 Hey everyone, this is Dan with another episode of my weekly market review. SPY hit a bottom on 617, since then it has rebounded 7%, but since the beginning of the year SPY is still down 18% and QQQ is down 26%. Has the market hit bottom and is now rebounding? Is this a good time to buy long positions? I looked at the charts and macroeconomic events and found a few very important items that I want to share with you. In this video, I will also talk about my trading strategies for the few ETFs that I've been tracking. Let's get into the details. First, let's look at how the market has been trending. The chart here shows the year to date movement of the ETF SPY which is paked to the S&P 500 index and it's also showing QQQ which is paked to the NASDAQ 100. As you can see, year to day SPY has been down 18% and QQQ has been down 26%. The market has certainly been very bearish so far. We can see that SPY has been trending down along this line since April. However, since June 17, SPY has been going up being supported by this yellow line. What we see here is a triangular or pennant pattern. SPY broke above the pennant pattern a couple of days ago which is supposed to be a bullish sign, at least for the short term. Similarly, QQQ has been trending down also along this yellow boundary line, similar to SPY. QQQ has also been going up since June 17. We see also the pennant pattern. QQQ has moved even more above the pennant pattern than SPY. Since the market has been going down for so many months, will the market be still heading down? Will we be seeing the bear flag? In the next few days, if SPY and QQQ drop below the bottom yellow trend lines then the bear flag will be confirmed which will be of course a very bearish sign. If that happens, the market will most likely make new lows. Here's however the possibility that the rebound will go on for much longer, especially if the prices can get above the recent highs. I will talk more about SPY and QQQ later on. To understand where the market might be going, we need to first understand the macroeconomic events influencing the market. First of all, there has been a war in Ukraine since February 24th which has been driving up the prices of oil, natural gas, weed, and other commodities in addition to causing unimaginable human suffering. The Federal Reserve banks have been raising interest rates in the last few months in order to control inflation. The Fed has also been doing QT quantitative tightening with the target of $47.5 billion of asset reduction for each month from June to August and starting from September the total asset reduction will be at $95 billion a month. The COVID lockdown in China, Fushan High and other major cities has been easing although at a very slow pace so far the lockdown in China has been causing supply chain issues and driving up prices of certain goods. The current inflation rate is very high which is compelling the Fed to raise interest rates and to do quantitative tightening. The May CPI came in at 8.6%. The June CPI is expected to be 8.8% which is still very high. The EU leaders said they would eliminate two thirds of the Russian oil imports to Europe by the end of 2022, that's in reaction to the Russian invasion of Ukraine. Recently, G7, the seven leading nations, agreed to start exploring the possibility of imposing a price cap on Russian oil. If the price cap is implemented it will further drive up the price of non-Russian oil. President Biden will be visiting the Middle East from July 13 to 16 including a stop in Saudi Arabia. President Biden will certainly try to convince Saudi Arabia to produce more oil which many people believe will cause the price of crude oil to go down. Because of June 17, Russia reduced the natural gas it provides to Italy and Slovakia by 50% each and Russia also cut off the natural gas supply to France completely. Earlier Russia already cut off natural gas supply to Poland, Bulgaria, Finland and Denmark. Because of these actions, the natural gas price in Europe has been shooting up. On June 9, there was an explosion at the Freeport, Texas, liquefied natural gas plant. Because of the explosion, the plant has been disabled and will take several months to repair. This incident has constrained the ability of the United States to export liquefied natural gas to Europe to backfill the reduction of Russian natural gas. Therefore, the price of natural gas in Europe has gone up. Meanwhile, because of the reduced capability of the US to export, the natural gas price in the US has been falling which creates what I call the bifurcation of natural gas prices between Europe and the US. I'll talk more about that later. The Ukraine war has severely constrained the export of wheat from Ukraine which drove up the wheat price around the world. Since the beginning of June, there has been the talk about a possible humanitarian corridor to be opened by Russia to allow the export of wheat from Ukraine. Regrettably, this corridor has not happened yet. The New York Fed's computer model showed that the probability of having an economic soft landing is just at 10%, whereas the probability of a hard landing is 80%. This is certainly a bearish piece of news. The CEO of JPMorgan Chase, Mr. Jamie Dimon, said recently that he saw a hurricane coming over the economy. Former Treasury Secretary Larry Summers said a recession is almost inevitable. As of July 1st, the Atlanta Fed's GDP model indicated that the US economy is already in recession, which is another bearish piece of news. Commodity prices have been falling since the beginning of June, although the prices recovered slightly in the last couple of days. This is the chart showing the price movement of several major commodities. As you can see, from the ranking here, since the beginning of the year, natural gas has gone up 58%, oil up by 37%, and