Preview for week starting 16 May 2022

Preview of the week starting 16May2022

Holidays

None for the US, China and Hong Kong.  

Singapore is closed for the Vesak Day holiday on 16 May 2022.

News Summary (from last week)

$200B crypto wiped out in 24 hours

The Fed needs to prioritize timely and adequate measures to navigate away from inflation and recession. Without this, this could pave the way for China to replace the USA as the leading economy.

Traders’ flight from risky investments has halved the price of bitcoin and other cryptocurrencies, wiping out more than $1 trillion worth of digital money since November.

$200 billion was wiped off from Crypto Market in 24 hours... Cryptic.

The US crossed the "unwanted" milestone of over 1 million Covid related deaths as cases rise in different states.

Gas prices in USA - Statista

The price of fuel in the U.S. is climbing as markets remain in turmoil following Russia’s military operation in Ukraine. Additionally, the Biden administration’s embargo on Russian oil may be another factor causing even more pain at the pump.  This will lead to lead inflationary pressures for the US in the coming weeks.

Economic Calendar

Economic Calendar for week starting 16May2022

For the coming week, we start with China's YoY Industrial production figures. With a country under lockdown, we can expect the figures to be less than favourable.  However, China is widely considered to be the world's factory. Thus, this will no doubt cast some shadows on the global economy as we learn to live with Covid.

Following this, the US will report Core Retail Sales (Apr) and Fed Reserve Chair Mr Powell will speak.  The Crude oil inventories will paint a "forecast" of the coming consumption.  On Thursday, there will be an update on initial Jobless claims.  This will serve as an important reference for Fed as they use interest rates to manage the economy and unemployment.

China will announce their Loan Prime Rate to round up the week as they seek to manage its economy.

Earnings Calendar

Earnings for the week of 16May2022

There are a few earnings of great interest this coming week:

• Walmart has seen its stock price fall from a recent high of $160.77 to $146.14 on 13May2022.  This is one of the leading hypermarkets with a strong following and has expanded into China.  This is a good "defensive" stock to own in our portfolio
• Sea's stock has fallen from a high of $372.70 to a recent low of $54.06.  Thus, the coming earnings are important.  With the current macro climate, has Sea found its bottom?
• JD.com is one of the notable competitors to Alibaba in the China e-commerce market and it is a good indication of "consumer health" in China.
• ZIM is one of the shipping lines whose earnings and outlook will cast an important forecast of the supply chain shipping.
• CISCO is one of the top blue-chip companies with a strong market presence in IT and networking.  Is the market returning to such stocks in lieu of the rising interest rates?
• Applied Materials' earnings and outlook are good indicators of industrial health.  Is this one of the "value" stocks that the investors will turn to in lieu of the coming inflation or is industrial hitting a downtrend?
• John Deere represents the consumption of agricultural and industrial hardware.  With the weather challenges and the rising energy costs, are we in the midst of growing food concerns?  Its earnings and outlook can help to give us a good reference.
• NU became great interest with Berkshire investments into this company is seeks to disrupt the traditional banking services. Is this on track to be a force in Brazil and Central America.

Walmart

Walmart Inc. is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores in the United States, headquartered in Bentonville, Arkansas. 

Sea Limited

Sea Limited is a tech conglomerate headquartered in Singapore. Established in 2009 by Forrest Li, Sea was initially founded as Garena, a game development and publishing company known for its Free Fire title.

JD.com

JD.com, Inc., also known as Jingdong and formerly called 360buy, is a Chinese e-commerce company headquartered in Beijing. It is one of the two massive B2C online retailers in China by transaction volume and revenue, a member of the Fortune Global 500 and a major competitor to Alibaba-run Tmall.

ZIM

ZIM Integrated Shipping Services Ltd is one of the leading carriers in the global container shipping industry.

CISCO

Cisco is the worldwide leader in IT and networking. We help companies of all sizes transform how people connect, communicate, and collaborate.

Applied materials

Applied Industrial Technologies, Inc. is a public, global company based in the U.S. and focused on the distribution of bearings, power transmission products, engineered fluid power components and systems, specialty flow control solutions, and other industrial supplies.

John Deere

John Deere is the brand name of Deere & Company, an American corporation that manufactures agricultural machinery, heavy equipment, forestry machinery, diesel engines, drivetrains used in heavy equipment, and lawn care equipment.

NU

Nu is one of the world’s largest digital banking platforms, serving almost 54 million customers across Brazil, Mexico and Colombia. As one of the leading technology companies in the world, Nu uses proprietary technologies and innovative business practices to create new financial solutions and experiences for individuals and SMEs that are simple, intuitive, convenient, low-cost, empowering and human. Guided by a mission to fight complexity and empower people, Nu is focused on connecting profit and purpose to create value for all stakeholders and have a positive impact on the communities it serves.

 

Market overview:

Before I start, let us not forget that we will need to qualify the business first through reviews of its fundamentals over a good period of time.  Its recovery from the ongoing pandemic can give us assurance on the quality of the businesses and the durable competitive advantages that it owns. 

S&P 500 1D chart as of 14 May 2022

In mid-March 2022, we identified a death cross (intersection of the Moving Average 50 & 200 lines where the MA 50 cuts MA 200 from above, a usually bearish indicator) using the 1D chart.

From the technical indicators, the 1D chart of S&P 500 looks to be hitting the bottom soon. The Stochastic seems to have bottomed up and a reversal seems to be in place.  The MACD indicator shows that the decline has yet to bottom up and there could be more room to go down.  Till the reversal in MACD is completed, I prefer prudence and assume the decline could continue despite the reprieve on Friday (13 May 2022).

1D chart of NASDAQ as of 14May2022

In mid-March 2022, we identified a death cross (intersection of the Moving Average 50 & 200 lines where the MA 50 cuts MA 200 from above, a usually bearish indicator) using the 1D chart.

From the technical indicators, the 1D chart of NASDAQ looks to be hitting bottom soon. The Stochastic seems to have bottomed up and a reversal may be in place.  The MACD indicator shows that the decline has yet to bottom up and there could be more room to go down.  Till the reversal in MACD is completed, I recommend the same prudence towards S&P500 to assume the decline could continue despite the reprieve on Friday (13 May 2022).