Stock Bulls Remain Optimistic As Data Indicates a Slowdown in Manufacturing Inflation

Stock bulls remain extremely cautious but a bit more optimistic as data indicates a slowdown in manufacturing inflation. The Producer Price Index rose +11% year-over-year in April, higher than expected but a meaningful pullback from March’s +11.5%. Producer prices lead consumer prices, so the report is a good sign overall, though investors, as well as the Fed, will need to see a couple more months of declines before declaring that inflation is indeed cooling.


Economists also warn that goods inflation may be coming down because consumer demand is shifting more to services, meaning high prices could simply be moving from one part of the economy to another. The latest data shows services prices are rising at the fastest rate in three decades with airfare leading the way. Even if inflation has peaked, the question now is, how long will it remain elevated?

Federal Reserve Chair Jerome Powell cautioned yesterday that he can’t guarantee the central bank can deliver a so-called “soft landing” for the economy, pointing to the tight labor market and ongoing supply chain dislocations. Powell also stressed that other “huge events” are playing important roles right now, including Russia’s war in Ukraine, that are beyond the Fed’s control. Powell made the comments after being confirmed by the Senate for a second 4-year term.

The central bank’s target inflation rate is still a “flexible +2%” but several officials have indicated that the new normal might be more in the +2.5% to +3% range. One of the main gauges (but not the only one) the Fed uses to determine the rate of inflation is the Core PCE Prices Index, which for March was running at +5.2%. The April read is due out on May 27, which is a couple weeks ahead of the Fed’s next meeting on June 14-15.

Data to watch

Consumer data recently has been sending mixed signals that are hard to interpret. Sentiment has been mostly falling since the start of the year but consumer spending has not shown any signs of pullback.

Next week, investors get an update on how spending is holding up via April Retail Sales on Tuesday. A slew of fresh housing data next week will provide a deeper look at how substantially higher mortgage rates might be impacting the market. The NAHB Housing Market Index for May is out on Tuesday, followed by April Housing Starts on Wednesday, and April Existing Home Sales on Thursday.

Several key earnings are on the calendar next week as well, including Home Depot and Walmart on Tuesday; Cisco, Lowe’s, Target, and TJX Companies on Wednesday; Applied Materials, Palo Alto Networks, and Ross Stores on Thursday; and Deere & Co. on Friday.

Wall Street Week Ahead Earnings: Shopify, Baidu, Walmart, Deere and DraftKings in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 14

Monday (February 14)

AAP Advance Auto Parts $1.93
ALX Alexander’s $4.29
AMKR Amkor Technology $0.65
ANET Arista Networks $0.6
SRC Spirit Realty Capital $0.81
VNO Vornado Realty Trust $0.76
WEBR Weber $-0.02

Tuesday (February 15)

ABNB Airbnb $0.05
AKAM Akamai Technologies $1.14
DVN Devon Energy $1.24
MAR Marriott International $1.04
RPRX Royalty Pharma $0.79
VIAC ViacomCBS $0.37
WFG West Fraser Timber $3.51


Wednesday (February 16)


SHOPIFY: Canadian multinational e-commerce company is expected to report its fourth-quarter earnings of $0.62 per share, which represents a year-over-year decline of over 46% from $1.15 per share seen in the same period a year ago. But the e-commerce software company would post revenue growth of over 37% to $1.34 billion.

According to Barron’s report, Gary Robinson, investment manager at Baillie Gifford said that Shopify is miles ahead of its competitors in helping merchants all over the world sell their items. He added that the company’s revenue could rise sharply in the next five years.

BAIDU: The Chinese tech giant is expected to report its fourth-quarter earnings of $1.89 per share, which represents a year-over-year decline of nearly 40% from $3.08 per share seen in the same period a year ago.