so on. All these commodities have performed better than SPY, representing the general market. You might also notice that the prices of these commodities have been dropping since the beginning of June, although the prices have recovered somewhat just in the last couple of days. During a recession, usually the prices of all commodities fall because demands are significantly reduced in a recession. Are we seeing the initial signs of a recession? In the next few minutes, I'll talk more about the possibility of going to a recession. This is a summary of the major economic data published in the last week. Several numbers here caught my attention. Factory order came in at 1.6%, which is higher than the previous month and higher than the estimate. This is certainly counted to the prediction of having a recession. We will have to see whether factory orders will continue to hold up in the next couple of months. The initial jobless claim rose slightly. Maybe we are indeed moving into a recession. Crude oil inventory has gone up. That's one of the reasons why oil prices have been falling. Non-farm payroll is slightly lower than last month. Maybe this is another early sign of a recession. Unemployment rate continues to be at 3.6%. We are certainly not quite in a recession yet based on this piece of data. Actually, this low unemployment rate will give the Federal Reserve banks the assurance that they can continue to tighten without causing a deep recession. As the Fed continues to tighten and do QT, the stock market will most likely go down and the interest rates will be going up. At this point, I'd like to remind you to subscribe to my Twitter account, which is DanMarketL, in addition to subscribing to my YouTube channel. I notify my YouTube subscribers almost on a daily basis some of my trades as well as any significant news developments. For example, on June 7th, I tweeted that I bought SQQQ, the triple inverse ETFs pegged to the nest at 100. Then three days later, on June 10th, I tweeted that I saw half of my SQQQ at 14% gain. On July 7th, I tweeted that I bought UCO because the price has dropped so much that it is almost at the pre-Ukraine war level. As of today, I'm seeing 3% paper gain already on my UCO shares. If you like what you've seen so far, I'd like to suggest that you click the like, subscribe and notification button. This will enable you to receive notification when I post my next video. It'll also encourage me to create more videos like this in the future. Thank you very much. Let's continue. Since the Fed will most likely continue to do quantitative tightening in order to control inflation. The question is, how far will the market drop? If you look at the monthly chart for SPY, you will see that today's RSI level is very low. In the last 30 years, there are only three times during which RSI values were lower than today's. There were 2001, which was right at the beginning of the dot com crash. And 2008, the great recession triggered by the CDO collapse. And 2020, the pandemic crash. What were the unemployment rates for those three years? They were at 6.2%, 9.9% and 14.7%. What's the unemployment rate today? It's at 3.6%, which is very low compared to these three historical points. The Fed had to reduce interest rates or do quantitative easing during those three years to salvage the economy and to restore the stock market. Will the Fed be doing the same now? My answer is a resounding no because of the low unemployment rate and high inflation rate today. Actually, the low unemployment rate gives the Fed the safety to be able to tighten more and to try to bring down the inflation rate more because they do not have to be afraid of bringing in a deep recession, at least not yet. The former Fed official, Mr. Bill Dudley, said recently that the Fed might have to tighten the Fed funds rate to 6% in order to control inflation. Also today, the Fed funds rate is at 1.5% to 1.75%. That means the rate will have to go up a lot more if Mr. Bill Dudley is correct. I did my own analysis of two periods in the 1970s when the inflation rate was above 8%. My conclusion was that the rate will most likely go higher than even 6%. During these two periods in the 1970s, the stock market dropped by 50% and 27% respectively. In other words, I believe the market will go down more before inflation is brought under control. If you want to learn more about my analysis, please refer to the video I posted on May 22. I don't usually track the movements of cryptocurrency, but I believe this development is pertinent to our non-crypto investments. If you look at this year-to-day chart for the total cryptocurrency market capitalization, you will see that the market cap peaked at $3 trillion in November of 2021. The total market cap today is less than $1 trillion. That means the crypto market lost two-thirds of its value or lost $2 trillion. You might remember that the 2008 market crash was triggered because of the collapse of a CDO market. It then quickly spread to other assets. At that time, the CDO market cap was only $1.4 trillion before the crash. The loss of $2 trillion market cap of the crypto market today is therefore a very significant event. Let's hope there's not going to be any major domino effects due to the collapse of the cryptos. We definitely need to be watchful and get ready to protect our investments if the collapse spreads from the crypto market to other assets. So far, we have seen enough bearish signs and have heard about some glimmers of hope. So when would the market actually recover? In my opinion, the market will recover when the Fed stops raising interest rates and stop quantitative tightening. And when would the Fed stop doing those? It'll be when the inflation rate as reflected in the CPI is less than 5%. Even though the stated goal for CPI according to the Fed is 