Welcome back to the MSI weekly newsletter!
The week that was:
This week, the Fed chairman reiterated the fact that the Fed will do whatever they can to bring inflation under control, no matter how long it takes. Next week, in the next Fed meeting, it is likely that interest rates will be raised by .75%.
However, it does not matter whether the Fed raises interest rates by .50, or 75%. The only thing that matters is that the Fed will continue to raise interest rates, until the rates reach a specific point at which the Fed will decide that the interest rates are high enough, though that specific interest rate level is currently unknown. For that reason, I think that the market does not have much of a reason to worry about how much the rates will be hiked for each month.
Despite the market being on a downtrend for a few days, the market has recovered in the past three or four days. One reason for that happening is that the market is oversold. The other reason is that there has been no real news for the market to go down.
Two weeks ago, I stated this in my newsletter: "The market will probably go on a downtrend for the next few days. However, there is no reason for the market to go down too much lower.". This ended up really happening. When I wrote that, the S&P 500 was at $405. In the next few days, it went down to $390, because of the panic that followed the Fed's statement, though it did not go down too much. However, the market is back to $406, where the market should have been all long. The same thing happened with some blue chip companies such as Google, Amazon, and Nike.
The market dipped slightly in recent times purely because of panic. However, in a situation like this, other people's panicking can help calm investors make a profit. When a stock is temporarily down for irrational reasons, it is a good time to buy some good stocks, as the stock will most likely recover soon after.
In my last few newsletters, I had included a chart of the S&P 500, showing the resistance and support levels, resistance being a ceiling, and support being a floor. Currently, the ceiling is at about $412, while the floor is at $390. The inflation data for last month will come out on Tuesday, and though inflation will most likely go down, the market could either break through the ceiling, or crash below the floor depending on the inflation data.
This is the all-time chart for Nike(NKE). As the chart shows, the stock went up more than it should have during the pandemic, as people mostly liked wearing comfortable athletic clothes at home. Just like all other companies that got a Covid bump, the price of Nike corrected a lot soon after that. That is a very good opportunity to buy a great stock like Nike, as it will eventually recover. Nike is facing small problems now because of the current market situation, but Nike will be able to overcome them, and do excellent in the long term.
Thanks for reading my newsletter! See you next week!