Good Friday evening to all of you here on r/stocks! I hope everyone on this sub made out pretty nicely in the market this past week, and are ready for the new trading week ahead. đ
Here is everything you need to know to get you ready for the trading week beginning June 6th, 2022.
Investors set their sights on upcoming inflation report as the bear market rally falters – (Source)
The stock market may try to regain its footing in the next few sessions, even as a fresh inflation report looms large at the end of the week.
Stocks struggled to move forward in the past week. With Fridayâs sell-off, the major indexes closed out the four-day period with losses. That was disappointing to investors looking for a similar upside to the week before Memorial Day during which the S&P 500 gained about 6.5%.
Liz Ann Sonders, Charles Schwab chief investment strategist, said the marketâs late May surge was likely the setup for more selling.
âThe type of rally like we saw last week and some of what it contained looks a little more typical of bear market rallies,â she said. âI still think youâre likely to get countertrend pops in some of the more speculative areas of the market. … But I think very decidedly the low quality trade is in the rearview mirror. I think to do well in this environment you have to be value minded. Not value indexes, but valuation minded.â
While the S&P 500 briefly dipped into a bear market on May 20, it has not closed with a 20% decline from its high. However, Sonders said the current situation is the equivalent of a bear market, based on the sharp declines in individual stocks.
Sonders does not yet see signs that would indicate stocks could turn higher, though she says there is scope for more sharp rallies.
âI think the sentiment environment is not universally bearish enough yet,â she said. She said sentiment and behavioral measures need to show extremes.
Inflation peak?
In the coming week, the economic calendar is relatively light. Consumer price index and consumer sentiment â both released on Friday â are the most important reports.
Mayâs CPI is expected to be just slightly cooler than April, and some economists are expecting it could confirm that inflation has peaked. Art Hogan, chief market strategist at National Securities, said year-over-year headline inflation is expected at 8.2%, just below Aprilâs 8.3% pace.
âIf CPI comes in at or near consensus, I think investors could feel better,â he said. Hogan said the marketâs late May breakout helped sentiment, even though stocks backtracked in the past week. âInvestors are in a more constructive place, and that can carry through if CPI is anywhere near consensus or better,â he said.
Headline inflation, including food and energy, was running at 8.5% in March, and the hope is that CPI will ease from here to half that level by year-end, Hogan said.
Diane Swonk, chief economist at Grant Thornton, said CPI will be affected by the jump in gasoline prices in May. Used car prices and food costs could also be factors, she added.
âEveryoneâs hoping for this peak inflation, but it may be more elusive and less of a peak than people would like it to be,â Swonk said.
Cleveland Fed President Loretta Mester said Friday that she does not see enough evidence inflation has peaked, and she is on board with multiple half point rate hikes to combat it. Fed officials are in a quiet period in the coming week, ahead of their meeting June 14.
Schwabâs Sonders said the market may be concerned in the short term about whether inflation has peaked.
âBut itâs not just whether weâre at the peak. Itâs the speed at which we come down off that peak and ultimately to what level,â she said. âIs the [Federal Reserve] on a mission to get inflation down to the 2% target? Or are they going to feel comfortable with a 3% level. … To me, itâs where does the plane land? Is the runway at a higher elevation than it was pre-pandemic?â
With the CPI Friday, traders say there is not much for the market to latch onto ahead of that report.
âYou have a whole week of price action, and as of right now, the price action seems âglass half empty,ââ said Scott Redler, partner with T3live.com.
Redler, who follows short-term technicals, said he is watching to see if the S&P 500 holds support at 4,073 and 4,000 below that. If not, it could drop back to its recent low of 3,810.
The S&P 500 closed Friday at 4,108, down 1.6% on the day and 1.2% for the week.
âTraders are losing faith in trying to put more risk on to catch more of an oversold bounce, or a bear market bounce. Theyâd almost not want to be involved because thereâs too many potholes,â said Scott Redler, partner with T3Live.com.
Redler said Tesla CEO Elon Musk soured sentiment, after reports that Musk told Tesla executives he had a âsuper bad feelingâ about the economy and needs to cut 10% of Teslaâs workforce. The comments followed closely on a remark from JPMorgan CEO Jamie Dimon that he is preparing for an economic hurricane.