2%, I believe if the CPI can drop to 5% in the next year, so the Fed would declare short-term victory and start to slow down its tightening process. The other scenario, which is not very desirable, is when unemployment rate goes up to more than 6%. In that case, the Fed will slow down its tightening process regardless of the inflation rate because they will be worried that in trying to fix inflation, they might have created another more serious problem, which is high unemployment and a deep recession. With high unemployment, the Fed will most likely slow down its tightening process until the employment picture is better. And then the Fed will tighten again. The end of the Ukraine war will certainly bring about a market rebound. This market rebound at the end of the war might last for two to three months. After that, if inflation continues to be high, the Fed will have to continue to tighten, which will bring down the market again. If the bear flag that we talked about a few minutes ago became a reality and that the market continues to drop, what can we do to protect our investments? I've been trading and tracking a few ETFs that have been going up when the market has been going down. They are SQQQ and SPXS, the triple inverse ETFs pegged to the NASDAQ 100 and S&P 500. TMV, the ETF pegged to the 20-year treasury rate. UCO, the crude oil ETF, which has been going up because of the oil shortage created by the Ukraine war. UGA, the gasoline ETF, also related to the Ukraine war. XLE, the energy ETF, also related to the Ukraine war. WEAT, the wheat ETF. In my previous weekly reviews, I mentioned UNG, the natural gas ETF because of the bifurcation of natural gas prices between Europe and the U.S. I don't think it's a good investment anymore. The copper-related ETFs are no longer good investments either because of the slow reopening of China and because of the prospect of a recession. This is the year-to-day chart showing the ETFs that I mentioned, with TMV being the best performer at 82% gain. As you can see, all these ETFs perform better than SQQQ on a year-to-day basis. In the last month, because of the drop in commodity prices, the picture has changed. What remains better than the broad market are only SPXS and SQQQ and TMV. If you like what you've seen so far, I'd like to encourage you to click the like, subscribe, and notification button. As usual, I'll very much welcome your comments, questions, and suggestions. Let's look at the individual ETFs. First, let's look at SPY, the ETF picked to the movement of S&P 500. In the following charts, I'm also showing the Bollinger Bands, the RSI indicator, the DMI indicator, and the MA-CD indicator. Superimposed on each chart are the 50, 100, and 200 exponential moving averages represented by the dashed lines of different colors. For SPY and all the other charts, I'm showing three panels. On the left one is hourly chart, the middle one is a daily chart, and the right panel is a weekly chart. And under each chart, I'm showing the volume, the RSI indicator, the DMI indicator, as well as the MA-CD indicator here. As you can see, for RSI, we have this trend line defining the upper limit of the price movements in the last few months, which is trending down. And then we have this new trend line that's been sloping up in the last two, three weeks to show the rebound. We see the triangular pattern or the pendant pattern. And at this point, the price is just about emerging from above this upper boundary line, which is a bit of a bullish trend for the short term. Now the market might continue to go up and continue to be bullish, or it will get below this lower trend line, which then will confirm the formation of the bear flag, and that'll be a bearish sign. I'll be waiting for the earnings announcements in the next few weeks, which will definitely determine the direction of the market. I've been trading TQQQ, SQQQ based on the SPY chart as well as the QQQ chart. If you look at support levels, I see the next support level at 381, which is defined by the yellow trend line here, and also it's the middle of the Bollinger Band, and the next level down will be 371, and then 362, the recent bottom. For resistance line, I see the next resistance at 391, which is defined by the upper yellow trend line here, and then above that 396, which is the 50-day exponential moving average, and then the next level up will be 401 for gap closure, and then 418, which was the recent peak. Let's look at QQQ, the ETF take to the NASDAQ 100. For QQQ, it's very similar to the SPY. It's been trending down since the beginning of the year, and in the last few months, we see the price movement being confined by this downward sloping trend line, but as of the last two, three weeks, we see a rebound, which is defined by another trend line that's sloping up. In the last couple of days, the price has popped above this upper trend line, which is a bullish sign for the short term. Again, we might see the price continue to go up, in that case, if it can exceed the recent peaks and make higher highs, definitely it'll be very bullish. On the other hand, if it goes below this lower trend line, that'll confirm the formation of the bare flag. In that case, the market will most likely be making lower lows. For support, I see the next level support at 285, which is the middle of the Bollinger Band, and then the next level down will be at 280, which is defined by this lower trend line here, and then the next level down will be 276, and then the next level down will be 269, which was the recent bottom. For resistance levels, I see the next level of resistance at 297, which is right about where we are now, limited by the 50-day exponential moving average, the blue dashed line here, and then the next level up will be 280, and then the next level up will be 300, the upper Bollinger