Daily Plan 7.25.23

Jul 25, 2023

∙ Paid

20 Sunrise Quotes - Sayings About the Start of a New Day

Good morning readers!

Flow State had a phenomenal start to this week, accurately predicting and capturing many of the significant market moves we witnessed yesterday. Oil commenced the session at a long level, rallying impressively with an increase of over 2 handles! It was a true monster session, surpassing even my own expectations. If you haven't already noticed, by next week, these price surges will undoubtedly be evident at the gas stations. As soon as the recent batch of oil is sold, the new prices will be posted, leaving no doubt about the impact on consumer costs.

Let's take a moment to acknowledge the current situation in America, with the escalating oil prices and their ramifications on the economy. As these challenges unfold, it becomes crucial to stay informed and prepared for any further developments in the energy sector. The fluctuations in oil prices have far-reaching effects on various industries and households alike.

Here in Florida, prices have spiked by 50 cents in under a month, locally, and they are showing signs of continuing to rise. The concerning aspect is that there is no clear catalyst responsible for pushing prices higher. It is highly probable that these elevated prices are here to stay, which puts even more strain on consumers. As transportation costs increase, this additional burden will inevitably be reflected in the prices of goods sold in stores. It's worth noting that Diesel, which has the most impact on transportation costs, has seen the least fluctuation in price.

Despite the data releases not holding much significance for me personally, I continue to observe them diligently. Interestingly, ever since I mentioned that the data is improving, we have consistently moved in a positive direction. But, it's essential to question whether this is truly the case.

One crucial factor in the decline of inflation is the Year-on-Year (YoY) change in Consumer Price Index (CPI). If inflation spikes, for example, 100% in a year, and then remains unchanged for the following 12 months, the YoY inflation rate drops to zero. This is why we use the YoY metric, as opposed to the full inflation number, as it can sometimes manipulate public perceptions of price fluctuations. Despite the absurd prices we see on store shelves, many tend to forget that the Federal Reserve's target for CPI is 2% – meaning prices are expected to increase by at least 2% annually. While policy can influence prices, the underlying reality is that our country relies heavily on debt, and this is unlikely to change anytime soon.

Shifting our focus to the Earnings horizon, numerous prominent companies are set to report after the close today. Many companies that have already reported this morning have exceeded expectations and are experiencing upward gaps in their stock prices. In the tech sector, I anticipate further upward continuation driven by strong earnings reports. However, it's crucial for traders engaging in Earnings Reports (ER) trading to use small position sizes. I would advise allocating no more than 5% of capital to a single ER trade. To reduce risk even further, traders can stick with trading common stocks rather than options.

Today, I will rely on long levels for trading earnings, and as long as we hold above those levels into the close, my bias remains bullish. Ideally, I hope to see a rally into the close, allowing me to lock in some of my positions before the ER reports are posted after hours.

Key ER: MSFT 0.00%↑ GOOGL 0.00%↑ V 0.00%↑ TXN 0.00%↑