However, Baidu Inc, a leader in the Chinese search industry in terms of user market share, would post revenue growth of about 9% to $5.04 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“We maintain a “Buy” rating for Baidu (BIDU) with a target price of RMB 165. Our target price is based on the forward P/E of 18.48x and forward P/S of 0.42x for FY22. Non-GAAP EPS of RMB 56.59 ($8.98) for FY22. This provides an upside potential of 15% over the CMP of RMB 143.80,” noted Shejal Ajmera is founder and head of research at CrispIdea.

“We decrease our estimate for revenue growth to 14.3% from 19% for FY21 due to China’s low GDP growth. We estimate revenue growth of 10% for FY22 and 12% for FY23. We estimate EPS of RMB 56.19 ($8.87) and RMB 56.59 ($8.93) for FY21 and FY22, respectively.”


AMAT Applied Materials $1.85
SAM Boston Beer $2.87
H Hyatt Hotels $-0.08
MGY Magnolia Oil & Gas $0.77
MRO Marathon Oil $0.52
NVDA Nvidia $1.0
TRIP TripAdvisor $-0.04


Thursday (February 17)


Bentonville, Arkansas-based retailer Walmart is expected to report its fourth-quarter earnings of $1.49 per share, which represents year-over-year growth of over 7% from $1.39 per share seen in the same period a year ago.

The multinational retail corporation that operates a chain of hypermarkets would post revenue growth of nearly 1% to $150.91 billion. The company has beaten consensus earnings estimates in most of the quarters in the last two years, at least.

“Latest AlphaWise data shows Walmart+ membership continues to increase, with ~15m members total (~12% household penetration) & ~1m net members added in the past quarter. Overlap between Walmart+ & Prime remains high; we’ll monitor if this changes with a Prime fee hike coming,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We expect Walmart (WMT) to sustain recent momentum in its core business in F’22/F’23 and see a growing ability to balance longer-term investments with near-term returns. Our OW rating and $170 PT are underpinned by a preference for 1) quality players with scale and 2) defensive retailers as the market undergoes a mid-cycle transition.”


AN AutoNation $4.96
DBX Dropbox $0.2
ROKU Roku $0.01


Friday (February 18)


DEERE: The world’s largest maker of farm equipment, is expected to report its fiscal first-quarter earnings of $2.28 per share, which represents a year-over-year decline of over 41% from $3.87 per share seen in the same period a year ago. The agricultural, construction and forestry equipment manufacturer would post revenue growth of about 0.5% to $8.09 billion.

“Higher input and freight costs to affect FY22 margins. We downgrade our rating to “Hold” from “Buy” for Deere & Co. and upgrade our TP to $406 for FY23. We derive TP based on non-GAAP EPS to $22.30 & $25.14 for FY22 & FY23, respectively and P/E of ~16.1x for FY23. This provides an upside potential of 8.6% from CMP of $373.79,” noted Shejal Ajmera, Head of Research at Crispidea.

“Following are the reasons for the above assumptions: 1) Strong demand in farm and construction equipment to aid topline; 2) Focus on automation to ensure long term growth and 3) Short term headwinds to affect profitability.”

DRAFTKINGS: The U.S.-focused gambling operator is expected to report its fourth-quarter loss of $0.78 per share, a dime greater than the loss of $0.68 it recorded in the same period a year ago. But the revenue would grow more than 36% to $439.5 million.

“We forecast legal US sports betting & iGaming to increase from <$1.5B in 2019 to $20.6B in 2025 as more states legalize and spend per capita rises. Forecast DKNG to maintain top tier share, 24% in OSB and 21% in iGaming in 2025. Investors question LT profits, but other developed markets have shown 25-30%+ profits for operators at maturity, esp. those with a customer acq. advantage similar to DKNG’s with its DFS database,” noted Thomas Allen, equity analyst at Morgan Stanley.

“Current valuation of 9x 2025e EBITDA does not reflect long-term margins or growth. Upside drivers include signs of profits in mature states, new product innovation and higher market share. Downside risks include higher losses, greater competition and lagging product innovation.”


