Hey Wealth Builders!
Last week, we discovered that the Consumer Price Index (CPI) inflation accelerated to a new 40-year high of 8.6% in May, surpassing the previous high of 8.5% set in March. The latest reading indicated that inflation rates have not yet peaked, meaning that more aggressive action by the Federal Reserve may be required to decrease the rise of inflation. The current rate of 8.6% is more than four times the Fed’s long-run inflation target of 2%. Yikes!
Because of the more aggressive increase in interest rate hikes, the stock market naturally dropped even more, leading the overall markets into a bear market, or a market that has dropped more than 20% from its all-time-highs.
Technical Analysis 📈
SPY
Interestingly, SPY dipped below our teal support line this week as many algorithms are still selling off their positions to protect their client portfolios and prevent themselves from getting margin called. I expect to see some relief rallies in the upcoming days. However, don't let these green days fool you. The overall market trend is downward and I still recommend to observe the markets closely before buying anything. Please be careful to not catch a falling knife.
QQQ
QQQ is still trending between its predicted downward channel.
DIA
DIA, like SPY, also dipped below its support.
AMD
AMD formed a classic bear flag and broke down its $84 support.
AMZN
AMZN seems to be holding above the $100 level. However, I wouldn't be surprised if it falls lower in the next couple of weeks.
GOOGL
Similarly, GOOGL is holding above around the $2150 support. If it breaks, the next stop would the $2000. Again, please be aware that the company will have a 20 for 1 stock split on July 18. However, I would not recommend getting anymore shares at the moment since the markets as a whole is still trending lower.
Ask Steve 💭
Let's see what some of our members asked this week. Here are the top questions we received:
Rafi
Q: As stocks are declining due to recession and panic. What would be the best stocks to buy thru a Roth IRA so when the market rebounds, we are having positive gain? Would you be able to recommend any fundamentally strong stocks to invest towards?
A: We currently don't recommend purchasing any stocks or ETFs both in our cash accounts or in our Roth IRAs.
We recommend patiently waiting until we have a trend reversal with higher highs, higher lows, and a positive market sentiment.
When this happens, I recommend investing in ETFs such as SPY, VOO, DIA, and QQQ. I also favor MSFT, AAPL, AMZN, and GOOGL.
Submit Your Questions 🙋♂️🙋♀️
Have any other questions? Before asking me and my team, feel free to check out our Level 1 FAQ. This FAQ is located on the Dashboard. You might find what you're looking for. 😊
If you do have questions, make sure to ask them on our Dashboard, rather than asking us via email. We also encourage you to watch all of the core video content and some of the past archived videos, read past Membership Positions, and take all the quizzes before sending us your questions.
Join Our Discord 💬
Investing, trading, and building wealth was a lonely journey for me. This is why my team and I created a Discord group for you and the other members to shares ideas and support one another. You don't have to go through it alone as we're all here to help. 😉
Make sure to check it out on the bottom of your "Dashboard" and follow the instructions on how to sign up. Coming from a teacher's perspective, I believe it's important to engage in conversations with people who are also seeking to reach financial freedom.
Remember that we are a community of wealth builders at all different levels, so be positive, kind, and helpful to others, so we can help each other get to financial freedom much faster.
Steve's Recommendations 💡
I don't recommend starting any new wheel positions (selling new covered calls or cash-secured puts) until there is a trend reversal and positive market sentiment.
Through from a long-term lens, it may not matter, but I don't recommend buying any shares or ETFs for the long-term at the moment.
Continue to buy to close past covered call positions once they shrink down to around 50-80% of their values, and roll out to a further date to collect more premium. This is a great environment to sell short-term options as IV is high due to all the fear. I favor 30 to 45 day expirations. It's a boring and repetitive process, but it's like collecting free money while 95% of other retail investors are panicking.
If you have more than 100 shares of long-term positions, you can consider selling 30 to 45 day covered calls at around a delta 0.10 to bring in cash.
Continue to deposit money into your account.
Continue to set up bear call spreads.
Let your capital stay as cash so we can have plenty of ammo when the bull market returns. And trust me, when it does, it will be glorious since we will be prepared.
Stay positive. I know it's easier said than done, but keep in mind that you have knowledge on how to still generate income during a downward market. This is something that more than 95% of retail investors don't know how to do!
Stay smart, and invest and trade strategically. You got this! 🙂👍
-Steve and the Call to Leap Team
The following article is strictly the opinion of the author and is to not be considered financial/investment advice. Call to Leap LLC and the author of this article does not claim to be a registered financial advisor (RIA) or financial advisor. Please visit our terms of service and privacy policy before reading this article.