Farmers Fuel Tractor Stock Boom
Greetings from Costa Rica! I am writing to you from the yoga retreat I mentioned in the previous issue. While here, I have been basking in the natural beauty of this country and practicing yoga three times a day.
My yoga practice includes meditation and breathing exercises for 45 minutes, which has been a completely new experience for me. I must say, it has been both challenging and rewarding.
As someone who does not regularly sit still or pay attention to their breath, I must admit, it is quite difficult--especially for 45 minutes! However, the feeling that comes afterward is simply indescribable. Some people even reach a state of euphoria! Personally, I found it challenging to walk down the stairs afterward, but overall, I felt great.
I have come to realize that practicing mindfulness, breathing, and self-awareness can have a profound impact on our lives, not just physically, but also mentally. As traders, we tend to get caught up in the fast-paced world of finance, but it is crucial to slow down and analyze our thoughts before making any decisions.
Meditation and breathing exercises not only help us to become healthier individuals, but they can also make us more patient traders. Success in trading is not always about how often you trade but about deciding when not to trade. By taking a moment to analyze our thoughts and motives, we can make better-informed decisions and ultimately become more successful traders.
If you're interested in learning more about the benefits of breathing exercises, I highly recommend reading "Breath" by James Nestor. It's a fascinating read that highlights the research conducted on some of the above topics.
James Nestor explores the science and history of breathing. Nestor draws on the latest scientific research to reveal the many ways in which breathing affects our physical and mental health. He also explores the impact of modern lifestyles on our breathing patterns and offers practical advice on how to optimize our breathing for better health and well-being. The book has been widely acclaimed for its fascinating insights into a largely overlooked aspect of our lives.
I encourage you to take a moment to slow down and practice mindfulness, breathing, and self-awareness. It may not be easy, but the rewards are truly priceless.
Conversations like these are what we strive for in our weekly webinars. Connecting the fundamentals of technical analysis with current market conditions and additional insights is what sets YellowTunnel apart from the rest. Not only do I bring a personal touch, combined with top-of-the-line A.I., but also key psychological pillars.
Our community is designed to provide you with a unique trading experience where you can benefit from our A.I. trading program and learn while looking over my shoulder.
YellowTunnel provides a 30-day risk-free trial that gives you full access to our platform and allows you to explore different trading strategies. You can test out our predictive software and trade intelligence platform and see for yourself the accuracy of our signals and the power of our trading tools. Our community is designed to provide you with the support and guidance you need to become a successful trader.
For more information on the YellowTunnel tools and our trading community, I suggest reviewing our latest Strategy Roundtable, which we hold weekly on YellowTunnel. I also recommend checking out our latest Roundtable webinar in its entirety below:
How To Trade a Bear Market Strategy
With the unpredictable nature of the market and the uncertainty ahead of us, I can’t emphasize enough how vital it is for our readers and members of the Yellow Tunnel community to keep referring to our Live Trading Room so as to maintain a close tie of how our I and my AI platform is navigating us in and out of select trades. It’s FREE and I highly encourage everyone to sign up for the Live Trading Room and keep checking in throughout the trading day.
Every Monday and Wednesday, I highlight our best strategies and potential trading setups via the DISCORD server. It’s the future of bringing together a trading community’s total services, educational products, live chat venues, support, news, how-to tutorials, webinars, live-trading demonstrations, and tons of market analysis. It is incredibly interactive and full of crucial and timely information. Just go to:
I also want to emphasize to traders how vital a stop-loss discipline is to winning and being successful in an unforgiving market. We employ specific stop-loss instructions with every trade. The buy and sell programs controlled by high-frequency related algorithms can create great profits or cause sudden losses, so it is imperative to maintain an element of controlling risk with each trade.
CURRENT TRADING LANDSCAPE
The stock market experienced a volatile week, with both ups and downs. On Friday, the market was trading lower following the shutdown of SVB Financial and the release of the February jobs report, which showed a slowdown in hiring. The U.S. economy added 311,000 jobs in February, which exceeded expectations but was down from January's revised figure of 504,000 jobs. The unemployment rate rose to 3.6%, and wages grew 4.6% year over year.
The two-year Treasury yield, which is a barometer for expectations about the fed funds rate, dropped to around 4.6% from over 4.8% before the jobs report. This caused the 10-year yield, which had recently been trading in line with the two-year yield, to decline to about 3.7% from about 3.85% earlier. This is a mild reversal of what markets had expected earlier in the week after Fed Chairman Jerome Powell testified before Congress - more on that in a bit.
On Thursday, all three major U.S. indices closed in the red after a significant downturn, with banks, in particular, being a significant drag on the market. The large loss of SVB Financial caused other banking stocks, such as JPMorgan Chase, Bank of America, and Wells Fargo, to plummet.