Band, and then the next level up will be 314, the historical level, and then the next level up will be 330, the recent peak. Let's look at TMV. For TMV, we can see that it's been dropping ever since around June 13th, although there has been a rebound in the last three trading days. Recently, I bought more TMV on July 6th, and I've seen 8.5% paper gain already. I believe TMV will go higher for the long term, as the Fed continues to raise interest rate to fight the inflation. If you look at the chart, it was rebounding from the lower Bollinger Band. Now it's hitting the middle of the Bollinger Band, and if it can overcome the middle of the Bollinger Band and get above that, that'll be a very bullish sign. The support, I see the next level support at 103, which is the 50-day exponential moving average, and then the next level down will be 95, the lower Bollinger Band, and then the next level down will be 92, the recent bottom. For resistance, I see the next level of resistance at 112, which is here, and then the next level up 119, upper Bollinger Band, and then 122, the recent peak. Let's look at UCO, the oil ETF. For UCO, as we mentioned previously, it's been down a lot since the beginning of June, and then it finally rebounded at the 200-day exponential moving average, the red dashed line. I believe UCO, the oil ETF, was oversold at this point because it was really very close to the pre-Ukraine war level at the recent bottom. That's when I bought UCO shares, and I'm seeing 3% paper gain already. Hopefully it'll continue to go up. The main reason is because the EU oil shortage is still very real, and I don't think the OPEC will be able to increase production much in the short term to offset the shortfall of the Russian oil. For support level, I see the next level of support at 32, and then the next level down will be 30, which is the 50-week exponential moving average indicated by this blue dashed line here, and then the next level of support will be at 21, which is the 100-week exponential moving average, and coincidentally that's also the January level before the Ukraine war. For resistance level, I see the next level of resistance at 41.5, which is the 50-day exponential moving average, and also for gap closure here, and then the next level of resistance will be at 45, the middle of the building demand, and then the next level up will be 48, the recent peak. Let's look at UGA, the gasoline ETF. For UGA, we can see that the pattern is very similar to UCO, it's been going down since the beginning of June, and only started to rebound in the last couple of days. The price for retail gasoline in the US, however, has not been coming down like UGA, which has already been down for 13% already from the peak. We don't see nearly the same amount of reduction at a gas pumps, and that's why the gasoline price with the input upward pressure on the inflation rate in the next two, three months. But if we just look at the UGA, we can see the next level of support at 62, which is the lower bowling demand, and then at 61, and then at 56, which is the previous bottom established in April. For resistance, I see the next level of resistance at 68.5, and then 70.5, which is the middle of the bowling demand, and then 74, and then at 80, the recent peak. Let's look at XLE, the energy ETF. For XLE, it's also very similar to UCO. When it hit this recent bottom here three days ago, it was as low as a level before the Ukraine war. That shows me that it was oversold. I will probably buy XLE when I see bullish signs from the DMI indicator on a daily basis, on an hourly basis, and also for the two-day timeframe. For support levels, I see the next level of support at 66.5, which is the bottom of the bowling demand. For the next level support, I see the next level support at 66, which was the recent intraday bottom, and then the next level down would be 65.5, which is the February 24th level, and then the next level down would be 59.5, which is the January level. For resistance, I see the next level of resistance at 74, and then 76, which is the middle of the bowling demand, and then at 82 here for gap closure, and then at 86, and then 93, which is the all-time high. Let's look at WEET, the WEET ETF. It's been going down since the middle of May, and then the top of the possible humanitarian corridor is causing the price to go down even further. And then finally, at bottom, three days ago, at the level found in the beginning of March, I believe WEET was oversold. After the little rebound, I think there's still probably a buying opportunity because the world shortage of WEET is still very much there, and I don't see the humanitarian corridor will be opening anytime soon because of the heavy concentration of mines in the Black Sea, which are not gonna be removed anytime soon. I'll be waiting for the bullet signs from the DMI indicator on an hourly basis and on a daily basis before I move into my WEET shares. For support, I see the next level of support at eight, which was the recent bottom, and then the next level support will be at seven, which is the January level, and then the next level down will be at 6.6, which was established in September 2021. For resistance, I see the next level of resistance at 9.6, and then 9.8, which is the middle of the bongeman, and then 10.6 for gap kosher, and then 12.3, the recent peak. I'd like to remind you that I'm not a financial advisor. I share my stock trading strategies and analyses for educational and entertainment purposes only. If you wanna buy or sell stocks, you should make your own decisions, and you should definitely consult with your financial advisors before you do so. This wraps up my video for now. I will chat with you again in the next few days. In the meanwhile, I'd like to wish you the very best of luck with your financial investments.