âYou canât have the poster child of risk saying theyâre going to reduce their headcount by 10%. If theyâre supposed to have a multiple for growth, and they reduce the headcount, then something has to give with valuation,â Redler said. Tesla shares fell 9% Friday.
Earnings warnings
While there are few earnings reports in the coming week, Hogan said companies could follow Microsoftâs lead and issue warnings. Microsoft lowered its guidance on revenues, citing an unfavorable currency impact. Salesforce also lowered revenue guidance due to currency.
âInvestors are at least looking through that. At least, itâs not a demand issue. Theyâre focusing on the higher dollar and what it might do to multinationals,â he said.
Campbell Soup and Brown-Forman, the maker of Jack Danielâs, report quarterly results Wednesday. Signet Jewelers and DocuSign post earnings Thursday.
Sonders said weakening earnings and profit margin outlooks could trigger another leg down for the market.
âWe had the valuation re-rating by virtue of the weakness in the market, but we havenât yet seen the weakness in forward expectations in earnings,â she said.
Sonders said the market rallies need to show better breadth, meaning a high percentage of stocks climbing together, before it begins to turn.
Another sign she is watching is the put/call ratio, which would need to be a higher level to reflect more pessimism. This ratio is used as a contrarian indicator. It is a measure of the number of put to call options. Put options bet that stock prices decline and a high number would suggest very negative sentiment in the market.
This past week saw the following moves in the S&P:
(CLICK HERE FOR THE FULL S&P TREE MAP FOR THE PAST WEEK!)
S&P Sectors for this past week:
(CLICK HERE FOR THE S&P SECTORS FOR THE PAST WEEK!)
Major Indices for this past week:
(CLICK HERE FOR THE MAJOR INDICES FOR THE PAST WEEK!)
Major Futures Markets as of Friday's close:
(CLICK HERE FOR THE MAJOR FUTURES INDICES AS OF FRIDAY!)
Economic Calendar for the Week Ahead:
(CLICK HERE FOR THE FULL ECONOMIC CALENDAR FOR THE WEEK AHEAD!)
Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:
(CLICK HERE FOR THE CHART!)
S&P Sectors for the Past Week:
(CLICK HERE FOR THE CHART!)
Major Indices Pullback/Correction Levels as of Friday's close:
(CLICK HERE FOR THE CHART!)
Major Indices Rally Levels as of Friday's close:
(CLICK HERE FOR THE CHART!)
Most Anticipated Earnings Releases for this week:
([CLICK HERE FOR THE CHART!]())
(T.B.A. THIS WEEKEND.)
Here are the upcoming IPO's for this week:
(CLICK HERE FOR THE CHART!)
Friday's Stock Analyst Upgrades & Downgrades:
(CLICK HERE FOR THE CHART LINK #1!)
(CLICK HERE FOR THE CHART LINK #2!)
Will There Be A June Swoon? Maybe, But Maybe Not
After a late month rally, we can say goodbye to the month of May, which now opens the door to June. Hereâs the bad news, June is historically a weak month and it is actually the worst month of the year during a midterm year, down 1.8% on average.
(CLICK HERE FOR THE CHART!)
As shown in the LPL Chart of the Day, the good news though is the past 10 years, it has been a solid month, up 1.4% on average to rank as the fourth best month. But the past 20 years it has been weak (only September has been worse) and since 1950 only August, February, and September were worse.
(CLICK HERE FOR THE CHART!)
âJune has something for everyone, as it is no doubt a very weak month historically, but the past decade it has been strong,â explained LPL Financial Chief Market Strategist Ryan Detrick. âStill, after the big bounce in late May, we wouldnât be surprised at all if this recent strength continued into a potential summer rally.â
Here are three reasons for optimism. First, after the huge gains last week, the 7 week losing streak for the S&P 500 Index is finally over. There had been only three prior 7 week losing streaks and twice (1970 and 1980) saw the S&P 500 up more than 33% a year later. On the other side though, the returns in 2001 werenât very good as 9/11 and the recession hurt returns.