ABR Arbor Realty Trust $0.39
B Barnes Group $0.49
BLMN Bloomin’ Brands $0.52
DE Deere & Co. $2.28


Applied Materials Attracts Big Money Buying

And the semiconductor supplier could rise even more due to strong demand across multiple lines of business. But another likely reason is Big Money lifting the stock.

So, what’s Big Money? Said simply, that’s when a stock goes up in price alongside chunky volumes. It’s indicative of institutions betting on the shares.

Smart money managers are always looking for the next hot stock. And Applied Materials has many fundamental qualities that are attractive.

This sets up well for the stock going forward. But how the shares have been trading points to more upside. As I’ll show you, the Big Money has been consistent in the shares.

You see, fund managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all the Big Money signals AMAT has made the last year.

The last few months have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:


In the last year, the stock attracted 17 Big Money buy signals. Generally speaking, recent green bars could mean more upside is ahead.

Now, let’s check out technical action grabbing my attention:

Outperformance is important for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, Applied Materials has been growing sales and earnings at a double-digit rate. Take a look:

  • 3-year sales growth rate (+12.2%)
  • 3-year earnings growth rate (+29.6%)

Source: FactSet

Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, AMAT has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock has buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

AMAT has a lot of qualities that are attracting Big Money. It’s made this list 32 times since 2016, with its first appearance on 5/24/2016…and gaining 610.94% since. The blue bars below show the times that Applied Materials was a top pick:


It’s been a top stock in the technology sector according to the MAPsignals process. I wouldn’t be surprised if AMAT makes additional appearances in the years to come. Let’s tie this all together.

The Bottom Line

The Applied Materials rally could have further to go. Big Money buying in the shares is signaling to take notice. Shares could be positioned for further upside. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds no positions in AMAT in personal or managed accounts at the time of publication.

Learn more about the MAPsignals process here.



Sector Themes In Play In The Markets For 2022

Years like 2021 saw a solid broad-based performance in many stock market sectors. Relatively simple approaches such as Indexing and Sector Rotation did well. But with macro changes in play and many uncertainties for 2022, we may very well see broad indexes underperforming while individual sectors dominated by a few stocks really shine.

Dips will continue to be bought unless something significant changes. But let’s not forget that we’re long overdue for a substantial correction. Significant risk catalysts are:

  • Fed actions.
  • International conflicts (i.e., Russia and China).
  • Pandemic developments that are not currently known.

There’s always the risk of the unknown – the literal definition of a “Black Swan” event. We shouldn’t get too complacent, knowing that we may need to get defensive to protect capital suddenly. When it’s time to be defensive, let’s not forget that CASH IS A POSITION!

Sector theme DRIVERS FOR 2022

Many uncertainties about Covid and the lingering effects on the economy remain. Inflation has roared back to 30-year highs. Strong employment numbers and consumer spending are fueling significant growth in corporate earnings. We also have a shift in bias at the Fed on interest rates and quantitative easing. These are the “knowns” and are theoretically priced in.

For these reasons and more, we should expect more of a “Stockpicker’s Market” in 2022. Certain sectors will do well and weather corrections better than the broader markets.

Even short-term traders can gain an edge by paying attention to what sectors are strongest. Traders tend to benefit most from playing the strongest stocks in the strongest sectors for bullish trades and choosing the weakest stocks in weaker sectors for bearish trades. That “tailwind” can make a significant difference in results.

Let’s look at some sector themes and individual names to keep an eye on in 2022.


A long-anticipated return to a “normal” economy will continue to be a theme — we just don’t know if that will be Post-Covid or Co-Covid. Or when. Air travel, theme parks, hotels, cruise lines, etc., have all suffered in the persistent Pandemic. What does seem to be changing is the idea of a “new normal” where virus variants may be with us for years to come. We will adjust socially and economically to that for the foreseeable future. DAL, UAL, LUV, AAL are airlines to watch, and the JETS ETF may be a good way to play a general recovery in this sector.


