Preview of the week starting 02 May 2022

Holidays
Hong Kong celebrates Labour Day on 2nd May 2022
Singapore celebrates Labour Day and Hari Raya on 2nd & 3rd May 2022

China is closed for Labour Day from 2nd to 4th May 2022


News summary

Nasdaq has its worst month since 2008.  Tesla continues to drop following Elon's stock sales to finance his Twitter purchase.

With much of the market growth resting on the Big Tech, Fed's interest rate hike hopes to ease inflation but will it be too little, too late?

Economic Calendar

Economic Calendar for the week starting 2nd May 2022

On 4th May 2022, the FOMC will announce their Fed Interest Rate decision.  There are also updates on initial jobless claims, nonfarm payrolls, unemployment rate (Apr).  In midweek, we will also know the consumption of crude oil inventories - that is a good indicator of the coming consumption of the market.

Earnings Calendar

Earnings for the week starting 02 May 2022

This week has several notable important announcements about the market's recovery from the previous quarter.  

The hospitality & travel sector's recovery will receive a sneak preview from the earnings of players like Airbnb, Expedia, Lyft, Avis, Uber, Six Flags, Royal Caribbean Group, Hilton & Marriott.  These are good representations of "recovery" stocks.

Some of the top capital allocators of Berkshire and Blackrock will also share their earnings on Monday. Some of the pharma and health players like CVS and Pfizer will also be sharing their earnings. 

This will be another important week of the earnings season.  Should the results be less than optimistic, we can expect the macro market to slide further.

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.  What I am doing now is the technical setup that helps me to take a position for trade or when a great company reaches a range of "discounted" prices.  This is also known as the margin of safety that value investors add.

Personally, I prefer investing over trading that it essentially has a much longer-term time horizon - over 10 years into perpetuity.  Trading requires much more effort & closer monitoring.  The timezone difference does not permit me to trade actively when I live 12 hours away from the US market.  For the coming examples, I am exploring trading and not investing.

Coming to trades, we need to consider market sentiment as that can drive the prices in the short term.  For a start, let us look at S&P 500 for a start which recorded a 52 week high of 4,818.

Market overview (S&P500)

S&P500 chart as per 30Apr2022

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.

The stochastic indicator is hugging the bottom, a typically oversold region.  This "hugging" along the bottom can be "prolonged" with constant decline.  Now, let us look at the MACD indicator that indicates a downtrend.  From my 3 EMA lines (exponential moving average of 8, 13 & 21), the lines appear to be on a downward trend but more importantly, the lines are "not converging".  This can imply that there is some strength in the current (downward) trend and this should take a while.  We see an important support level around 4100 and this can be a crucial support.

Thus, the decline of a stock price does not always represent the "loss of value".  The value and stock price are seldom in agreement and it is at these instances where we can "take advantage".