Chapter 1: Understanding Portfolio Dynamics

In light of the recent market downturn, where 85% of investment portfolios experienced significant losses, I felt compelled to share how I managed to remain in the green while many others faced the temptation to pull their hair out.

My journey began when I stepped back to analyze my technical analysis (TA), which had accurately predicted the market peak on December 28th last year. I observed that SPY struggled to surpass the upper boundary of a broadening formation, indicating a downward trajectory ahead. However, I was uncertain about the extent of this decline. Like many traders, I initially anticipated that the dip would be temporary, expecting a swift return to all-time highs. This assumption seemed plausible until I noted the rapidity of the drop. While growth stocks like Ford and Macy's managed to stay afloat, companies such as NKE, TSLA, AFRM, and SQ faced significant declines, prompting me to seek answers.

In times when the economy requires stimulation—akin to a jolt to revive a patient—the U.S. government can issue bonds. These securities guarantee an annual return on investment (ROI). Typically, the Federal Reserve purchases these bonds using newly printed money, distributing them to banks, individuals, and corporations with the aim of encouraging spending and reinvestment, ultimately circulating funds back into the market. For a clearer understanding, I’ve included a visual representation of this process, highlighting how the Fed operates with the money supply.

This mechanism plays a pivotal role in the economic equilibrium cycle. Following a recession, the Fed typically lowers interest rates to stimulate growth, which often results in inflation. This inflationary trend eventually leads to rate hikes aimed at cooling the economy. Historically, the Fed waited about two years after tapering to cease bond purchases, but this time, they’ve opted for a more immediate approach, indicating they will sell off bonds within the year.

When the Fed reduces its bond holdings, it effectively tightens the money supply, reversing the previous process and reclaiming funds from the market. A lesser-known fact is that bond rates are influenced by these sales; as bonds are sold off, their prices drop, causing yields to rise, and vice versa. This was a significant revelation for me.

Upon examining the TNX (The 10-Year Treasury Note), I noticed a direct correlation between the spike in its price and the corresponding decline in the SPX, a relationship that was almost precisely measurable. This prompted me to strategically exit some positions. A review of the TNX’s quarterly chart indicated that if it surpassed its 21-day EMA and resistance at $17.65, a bullish crossover with the 8 and 21-day EMAs was likely. This suggested that the TNX could aim for a new target of $19.06. My technical analysis, combined with the plotted support and resistance levels on the 4-hour chart of SPX, confirmed my decision to short high-value tech stocks, including DOCU, SPY, AFRM, and my favorite, SQ.

You might be wondering, "When is it appropriate to buy? Is it time to invest again?" While I can't provide exact figures, a weakening TNX and a drop below its breakout level could signal that the market is stabilizing and buyers are returning. However, let me emphasize that I cannot predict when this will happen; it will occur in due time.

Moving forward, I, like you, will be equipped with the necessary tools and knowledge to navigate the market with confidence and ease.

Thank you for taking the time to read this article! If you found this information intriguing, you might be interested to explore more articles like this at The Financial Journal, a new platform dedicated to insights on side hustles, markets, and all things financial!

Chapter 2: Key Stock Insights

In this video titled "These 7 Stocks (Likely) Drive Your Entire Portfolio," the discussion focuses on how certain stocks can significantly impact your overall investment performance.

The second video, "How To Build Your Own Stock Portfolio Tracker Dashboard For FREE," provides a step-by-step guide on creating a personalized dashboard to manage your stock portfolio effectively.