The much-hyped rollout of 5G network technology had its share of setbacks and technology disappointments. But 2022 should see the 5G deployment start to take off as technical issues are worked out, and the promise of widespread coverage with transformational performance becomes real. In the background supplying the 5G infrastructure are AMD, QCOM, ADI, MRVL, AMT, XLNX, and KEYS. Along with infrastructure and testing companies, shares of major carriers T, TMUS, and VZ languished for much of the second half of 2021 and looked poised for recovery in the coming year.


In all its various forms (including autonomous vehicles), AI will remain a developing trend. Big players in the space to watch include MSFT, AMAT, GOOGL, NVDA, AAPL, and QCOM.


Electric Vehicles (EVs) are nearing an inflection point where widespread adoption is poised to take off. Technology and cost competitiveness has improved where some EVs will reach price parity with their traditional internal combustion counterparts.

While there are many smaller players in the EV space, automotive stalwarts F, GM, and TM are investing very heavily. TSLA has been grabbing the headlines, but many others want to stake out their territory in the space, including whole tiers of manufacturers and infrastructure enablers like WKHS, XPEV, NKLA, and CHPT.


Gold, silver, and related miners underperformed for much of 2021 and now look poised for a recovery year as inflation, and monetary concerns grow. GLD, SLV, GDX, GDXJ, SIL, SILJ look good as both longer and mid-term plays. Metals and miners may get hit initially with a significant downturn in stocks but could ultimately demonstrate their safe-haven potential.

Specific to the growth in EVs, battery technology, etc., copper, lithium, and related basic materials should see stronger demand ahead. FCX looks particularly interesting as a dual play on gold and copper. LIT may be a good ETF play on lithium battery technology.


The market for chips is primed for exponential growth. EV’s have about ten times the number of specialty semiconductors as conventional vehicles. AI, crypto, 5G, mobile devices, and ubiquitous computing should drive growth in the semiconductor sector for some time to come.


Real Estate and Homebuilders should continue to do well while employment numbers remain strong and if interest rates don’t rise too quickly. The inventory shortage in most real estate markets will likely persist well into the new year.

Storage REITs like PSA, LSI, and CUBE have been big winners in the Covid economy and still have room to run.


Many sectors still look bullish after gains in 2021. But there are “storm clouds” on the horizon, and we must not take future performance for granted.

Lastly, one of the simplest ways to assess how sectors are measuring up is to watch the charts for the S&P SPDR series sector ETFs and a few others. Here are some notable ones to watch:

These can give us a good starting place to look for leading stocks in winning sectors as the year unfolds.

Let’s remain vigilant for possible market corrections and may the wind be at our backs!

Want to learn more about our Options Trading Service?

Every day on Options Trading Signals, we do defined risk trades that protect us from black swan events 24/7. Many may think that is what stop losses are for. Well, remember the markets are only open about 1/3 of the hours in a day. Therefore, a stop loss only protects you for 1/3 of each day. Stocks can gap up or down. With options, you are always protected because we do defined risk in a spread. We cover with multiple legs, which are always on once you own.

If you are new to trading or have been trading stock but are interested in options, you can find more information at The Technical Traders – Options Trading Signals Service. The head Options Trading Specialist Brian Benson, who has been trading options for almost 20 years, sends out real live trade alerts on actual trades, such as TSLA and NVDA, with real money. Ready to check it out, click here:

Enjoy your day!

Chris Vermeulen
Founder & Chief Market Strategist


SMH: Portfolio Rebalancing Is a Positive to Navigate Uncertainty While Metaverse Demand Materializes

The reason is simply that required technologies, be it augmented reality (“AR”), AI, 5G, or blockchain, all require the utilization of semiconductors. The pie chart below shows the relative revenue per sector, with Computing and Wireless with a combined portion of more than 60% seen as the main beneficiaries of metaverse-related investments.