(CLICK HERE FOR THE CHART!)
Second, the S&P 500 corrected 18.7% before the rally last week, which could be a good thing as looking at previous corrections between 10-20% showed gains of nearly 25% on average a year later and nearly 40% two years later.
(CLICK HERE FOR THE CHART!)
Lastly, huge gains like the 6.6% gain for the S&P 500 last week are usually a great sign for the bulls. Here are all the times it has gained more than 6% in a week (since 1950) and the future returns are very strong. Up 12.5% on average six months later and nearly 22% a year later on average is something that could have most bulls smiling after the rough start to 2022.
(CLICK HERE FOR THE CHART!)
2022 has been a rough year for most investors, but we do see better times ahead. Last weekâs bottom and rally could be the start of brighter skies ahead for investors.
Biggest Energy Names See Record Moves
The Energy sector has been on an absolute tear over the pandemic period with a 273% gain since the pandemic lows in March 2020. During the overall market downturn of the past several months, it is the only cyclical sector to have managed to retain its uptrend as it has rallied over 60% year to date compared to a 13% decline for the S&P 500. Taking a look through our Chart Scanner tool, there is not too much variation in the charts of large-cap Energy stocks with strong uptrends across the board and many new multi-year highs as a result. Taking a look at two of the largest members who account for nearly three-quarters of a trillion dollars in market cap, Exxon Mobil (XOM) and Chevron (CVX) are good examples. CVX has reached new all-time highs following its meteoric rise over the past couple of years while XOM has recovered most of the past decade's declines. Additionally, we would note that XOM has historically tended to be much larger than CVX, but the pandemic and the subsequent rally over the past couple of years have brought the two stocks' market caps much more closely in line with one another.
(CLICK HERE FOR THE CHART!)
Both long-standing staples of the Energy sector, XOM and CVX are also notable in that they are both dividend aristocrats (a group of stocks that have now raised their dividend annually for 25 or more consecutive years). That means on top of massive capital gains, investors have also been rewarded handsomely with dividends. Even after these massive rallies, CVX still yields 3.25% and XOM pays an even better 3.67%. Taking this into account, the two-year runs including dividends that these stocks have been on are unlike anything observed since at least the early 1980s. Given the record two-year run we've seen in the Energy space, it's tough to get super bullish on this area of the market now. Remember, we saw an explosive move higher like this for other areas of the market earlier on in the post-pandemic era (think meme stocks, SPACs, high growth, etc.), but once the tide turned in late 2021, the downside reversal was just as extreme. Energy stocks have completely different fundamental risk profiles than aggressively valued Tech stocks, and ultimately their performance is mostly tied to the price of oil. That being said, investor psychology and herd mentality work the same regardless of the asset class.
(CLICK HERE FOR THE CHART!)
Sentiment Swings Back to Optimism
Sentiment has taken a big swing higher across surveys this week as the S&P 500 has experienced some upside mean reversion. The weekly AAII sentiment survey has seen bullish sentiment rebound from a sub-20% reading all the way back up to 32%. Relative to the historical average of 37.84%, that reading continues to show a depressed level of optimism for individual investors, but it is the strongest reading since the week of March 24th. As for the 12.2 percentage point jump in bullish sentiment week over week, it was the largest one week gain since the week of October 14th of last year when it rose 12.4 percentage points.
(CLICK HERE FOR THE CHART!)
As bullish sentiment surged, there was a massive 16.4 percentage point drop in bearish sentiment. That was the largest one week decline in the reading on pessimism since July 15, 2010 when it fell 19.27 percentage points. Now at 37.1%, bearish sentiment is at the lowest level since the end of March.
(CLICK HERE FOR THE CHART!)
Such a large decline in bearish sentiment in only one week has pretty much been unheard of in the post Financial Crisis years. Again, July 2010 was the last time bears fell by at least 15 percentage points and before that there are only about two dozen other occurrences without another instance in the previous three months. While it was a big decline, bearish sentiment remains fairly elevated at 37.1%, but that is inline with most other occurrences since the mid 2000s whereas bearish sentiment was generally lower from the occurrences before 2005.