Furthermore, jobless claims rose to 211,000, exceeding expectations and last week's results, indicating that the labor market may be loosening. However, economists predict that the February jobs report will show an increase of 225,000 jobs, down from January's 517,000. A decrease would be welcome news for the market, as it would suggest an economy weak enough to support further decreases in inflation but still strong enough to avoid a severe recession.
Federal Reserve Chairman Jerome Powell's recent testimony to Congress that more interest rate hikes are on the way has contributed to market instability. Powell noted that economic data indicates the rate of inflation is declining slowly, and rates need to rise slightly from here and then stay high for a while. While this may still be true, markets may now anticipate lesser rate hikes and then rate cuts sooner than before.
A "soft landing" could be possible if rate hikes are benign enough, meaning that the Fed could hike rates, lower inflation, and keep the economy growing. However, concerns over an impending recession have caused investor unease.
The latest Beige Book, released on Wednesday, revealed that six of the twelve Federal Reserve districts reported little or no change in economic activity through February's end, whereas the other six districts indicated growth at a modest pace had expanded. This resulted in only a slight rise in nationwide activity, according to the Fed report.
Inflation pressures remained widespread, with energy and raw material prices on the rise, while many districts reported moderating price increases. However, there was relief in shipping and freight costs, and some firms are finding it hard to pass on cost increases to their customers. This could be a positive signal that inflation can moderate without causing a sharp rise in unemployment. The labor market conditions remained healthy, with employment continuing to increase despite hiring freezes by some firms and scattered reports of layoffs. Meanwhile, consumer spending remained steady; however, some districts had concerns about rising credit card debt. On a positive note, travel and tourism were bright spots, while manufacturing, which had been a worry, was reported to have stabilized.
While the labor market conditions remained healthy, employment continued to increase. Likewise, the focus remains on treasury yields.
Investors may be bullish due to seasonally bullish periods and retail bullish sentiment, but it is not yet approaching extreme bullish levels. SPY rally is capped at $430-440 levels, and short-term support is at 390-400 for the next few months. The current pullback will be capped at the 200 and 50-day MA, and the market may rally into the next earnings season before pulling back in Q2.
Despite the ups and downs of the market, investors should remain cautious and consider diversifying their portfolios to mitigate risk.
The financial markets are facing a critical juncture as all sectors are hovering around long-term key support levels. The success or failure of this market setup will have far-reaching consequences. The theme continues to be the better-than-expected economy, which makes the job of the Federal Reserve much harder. With low unemployment and consumers continuing to spend money on leisure, entertainment, and services, the pressure on the Fed to maintain a hawkish stance on interest rates is mounting.
Adding to the complexity of the situation, the 2-year yield is breaking above the 52-week high, and money market yields are offering close to a 5% return. The average investor is now pondering whether to keep their money in market funds with zero risk or equities with the risk of a 20-30% pullback. As the dollar strengthens, the disconnect between the bond market, currency market, and equity market may be short-lived unless the dollar and yield drop significantly.
However, it remains to be seen how long this trend can continue. The US dollar is getting stronger, and the 2-year yield is above the 52-week high. Unless the dollar drops and the yield drops significantly, the disconnect between the bond market, currency market, and equity market will not last for long.
Many experts remain in the hard landing camp, not fighting the Fed's high-interest rates and the historically high US dollar. The bulls are expected to hold on to the 200 DMA and rally into the next earnings season, with a possible retest of the August or February highs. However, a pullback is expected to start sometime in Q2.
ECB and Fed members will speak in March, but this week Fed committee members have indicated that they will maintain the same hawkish posture on rates. Futures data already points to a high probability of a 50 bp rate hike in Europe and the US, and the markets are not factoring this in yet. There is still a disconnect between the bond market and equity market, where the 2-year yield and 10-year Bund yield (Germany) are breaking to a decade-high, and semiconductors are trading at the 52-week high.
Despite the optimistic outlook, caution is advised as the bear market is likely to continue this year. The equity markets are expected to be volatile, and the best-case scenario is that the market will reach the bottom in the first half of the year. The main reason is that the S&P 500 revenue numbers will most likely have to be revised down, which is not factored into the current market levels.
With this in mind, I have identified a specific sector and symbol I think should perform well in the coming weeks. Before we break that down, let’s review our A.I. data’s forecast of the current market conditions.
The VIX traded near $18 for most of the week before spiking to $22 on Thursday and then going up to $25 on Friday. The latest earnings from companies such as CRWD, ORCL, and DOCU, as well as Powell's congressional hearing, have strongly influenced the market. The SPY is currently trading at overhead resistance levels of $408 and then $418, with support at $402 and then $395. I expect the market to trade sideways for the next two to eight weeks. Additionally, I would recommend remaining market-neutral on the market at this time and encourage subscribers to hedge their positions. See the $SPY Seasonal Chart below:
In conclusion, the financial markets are currently at a critical juncture, and investors need to exercise caution while making investment decisions. While there are positive indicators, the bear market is expected to continue this year, and the volatility is likely to persist. Therefore, a market-neutral approach going into summer is recommended until the next earnings season starts in April and May.