Source: Chart prepared by author to highlight metaverse demand using data from IEEE Spectrum

For this purpose, the VanEck Semiconductor ETF (NASDAQ:SMH) provides exposure to a portfolio of semiconductor stocks ranging from the equipment makers like Applied Materials (NASDAQ:AMAT) to designers of graphics processing units like NVIDIA (NASDAQ: NVDA) who are fabless, or without foundries where the chip are manufactured. It also includes the world’s largest producer, Taiwan Semiconductor Manufacturing (TSM), which, according to the Wall Street Journal planned to raise prices by 10% to 20% back in August depending on the type of chips.

This is due to the supply crunch not only implying that chips have become unavailable, but more expensive too. The increases, expected to be applied towards the end of the year or from 2022 will also impact large customers, marking the end of discounts applied on big orders. The Taiwanese company also revealed that it faced a steep rise in the cost of raw materials and has to incur a three-year $100 billion investment plan aimed at increasing production in view of current shortages and developing chips.

Now, a change in the costs of raw materials in an industry already impacted by supply imbalance can have unforeseen effects on the price of finished goods, in the form of everything from consumer electronics, smartphones, Bitcoin mining equipment, cars, etc. Added to these are inflationary concerns not auguring well for next year. It is precisely here that portfolio rebalancing as effected by VanEck, SMH’s fund manager becomes handy.

In this case, with 25 holdings, SMH is an actively managed fund carrying an expense ratio of 0.35% and tracking the performance of the MVIS US Listed Semiconductor 25 Index (MVSMHTR), which provides exposure to semiconductor production and equipment. As for the rebalancing act, I noticed a crucial change between the holdings as of July 31 and December this year. The changes pertain to the percentage of assets for TSMC which has been reduced from 13.62% as shown in the table to the left to 9.89% (right-side table). This constitutes a significant reduction and is not only appropriate in an environment characterized by increasing geopolitical tensions between the U.S. and China but also to navigate short-term turbulence in the industry.

Source: Tables built with data from

Conversely, this reduction in TSMC’s assets has resulted in the portfolio being relatively more exposed to NVidia, thereby benefiting SMH’s price performance from the end of October (blue chart below). Now, whether its GPU-based computing power is produced for gaming or for crypto mining, the company should benefit from more sales in 2022, as long as it is able to source raw materials in a profitable way. Still, in the event that it is not able to do so, SMH as an ETF provides for investment diversification by encapsulating other plays in the chip ecosystem.

Another key player, Advanced Micro Devices (NASDAQ:AMD) could lessen chip supply woes by outsourcing some production to other foundries like Samsung Electronics (OTCPK:SSNLF), which is investing heavily in its foundry business in a bid to win more clients. Here, I also like VanEck cautiously increasing exposure to Intel (NASDAQ:INTC), from 4.66% to 5.14%, in light of the latter investing $20 billion to set up two plants in Arizona.


Source: Table prepared by author from data in

Furthermore, as seen by the dotted blue line, the VanEck’s fund is on an upwards trajectory and should reasonably cross the $325 level in the first quarter of 2022, with this forecast supported by data from the Worldwide Semiconductor Trading Statistics which predicts that the market is expected to increase by 25.6% in 2021, and continue to grow by 8.8% in 2022. This prediction does not take into consideration chip requirements to build augmented reality around Facebook’s social media platform, Microsoft’s (NASDAQ:MSFT) work-oriented “metaspaces”, and blockchain-powered metaverses like Decentraland, which require enormous computing power for millions of digital coins to be mined (produced) and where virtual plots of land are priced at millions of dollars.

Pursuing on a cautionary note, investors should beware of short term volatility, especially in the first week of January 2022 when the Semiconductor Industry Association (“SIA”) which represents a large chunk of the U.S and foreign chip firms covering all regions of the world will reveal sales figures for the month of November 2021. In this case, any global or even major regional shortcomings may cause a dip in SMH’s, in contrast to the more than 5% surge on December 6, when the SIA announced upbeat news for the month of October.

