgment on crude oil and natural gas prices in mid-early June. On one hand, the leaders of Germany, France and Italy, the major EU countries, visited Ukraine last week. The superficial reasons have been explained in various news, we will not repeat them here. Our view is that the deep meaning behind it is to put pressure on Ukraine to restart negotiations with Russia. Once the summer is over and there are no peace talks, the price of natural gas in Europe will be high again in autumn and winter, which will add to the rising inflation in Europe. Sure enough, news broke this weekend that Ukraine was preparing to resume peace talks with Russia in August. On the other hand, the expected decline in global demand and the potential increase in production by major oil producers in the short term are also the reasons for the fall in crude oil prices from high levels. However, it is worth noting that the supply of global oil production will not rise rapidly in the short term due to the impact of the supply chain. Biden will visit Saudi Arabia next month, but the Saudis may not buy Biden's ideas. In the medium term, oil prices are likely to remain relatively high.

Among the big technology stocks, AMZN's logic is relatively clear. After the stock split, it has fallen continuously, and the current stock price is somewhat attractive. We believe that the reason why AMZN splits 20 is largely to prepare for entering Dow Jones constituent stocks in the future, which is why AMZN does not split 10 and 5. Fundamentally, AMZN's operational efficiency has some problems, which is why the stock price performance has been unsatisfactory since last year, but after the stock price comes down, combined with revenue and growth, we can start to make some attempts in the midline. Similarly, we will also execute swing trade for AMZN.

In small and medium-sized stocks, one of the stocks we have traded continuously recently is CHPT, which belongs to the charging station sector. At a time of high energy prices, some sectors and stocks related to clean energy have seen some swing trading opportunities after continuous fall.

Recently, our judgment on the trend of the market and individual stocks is basically in line with what the markets performed, which depends on the deep understanding and foresight of the market. This deep understanding is not simply from a technical or fundamental point of view, nor can it be judged simply from a macro point of view. This requires a combination of multiple dimensions of thinking and more than 10 years of stock market experience. The strategy of buy and hold will not work in the stock market in the next few years. Instead, the holding strategy of the past two years may backfire this year. This year's swing trading strategy will be particularly important.

The above judgment and swing trading opportunities for the market and individual stocks are only a small part of our actual trading cases, and many of our recent stock picks have good gains. It is not difficult for the market to make money in the past two years, but the market can also have excess returns in the future shocks or declines to reflect the importance of the strategy. Every day, we publish comprehensive and timely market and individual stock analysis, swing trading strategies and medium and long-term strategies in our member group. 

Founded by Wall Street hedge fund traders, TMI Partner is dedicated to bringing the most professional knowledge of financial management and investment. Our community is active and energetic, helping people broaden their horizons and contacts, keep abreast of the latest investment information, and promote information sharing and experience exchange among members. Our investment is based on macro logic, combined with technical analysis, to create band trading opportunities, find value investment depressions, and help you make more rational investment decisions. It is never more interesting to watch than to experience and enjoy the wealth appreciation brought by investment. 

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