Strong turbulence ahead of the US stock and crypto markets upon China lockdown and Ukraine War
Written by Moneypig Trading Inc. on April 18th, 2022
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1. Fed SOMA balance and market summary
There are several key factors affecting the stock, bond, and crypto markets, and we must watch those updates closely.
1. Ukraine War
2. Inflation ($TNX, $CL, $NG, US Index)
3. China lockdown
4. US earnings season
Fed increased its SOMA balance from $8.4 tn to $8.42 tn in the past 7 days. The increase could lower $TNX financial, industrials stocks & push the tech & growth stocks higher.
2.a. Individual Charts to watch
The daily downtrend is still intact, but the downside momentum is slowing down. Currently, $SPY is entering another choppy zone between 440.09 and 445. If $SPY breaks 440.09 daily EMA support, we could see momentum to the downside to the key levels 436.5, 429.76, and 420. If 445 holds, room 447.22.
Daily chart bear flagging. On Saturday Apr 16, China’s Zhengzhou city has locked down some areas near Foxconn Technology Group’s main iPhone manufacturing base in a move that could spell further trouble for Apple Inc.’s supply chain.
If $AAPL 165.6 EMA breaks, $AAPL doesn’t have too much downside resistance and could test 158.38 which is 200-day EMA support. If $165.6 holds, $AAPL is likely to have a range-bounce between 165.6, 168.44, and 169.33 before the earnings.
Possible Action (no action yet):
If 165.6 EMA breaks, long $AAPL weekly 165p
2.c. Japanese Yen (USD/JPY) & Japanese Stocks
Japanese Yen has been deflating like crazy. After the 2011 earthquake, the Japanese Yen to USD rose to 75 and now JPY/USD is traded at 126! The Japanese Yen dropped a shocking 63% value against USD in 11 years! This drop will greatly help the Japanese travel industry as tons of tourists will come to Japan. The USD/JPY daily chart is currently flagging to the upside, and we are expecting 129.43 level will be tested in a few weeks.
Japan is also reopening. We should watch some Japanese travel stocks as potential long term investment opportunities. For example, Japanese Airline ($JAPSY) & Kosé ($KSRYY). I personally would wait until the worldwide stock and crypto markets to finish their correction as mentioned above before getting in. Also, we are expecting their US industry peers like American Airlines $AAL, Airbnb ($ABNB) to report great earnings in the coming weeks.
2.d. Shipping Updates
All the container shipping stocks pulling back heavily but start to hold EMA supports due to the shipping rate dropping across container shipping. We must monitor China carefully if there is a national-wide lockdown, which could further pull down the container shipping rates and hence container shipping stocks like $ZIM $MATX.
On the dry bulk shipping side ($SBLK $SHIP), the Baltic Dry Index has been curling back from the low because
1. most of the Chinese lockdown news are priced in
2. “China’s government granted provinces their full allocation of special bonds to be used for infrastructure investment, a sign it’s stepping up stimulus to boost an economy overshadowed by a worsening Covid outbreak”- From BBG
So we are seeing some rallying on $SBLK $SHIP for two days
The oil tanker stocks $INSW $TNK etc. are relatively strong due to the airline recovery and oil shipping overhaul due to Ukraine War and Russia sanctions
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Thank you for reading and have a great day!
Moneypig Trading team
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