Finally, with fewer holdings compared to the SPDR S&P Semiconductor ETF (XSD) but bearing the same expense ratio, SMH carries more concentration risks, but, despite all the volatility grappling the stock market in 2021, it has outperformed its peer by 2.38% during the last year. Consequently, looking forward to 2022, with a higher dose of market volatility to be potentially induced by factors like more intensive “metatalks”, geopolitics, Omicron spread, and regulatory scrutiny impacting cryptocurrency like Bitcoin, SMH is a better choice for the longer term.


Best Cheap Stocks to Buy Now December 2021

Oftentimes, big money buying is institutional activity. We’ll go over what that looks like in a bit. But, the 5 stocks we see as undervalued candidates are SIMO, AKAM, AMAT, QCOM, & ADI.

At my research firm MAPsignals, we believe that big money trading can alert you to the forward fundamental picture of a stock. We want the odds on our side when looking for the highest quality stocks.

Up first is Silicon Motion, Inc. (SIMO), which is a leading developer of integrated circuits for NAND flash storage devices like the microSD cards used in smartphones.

The best candidates tend to have strong performance. Check out SIMO:

  • YTD performance (+88.0%)
  • Historical big money signals

Just to show you what our big money signal looks like, have a look at the top buy signals Silicon Motion has made the past few years.

Blue bars are showing that SIMO was likely being bought by a big money player according to MAPsignals.

When you see a lot of them, I call it the stairway to heaven:


But, what about fundamentals? As you can see, Silicon Motion looks strong under the hood:

  • Forward P/E = 15.1
  • 1-year sales growth rate (+45.9%)

Next up is content delivery network company Akamai Inc. (AKAM), which delivers online content (like videos) efficiently and securely.

Check out these technicals for AKAM:

  • YTD performance (+6.7%)
  • Historical big money signals

Let’s look long-term. These are the top buy signals Akamai has made since 2015. Clearly the big money has been liking it for years:


Let’s look under the hood. As you can see, Akamai has grown earnings massively:

  • Forward P/E = 19.4
  • 3-year earnings growth rate (+29.6%)

Another name to consider is Applied Materials, Inc. (AMAT), which is a semiconductor supplier whose technologies are used to build complex memory chips and displays.

Strong candidates for growth usually have big money buying the shares. Applied Materials has that. Also, the stock has been a rocket:

  • YTD performance (+82.3%)
  • Recent big money signals

Below are the big money signals AMAT has made since 2015:


Now let’s look under the hood. Applied Materials’ earnings growth is impressive. I expect more growth in the coming years:

  • Forward P/E = 19.4
  • 3-year earnings growth rate (+29.6%)

Number four on the list is wireless chipmaker Qualcomm Holdings, Inc. (QCOM).

Here are the technicals jumping out at me:

  • 1-month performance (+10.1%)
  • Historical big money signals

Below are the big money signals for QCOM since 2005. While there isn’t much recent activity, it’s a big money favorite over time:


Let’s look under the hood. QCOM has been growing earnings nicely:

  • Forward P/E = 16.9
  • 3-year earnings growth rate (+50.5%)

Our last cheap candidate is Analog Devices, Inc. (ADI), which designs, makes, and sells signal processing circuits found in all kinds of electronic equipment.

Check out these technicals:

  • YTD performance (+26.1%)
  • Historical big money signals

Analog Devices has shown up with top big money signals a lot since 2015:


Now look at these juicy growth numbers:

  • Forward P/E = 24.7
  • 1-year sales growth rate (+30.6%)

The Bottom Line

SIMO, AKAM, AMAT, QCOM, & ADI represent top cheap stocks for December 2021. Strong fundamentals and big money buy signals make these stocks worthy of extra attention.

To learn more about MAPsignals’ big money process please visit:

Disclosure: the author holds long positions in AKAM, QCOM, and ADI in managed accounts, long positions in SIMO and QCOM in personal accounts, and no positions in AMAT at the time of publication.

Investment Research Disclaimer


What Fuels The Stock Market Now?

An outstanding earnings season and signs that economic activity are picking back up are clashing with unrelenting inflation, difficulty finding more labor, and continued supply chain logjams.