As for how the S&P 500 has tended to do following these massive bearish sentiment shifts, the S&P 500 has generally tended to move higher with outperformance versus the norm on a median basis one week and one month out. Although again performance is consistently positive, the size of gains have tended to be below or more inline with the norm three, six, and twelve months out from these occurrences.
(CLICK HERE FOR THE CHART!)
After the large moves in bulls and bears this week, sentiment continues to favor pessimism but to a much smaller degree than recent weeks as the bull bear spread narrowed to -5.1 points.
(CLICK HERE FOR THE CHART!)
Was that the Low?
Stocks rallied hard last week, as the S&P 500 Index broke a seven week losing streak in resounding fashion; its 6.6% gain was the best since November 2020. That strong response from equities, following one of the worst starts to the year ever, has many investors questioning, âWas that the low?â While we are certainly open to that possibility, today we will take a look at why the technical picture suggests volatility is likely to remain elevated in the near term.
First, letâs take a look at the technical set-up of the S&P 500. While stocks have bounced decisively off important support near 3800, the index is now faced with multiple levels of technical resistance, including broken support from the February and March lows, and the 50-day moving average at 4270. Given stocks steady series of lower highs and lower lows throughout 2022, it is important for us to see evidence that this trend has turned and can hold a higher high.
(CLICK HERE FOR THE CHART!)
Second, we remain skeptical that this market has truly bottomed without the capitulatory flush usually found at major market lows, as we discussed in last monthâs Weekly Market Commentary. Nothing in markets has to happen, but whether it is put/call ratios, a stubbornly low VIX (a measure of implied market volatility based on options prices), or even just the fact that several of the nongrowth sectors arguably remain rangebound from 2021 and havenât corrected, it would be highly unusual for us to see such a major market low without genuine signs of investor panic and indiscriminate selling. Of the five major signs of panic that we track and are often found at major market bottoms, only one has triggered so far this year in contrast to a minimum of 3 that have been found at recent lows in March 2020, the fall of 2015, late 2011 and the Great Financial Crisis in 2008-2009.
Finally, while we are inching closer, we remain in the seasonally weak part of the year and a May low would still be on the early side of the average low in a midterm year. Looking at all the midterm years going back to 1950, only two have seen their yearly low before May 19, when the S&P 500 made its closing low two weeks ago. We would note though, that the depth of this correction is almost exactly in line with the average mid-term year pullback. And regardless of when we make that bottom, as the chart below shows, the gains a year after the low have been substantial with a more than 30% average return and only one occurrence falling short of a double digit gain.
(CLICK HERE FOR THE CHART!)
âWe are anything but market pessimists,â explained LPL Financial Technical Market Strategist Scott Brown. âIn fact, we believe there will be substantial opportunity in stocks on the other side of this volatility and likely in the second half of the year. However, outside of this recent rally, very little about this market has changed from a technical standpoint and that makes us wary of calling the all-clear. We believe a slight lean towards defensive sectors and away from the growth-oriented areas of this market still make senseâ.
LPL Researchâs Strategic and Tactical Asset Allocation Committee is most positive on healthcare and real estate and is becoming increasingly positive on energy. Within growth sectors, we are most negative on communication services and consumer discretionary and also believe the industrials sector is likely to underperform.
Revisiting The 50/50 Club
Amidst all of the craziness in growth/meme stocks in early 2021, we took a look at the Russell 3000 stocks that were both 50%+ off their 52 week highs and still 50%+ above their 52 week lows to show some of the most volatile names in the market last May. Today, we are revisiting that club to show some of the growth names that have gotten hammered since last May but have recovered substantially off of their lows recently. Much of this craziness is resembled through Cathie Wood's ARK Innovation Fund (ARKK), which is now about 20% above its lows on 5/11 but still 67% off its 52 week high.
(CLICK HERE FOR THE CHART!)
Currently, there are 33 Russell 3,000 stocks with a market cap of at least $1 billion that are 50%+ below their 52 week highs and 50%+ above their 52 week lows. These 33 stocks are outlined below, and every single one of them are still below their 200-day moving averages. However, only 12 are below their 50-DMAs. The average stock on this list is 67.3% off its 52 week highs (median: 65.4%) and 68.9% above its 52 week low (median: 60.6%).
