Preview of the week 09May2022

Preview of the week starting 09May2022

Holidays

Hong Kong celebrates National Day on 2nd May 2022

News summary (from last week)

China's car sales will be down. it is partly due to COVID. let us watch as this will also spiral to insurance, financials and so forth.

Following the 1000 points drop in $DJIA, record trade deficit, stubborn inflation, rising interest rates, Ukraine war, energy &#SupplyChain challenges, are we looking at US entering a recession after the decline in Q1 of 2022?

One of the biggest single day decline in the market. BTC slides below $37k. #Bond intensifies the slides and Elon Musk secures funding for $TWTR. Market is unsettled because the highest rate hike of last few decades.

initial #jobless claims turned out to be worse than expected 200k vs 182k
US QoQ unit labor cost is up 11.6% vs 9.9% expected. Non-farm #productivity QoQ has dropped 7.5% vs 5.4%.
cost increased, lesser productivity & increased jobless claims should be bearish for US GDP.

US biggest Trade deficits of recent times

 

 

US trade deficit hit record of over $109 billion after hovering $40++ billion for months.

China continues their strategy on Covid. The US Takes First Steps Toward Four-Year China Tariffs Review. Hopefully, there will not be another trade war.  China rounds up people involved in the building collapse.

Economic Calendar

Economic Calendar for week starting 09May2022

For the coming week, we have few important announcements.  The Core CPI (Mom) (Apr 2022) data will be reflecting the inflation and the effectiveness of the recent Fed rate hike.  With the figures still showing fuel price increases in US, the inflationary pressures look to continue.  The Fed will need to take stock of this and the "Initial Jobless Claims" on 12 May 2022

 

The Fed will manage the inflation and unemployment through interest rate hikes.  Though Powell has mentioned that 75 basis points jump is unlikely but there are more lobby for a more aggressive stand for fear of a recession.  The CPI and unemployment figure will be key to shape the next interest rate hike.
 

Personally, the inflation is likely to go up and we should not be surprised if there are more "jobless claims".  Both are factors that could be bearish for the overall market as these will drive more aggressive Fed measures in both rate hikes and the sale of the assets they purchased since Covid started.

Earnings Calendar

Earnings for week starting 9 May 2022

There are few earnings of great interest for in this coming week.

Palantir will be sharing its earnings following weeks of price decline.  This will be important as the market seeks assurance of its growth and profitability.  After moving into non-governmental sectors, Palantir is expected to improve data analytics, big data management to allow better management, planning, review and decision making.  Could Palantir bottom from henceforth or will the drop continue?  The earnings will be key.

Tyson is the other company of interest.  The company is the world's second-largest processor and marketer of chicken, beef, and pork after JBS S.A.. It annually exports the largest percentage of beef out of the United States.  In lieu of the weather & agricultural challenges, the earnings will be important to shed a light on the food outlook with sources raising concerns about food supplies.

AMC is the darling of the Meme stock and its earnings will closely watched as "main street" continues to take on "wall street".

SOFI is an American online personal finance company. Based in San Francisco, SoFi provides financial products including student and auto loan refinancing, mortgages, personal loans, credit card, investing, and banking through both mobile app and desktop interfaces.  Started with backing of Chamath, this is touted to be one of "disruptions" to financial sector with their mobile and web based approach.  

Roblox is seen as a key player in gaming and the future metaverse.  Have things started to cool down towards the Metaverse?  Maybe, its earnings and outlook can provide important insights as we move towards the metaverse.

 

Occidental came to fame following the investments by Berkshire.  It is likely that they will continue to enjoy the benefits of price increase of oil.

 

On Wednesday, there are 3 companies of interest for me personally: Disney, Rivian and Coupang.  Disney is noted to be one of the major recovery stocks as we move into an endemic phase with Covid.  Rivian is touted to be one of the future EV players.  However, the price has fallen since the initial days.  Its performance will be key to where the drop will continue or the stock has bottomed up.  Coupang is one of the biggest e-commerce players in South Korea that drew investors like Bill Gates. 

 

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 09 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 continue its sideways or downtrend.  The Stochastic seems to have topped and a further dip is possible.  The MACD indicator shows that the decline looks to continue.

With the Big Tech driving much of the market movements, it is no surprise that the recent less than favorable performance/outlook of them has caused the market to fall.  Though the market is moving sideways, an unfavorable CPI and unemployment can easily remove the support.  Let us pay our attention to stocks like Disney for some indicators of market recovery.  Unfortunately, we could be part of the recession and thus, it is wise to be prudent.  Take short trades. If this is part of the recession, the great companies will be available at good discounts soon.  Let us consider saving up "Cash for the Crash".