Most insiders believe inflation has further to climb, though the consensus right now is calling for a peak around the beginning of Q2 next year. With big shopping holidays in the U.S. coming up, followed closely by Chinese New Year at the beginning of February 2022, shipping and transportation logjams aren’t expected to find much relief in the near-term.

Meaning inflation pressures will likely continue. How far inflation will climb as the severe supply chain dislocations drag on is a huge unknown. Some Wall street investors are concerned that the Fed might feel compelled to end its asset purchases and hike rates much sooner than expected if monthly inflation keeps accelerating.

What might be even more worrisome is the fear that some of these price increases could be more permanent in nature, so how much overall inflation will pull back in the long run is starting to become a bigger talking point.

Demand and supply chain

Supply chain insiders warn that many companies are front-loading inventories in an effort to avoid running out of critical materials, which could bite in the long run if demand suddenly drops off. A lot of manufacturers have also increased production capacity for products that currently face shortages. The risk is that once back orders are filled and demand retreats, stockpiling and excess production could result in an oversupply situation in some areas, along with much lower profits and total revenues.

Another worry right now is that demand starts to retreats due to the current inflationary environment especially with everyday items like food and gasoline costing substantially more. That has investors anxious to see the latest Consumer Sentiment read being released today which is expected to edge higher vs. last month.

Investors are closing tracking the inflation expectation gauges in the report as typically the higher those climb, the more consumers tend to pull back on spending.

Data to watch next week

Looking towards next week, the economic data flow picks up with key releases including Empire State Manufacturing on Monday; Retail Sales, Import/Export Prices, Industrial Production, Business Inventories, and the NAHB Housing Market Index on Tuesday; Housing Starts and Building Permits on Wednesday; and the Philadelphia Fed Index on Thursday.

On the earnings front, Q3 reporting is just about wrapped up with companies in the S&P 500 index reporting revenue growth of more than +17%, the second highest on record behind only Q2 2021’s growth of over +25%, according to FactSet. Earnings themselves are on track to exceed +40%. AstraZeneca is today’s earnings highlight. Earnings next week include several big retailers which will provide some more clues as to how consumer demand is trending as well as updates on supply chain struggles. Investors are also keen to hear how holiday hiring is going.

Key earnings reports next week will include Advanced Auto Parts, Lucid, Tyson, and Warner Music on Monday; Home Depot and Walmart on Tuesday; Bath & Body Works, Cisco, Lowe’s, NVIDIA, Target, TJX, and Victoria’s Secret on Wednesday; Alibaba, Applied Materials, Intuit, Kohl’s, Macy’s, Palo Alto Networks, Ross Stores, and Williams Sonoma on Thursday; and The Buckle and Foot Locker on Friday.

Checking in on the geopolitical front, the U.S. is warning that Russia may be planning a full-scale invasion of Ukraine. U.S. officials say they’ve briefed their EU counterparts about concerns over a possible military operation, citing a buildup of Russian troops along the Ukraine border. Tensions are boiling still in Belarus and Russia is fanning the flames on that front as well.

SP500 commentary

ES ##-## (Daily) 2021_11_14 (1_49_54 AM)

The bearish accumulation divergence played very well last week. Moreover, the Advance Decline Line is weaker than the price is. It is also a negative factor in the short term. Potentially SP500 started the formation of the bull flag. Finding support at lower levels would be a great buying point with a target of 4800.

The major economic indicators are still bullish despite rising inflation. 4500 level is a psychological level bears will target if 4600 fails. Current levels can be considered only for intraday trading. At the same time, lower levels are needed to get a good risk/reward ratio for swing traders.

For a look at all of today’s economic events, check out our economic calendar.

Applied Materials Gains After Announcing $7.5 Billion Buyback

Applied Materials, Inc. (AMAT) shares rocketed 3.89% Monday after the Santa Clara chipmaker said it planned to undertake a new $7.5 billion share repurchase program.