Having taken the above into consideration, I believe I found my portfolio’s next addition.
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SECTOR SPOTLIGHT
While the market has shown resilience in the face of economic headwinds, investors should expect more volatility during the first half of this year. With the ongoing geopolitical tension and concerns over inflation, one sector is likely to experience fluctuations in demand and supply chains. However, as the global economy continues to recover, this sector may benefit from increased infrastructure spending and rising consumer confidence. I will be keeping a close eye on the performance of key players in the sector, and have identified potential opportunities for growth.
Industrial Select Sector SPDR Fund ETF (XLI) tracks the performance of the industrial sector of the S&P 500 Index. The industrials sector is a broad category that includes companies involved in manufacturing, construction, aerospace and defense, and transportation, among others.
The XLI ETF is composed of large-cap industrial companies such as General Electric, Boeing, and Honeywell. These companies are leaders in their respective industries and play a significant role in the global economy. Investing in XLI provides exposure to the industrials sector, which has historically been a key driver of economic growth.
Overall, XLI and the industrials sector represent an important component of the economy and offer investors the opportunity to gain exposure to a diverse range of companies in this vital sector. With the current market conditions, I believe there is an opportunity with XLI. Let's review the A.I. data.
With the 52-week range of $82-$105, XLI recently neared its high but has since moved back. Having sold off significantly over the last week, XLI is trading near the $100 range and could dip a bit further by Monday. This presents a great opportunity to buy XLI as our 10-day forecast shows a strong and steady trend towards the upside of the industrials ETF. See 10-day predicted data:
Adding to this optimism is my long-term forecast tool’s reading of the symbol. XLI is showing all four-time frames within the Seasonal Chart as “higher” indicating the stock has a good probability of trading higher and the fundamental and forecasted data appear to agree. See $XLI Seasonal Chart:
If industrials are to boom as forecasted, there’s one symbol I love adding to my portfolio during times like these.
TRADE OF THE WEEK - Farmers Fuel Tractor Stock Boom
Deere & Company (DE) is a multinational corporation that manufactures agricultural, construction, and forestry equipment. Operating in over 160 countries worldwide, the products of Deere are sold under the brand names John Deere, Wirtgen, and others.
Deere's stock is traded on the New York Stock Exchange under the ticker symbol DE. As a leading manufacturer of farming equipment, Deere is often considered a bellwether for the agricultural industry. The company has had a long history of strong financial performance, with consistent revenue growth and solid earnings. In recent years, Deere has also invested heavily in digital technology and precision agriculture, positioning itself as a leader in the growing field of agtech.
In recent days, DE has sold off significantly, and just as with XLI, is offering us a great entry price. Let's review the A.I. data.
With a 52-week range of $283-$448, DE, just like XLI, is moving off its high and dipping at the right time. The symbol has a model grade of "A", indicating it is in the top 10% for accuracy within the YellowTunnel data universe and is displaying several promising signs. Looking at the 10-day predicted data for DE, we see a disruptive vector trend that appears to fluctuate between gains and losses to start next week. In contrast with XLI, this forecast shows that the model is predicting both modest gains and losses. However, if XLI booms, then DE will surely do the same and we could see a much brighter forecast as early as Monday.
Looking at our long-term forecast for the symbol, there are two instrumental time ranges in which our A.I. data predicts DE to rise. The 20 and 30-day frames are showing impressive higher gains for the symbol which could turn to additional time frames when the tool updates on Sunday. In line with XLI, I believe DE should create gains from its recent selloff. See $DE Seasonal Chart:
This week, I’ll be adding $DE to my portfolio!
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The consistent performance of our services is just incredible. My historical stellar performance is made possible by being right on 84.75% of all trades that I made, with an average profit of 37% per trade on our collective trade recommendations. To my knowledge, this trading performance is one-of-a-kind that stands alone in the marketplace for superior trading advice where our numbers and results speak for themselves.
Go to our website at www.yellowtunnel.com and make one of our services your default trading system where the AI that powers my all-world, the proprietary platform, can help you make the first quarter of 2023 the best trading quarter of your portfolio yet!
One more thing, I've had the opportunity to take additional action with a great organization supporting families in Ukraine directly. Gate.org is a foundation where fundraising is held for specific families, allocating funds to multiple families currently living in Ukraine. I am on the board of directors for this great initiative and encourage everyone to check it out and donate if possible. The war in Ukraine is escalating and families are being negatively impacted and displaced daily. To learn more about this initiative to help families, please see the link below:
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