ConocoPhillips led the rally in energy stocks after raising the dividend and increasing the buyback.
Mega cap stocks are moving lower as Treasury yields rise.
A move below the support at 3725 will push S&P 500 towards the 3690 level.
Big Tech Stocks Remain Under Pressure
S&P 500 rebounded from session lows as traders reacted to the ISM Non-Manufacturing PMI data, which missed analyst expectations.
The rebound from session lows was led by energy stocks, which enjoyed strong support today. ConocoPhillips, APA Corporation, and Marathon Oil were up by 6-7% in today’s trading session. ConocoPhillips gained strong upside momentum after beating analyst estimates, raising the dividend, and increasing its share buyback plan by $20 billion.
Etsy gained 14% despite missing analyst estimates on earnings. The stock moved higher as the company presented an optimistic outlook for the fourth quarter of this year.
Booking was up by 5% after reporting revenue of $6.05 billion and adjusted earnings of $53.03 per share, which exceeded analyst expectations.
The broad market will not be able to gain sustainable upside momentum if the mega cap stocks remain under pressure. Traders remain worried that higher interest rates will hurt the business of leading companies.
While the tech leaders looked invincible during the coronavirus crisis, higher interest rates, stronger dollar, and the slowdown of the world economy put significant pressure on their stocks. Traders should continue to monitor the dynamics of big tech stocks to find clues about the future direction of S&P 500.
S&P 500 Tried To Settle Below The 3700 Level
S&P 500 made an attempt to settle below the support at 3725 but lost momentum and rebounded towards the 3750 level. The nearest resistance for S&P 500 is located at 3760. If S&P 500 climbs above this level, it will head towards the resistance at 3805. A move above 3805 will open the way to the test of the resistance at 3835.
On the support side, S&P 500 needs to settle below the support level at 3725 to have a chance to gain additional downside momentum in the near term. The next support level is located at 3690. In case S&P 500 declines below this level, it will head towards the support at 3650.
S&P 500 remains under pressure as traders stay focused on hawkish Fed. Today’s Initial Jobless Claims report, which indicated that 213,000 Americans filed for unemployment benefits in a week, served as an additional negative catalyst for stocks. The job market remains tight, which pushes Fed to raise rates aggressively as it wants to cool demand.
Consumer cyclical stocks, which were among yesterday’s losers, are under strong pressure today. Caesars Entertainment, Expedia, Etsy are down by 5-8% in today’s trading session. The market prepares for a recession when consumers cut “unnecessary” purchases.
Treasury yields keep moving higher, which is bearish for tech stocks. Currently, the yield of 10-year Treasuries is trying to settle above the 3.70% level. Such yields were last seen back in 2011.
AMD and NVIDIA are among the biggest losers in the tech segment. Traders fear that weakening PC demand will hurt their results.
From a big picture point of view, the market remains bearish. Rising Treasury yields indicate that bond traders continue to prepare for aggressive rate hikes from the Fed. In case Treasury yields move to new highs, stocks may find themselves under more pressure.
S&P 500 Tests Support At 3750
S&P 500 is currently trying to settle below the support level at 3750. In case this attempt is successful, it will head towards the next support, which is located at 3725. A move below this level will open the way to the test of the support at 3700. If S&P 500 declines below 3700, it will head towards the support at 3660.
On the upside, the nearest resistance level for S&P 500 is located at 3780. If S&P 500 gets above this level, it will head towards the next resistance at 3800. A successful test of this level will push S&P 500 towards the resistance at 3825.
At my research firm, MAPsignals, we track the Big Money looking for trends. We believe Big Money analysis can alert you to market and sector trends. Here’s what daily buys and sells looks like over the last six months. It’s been choppy:
That’s what a rotational market looks like. See the red bars? Those are stocks we believe are getting sold. When red bars run rampant, good names can get crushed. They can become what I call “oversold.”
And that can mean opportunity. Let’s look at five stocks seeing lots of red that appear to be near-term oversold: ROKU, BABA, RH, ZM & ETSY.
Up first is Roku, Inc. (ROKU), the television streaming platform.
Even though great companies’ stocks can be volatile, like ROKU over the past year, they’re worthy of attention, especially on pullbacks. Check out ROKU:
1-month performance (-24.2%)
Recent Big Money sell signals
To show you what our Big Money signals looks like on a stock, have a look at all the buys (green bars) and sells (red bars) in ROKU over the past year:
Clearly, that’s a lot of red since September.
Looking more broadly, Roku has been a high-quality stock for years. The blue bars in the chart below show when ROKU was likely being bought by a Big Money player and also a high-ranking stock, according to MAPsignals.
When you see a lot of blue, like ROKU did in 2019 (when it hovered around half of its current price), it can be very bullish:
Those blue signals indicate Big Buying and strong fundamentals. As you can see, Roku’s recent numbers have been strong, making it worth of attention at these levels:
1-year EBITDA growth rate (+18.9%)
1-year sales growth rate (+57.5%)
Next up is Alibaba Group Holding Ltd. (BABA), which is a Chinese technology giant – it’s like China’s Amazon.