The buyback, which represents around 7% of the company’s $109.5 billion market capitalization, supplements the $1.3 billion outstanding portion of its previous buyback program.

In other news, the company flagged that its Kokusai Electric share purchase agreement with KKR HKE Investment L.P. may fall through due to difficulty gaining regulatory approval in China. It told investors that if it fails to get the green light from Chinese authorities by March 26, it will terminate the deal and issue KKR a $154 million termination fee.

Through Monday’s close, Applied Materials stock yields 0.84% and has gained 214% over the past 12 months. Since the start of the year, the shares have added nearly 40%. From a valuation standpoint, the stock trades at 40% its five-year average forward earnings multiple of around 14 times.

Wall Street View

After the chipmaker reported better-than-expected Q4 results in mid-February, Cowen analyst Krish Sankar lifted the investment firm’s price target on Applied Materials to $140 from $120. He also maintained his ‘Overweight’ rating. Sankar believes the company’s product momentum, its market share gains, and operating margins should continue throughout the rest of 2021.

The sentiment also remains bullish elsewhere on Wall Street. The stock receives 21 ‘Buy’ ratings and four ‘Hold’ ratings. Currently, no brokerage research recommends selling the shares. Twelve-month price targets vary between $113 at the low end to $150 at the high end. The average target of $137 represents a 15% premium to Monday’s $119.33 closing price.

Technical Outlook and Trading Tactics

The Applied Materials share price has tracked steadily higher since late October. It finds a confluence of support from a multi-month uptrend line and the 50-day simple moving average (SMA). More recently, the price has oscillated within a symmetrical triangle as bulls and bears fight for control.

Active traders should consider buying if the stock breaks above the pattern’s upper trendline on above-average volume. As added confirmation, look for the breakout to coincide with a cross of the moving average convergence divergence (MACD) indicator above its signal line. In terms of trade management, place a stop-loss order somewhere below the triangle and target a move to around $143.50 (the height of the triangle added to the pattern’s top trendline).

AMAT Chart

For a look at today’s earnings schedule, check out our earnings calendar.

Three Chip Stocks Hitting New Highs

PHLX Semiconductor Index has posted fabulous returns so far in 2020, lifting more 40% since the last trading day of 2019. Sadly, many well-known names topped out with broad benchmarks in September and are working off overbought technical conditions through trading ranges or lower prices. As an alternative, let’s look at a smaller group that’s hitting new highs as we wrap up the month of November, well-positioned for even higher prices between now into year’s end.

A number of 2020 sector leaders have taken market share from Intel Corp. (INTC), which has fallen from grace after a series of self-inflicted wounds. The Dow component has lost 21% so far this year, in stark contrast with the broad-based SOX index, piling up misfires and delays driven by weak management and poor execution. The old school behemoth has lost significant business to more nimble rivals and could descend into oblivion in 2021.

Micron Technology

Micron Technology Inc. (MU) makes memory chips. The stock has booked a respectable 19% return this year but the rally off the first quarter low tells an even more bullish tale, doubling in price and lifting into a critical test at May 2018’s high in the mid-60s. A breakout could presage outstanding 2021 upside because the advance will face little resistance into the all-time high in the 90s, posted at the height of the Internet bubble in 2000.

Applied Materials

Applied Materials Inc. (AMAT) makes semiconductor equipment for mainstream and leading-edge fabrication and is benefiting from the developing technology war with China.  The stock has risen 36% so far in 2020 and just completed a massive cup and handle breakout above the 2000 high in the mid-50s. In addition, it’s gained more than 40% since the end of October, capitulating on strong Q4 2020 top and bottom line results.

On Semiconductor

On Semiconductor Corp. (ON) makes chips for power generation, electric vehicles, cloud computing, and industrial production. It’s lesser known than other chip stocks in this review but has also benefited from Intel’s misfortunes, with accelerating sales surprising many analysts. The stock has just broken out above the March 2018 peak in the mid-20s and is trading at an all-time high. It’s also more than tripled in price off the March 2020 low at 8.17.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.