There are a few notable names on this list, including the new-to-market EV manufacturer Rivian (RIVN), the famed meme stock GameStop (GME), the Metaverse Index component Unity Software (U), the digital platform engineering company EPAM Software (EPAM), and the EV charging station company ChargePoint (CHPT). CHPT is up 63% from its lows on May 11th. EPAM has already doubled since its lows in March. While it may not seem like much if you own the shares a lot higher, these names have recently seen massive bounces off of their lows.
(CLICK HERE FOR THE CHART!)
Lackluster June Recent 21-Year Seasonal Chart
June recorded average losses for DJIA & S&P 500 the last 21 years. NASDAQ and Russell 2K have fared better with modest average gains. Historically the month has opened respectably, advancing on the first and second trading days. Then stocks drifted sideways and lower into or near negative territory depending upon the index just ahead of mid-month. Here the market rallied to create a nice mid-month bulge that quickly evaporated and turned into losses. The brisk, post, mid-month drop is typically followed by a month end rally lead by technology and small caps.
(CLICK HERE FOR THE CHART!)
June Worst Month of Midterm Years
(CLICK HERE FOR THE CHART!)
Over the last 51 years June has shone brighter on NASDAQ stocks as a rule ranking fifth best with a 1.0% average gain, up 29 of 51 years. This contributes to NASDAQâs âBest Eight Monthsâ which ends in June. June ranks near the bottom on the Dow Jones Industrials just above September since 1950 with an average loss of 0.2%. S&P 500 performs similarly poorly, ranking ninth, but essentially flat (0.1% average gain). Small caps also tend to fare well in June. Russell 2000 has averaged 0.9% in the month since 1979.
In midterm years since 1950, June ranks no better than eleventh. June is the worst DJIA, S&P 500 and Russell 1000 month in midterm years. Average losses range from 1.5% by Russell 1000 to 1.8% from S&P 500. Of the five indexes, none has a winning track record in June. DJIA and S&P 500 have declined more than they have risen.
(CLICK HERE FOR THE CHART!)
STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending June 6th, 2022
([CLICK HERE FOR THE YOUTUBE VIDEO!]())
(VIDEO NOT YET POSTED.)
Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-
- (T.B.A. THIS WEEKEND.)
([CLICK HERE FOR NEXT WEEK'S MOST NOTABLE EARNINGS RELEASES!]())
(T.B.A. THIS WEEKEND.)
(CLICK HERE FOR NEXT WEEK'S HIGHEST VOLATILITY EARNINGS RELEASES!)
(CLICK HERE FOR MONDAY'S PRE-MARKET EARNINGS RELEASES!)
Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:
Monday 6.6.22 Before Market Open:
(CLICK HERE FOR MONDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)
Monday 6.6.22 After Market Close:
(CLICK HERE FOR MONDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
Tuesday 6.7.22 Before Market Open:
(CLICK HERE FOR TUESDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!
Tuesday 6.7.22 After Market Close:
(CLICK HERE FOR TUESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
Wednesday 6.8.22 Before Market Open:
(CLICK HERE FOR WEDNESDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES LINK!)
Wednesday 6.8.22 After Market Close:
(CLICK HERE FOR WEDNESDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
Thursday 6.9.22 Before Market Open:
(CLICK HERE FOR THURSDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!)
Thursday 6.9.22 After Market Close:
(CLICK HERE FOR THURSDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
Friday 6.10.22 Before Market Open:
([CLICK HERE FOR FRIDAY'S PRE-MARKET EARNINGS TIME & ESTIMATES!]())
(NONE.)
Friday 6.10.22 After Market Close:
([CLICK HERE FOR FRIDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())
(NONE.)
(T.B.A. THIS WEEKEND.)
(T.B.A. THIS WEEKEND.) (T.B.A. THIS WEEKEND.).
(CLICK HERE FOR THE CHART!)
DISCUSS!
What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead r/stocks. đ
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