Recently, it’s been a choppy downward slide, with more Big Money selling than buying:
But not long ago, Zoom was a Big Money darling. Below are the Big Money buy signals for ZM since it’s 2019 trading debut:
Let’s look under the hood. Despite its price slide, Zoom has been growing earnings nicely and generated huge sales growth:
1-year EBITDA growth rate = (+6.4%)
1-year sales growth rate = (+325.8%)
Our last growth candidate is Etsy, Inc. (ETSY), which is an online marketplace and commerce platform. A strong final quarter in 2021 of Big Money buying has given way to steep declines:
Check out these technicals:
1-month performance (-24.1%)
Historical Big Money signals
Etsy is a high-quality stock since it’s made my Top 20 report. As you can see below, it’s been a Big Money favorite since 2016. Right now, it’s on a pullback and could be an opportunity.
Now let’s look below the surface a bit. Earnings have been growing quite well, and there’s been enormous sales growth:
1-year EBITDA growth rate = (+16.2%)
1-year sales growth rate = (+110.9%)
The Bottom Line
ROKU, BABA, RH, ZM & ETSY represent the top oversold stocks for January 2022. They’ve been sold a lot lately…perhaps too much. Strong, fundamentally-sound stocks seeing near-term sell signals are worthy of extra attention because of their long-term potential.
For years, growth stocks have been beneficiaries of outsized gains compared to the averages. The best growth stocks have 3 traits: strong fundamentals, great technicals, and a history of Big Money activity in the shares. Outlier stocks see a lot of Big Money buying.
Oftentimes, that can be institutional activity. We’ll go over what that looks like in a bit. But the five stocks we see as long-term candidates will make you SMILE: SHOP,MIME, INMD, LRCX, & ETSY. 😊
For 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 Shopify, Inc. (SHOP), which is an online commerce platform.
Even though their stocks can be volatile, like SHOP this year, great companies are worthy of attention. Check out SHOP:
1 month performance (+17.6%)
Historical big money signals
Just to show you what our Big Money signal looks like, have a look at the top buy signals Shopify has made the past few years.
Blue bars are showing that SHOP was likely being bought by a Big Money player according to MAPsignals.
When you see a lot of them, like SHOP did in 2019 (when it hovered around 1/4 of its current price), I call it the stairway to heaven:
But, what about fundamentals? As you can see, Shopify’s revenue numbers have been strong:
1-year sales growth rate (+71.3%)
3-year sales growth rate (+64.0%)
Next up is Mimecast Limited (MIME), which is a cloud software and risk management company.
Check out these technicals for MIME:
1-month performance (+29.1%)
Recent big money signals
Let’s look long-term. These are the top buy signals Mimecast has made since 2015. The Big Money may have found a new gem:
Let’s look under the hood. As you can see, Mimecast has had rock-solid growth:
3-year sales growth rate = 24.3%
3-year earnings growth rate = 58.3%
Another growth name is InMode Ltd. (INMD), which is a maker of specialized medical equipment.
Strong candidates for growth usually have big money buying the shares. InMode has that. Also, the stock has bounced recently:
1 month performance (+13.6%)
Historical Big Money signals
Below are the big money signals InMode has made since 2019. That’s the JUICE!
Now let’s look under the hood. InMode’s sales growth is impressive. I expect more growth in the coming years:
3-year sales growth rate = +58.4%
3-year earnings growth rate = +119.7%
Number four on the list is Lam Research Corporation (LRCX), which is a leading semiconductor industry supplier.
Here are the technicals important to me:
1 month performance (+12.4%)
Historical big money signals
Below are the big money signals for LRCX since 2015:
Let’s look under the hood. Lam Research has been growing nicely:
3-year sales growth rate = +12.3%
3-year earnings growth rate = +26.9%
Our last growth candidate is Esty, Inc. (ETSY), which is another top online commerce platform.
Check out these technicals:
YTD performance (+29.7%)
Historical big money signals
Etsy is a high-quality stock since it’s made my Top 20 report:
Now look under the hood. Earnings have been growing quite well:
3-year sales growth rate = +61.1%
3-year earnings growth rate = +92.4%
The Bottom Line
SHOP, MIME, INMD, LRCX, & ETSY (😊) represent top growth stocks for December 2021. Strong fundamentals and big money buy signals make these stocks worthy of extra attention.
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 Etsy 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 all year.
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 ETSY has made the last year.
The last few weeks have seen Big Money activity, too. Each green bar signals big trading volumes as the stock ramped in price:
In 2021, the stock has attracted 11 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:
1-month outperformance vs. Consumer Discretionary Select Sector SPDR Fund (+4.3% vs. XLY)
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, Etsy has been growing sales at a double-digit rate. Take a look:
3-year sales growth rate (+61.1%)
3-year earnings growth rate (+92.4%)
Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.
In fact, ETSY has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock saw buy pressure, strong technicals, and growing fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.
ETSY has a lot of qualities that are attracting Big Money. And since 2015, it’s made this list 12 times, with its first appearance on 10/18/2016… and gaining 1,576.65% since. The blue bars below show the times that Etsy was a top pick since 2015:
It’s been a top stock in the consumer discretionary sector according to the MAPsignals process. I wouldn’t be surprised if ETSY makes additional appearances in the years to come. Let’s tie this all together.
The Bottom Line
The Etsy 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 ETSY positions in personal and managed accounts at the time of publication.
Stocks tumbled today in response to weaker than expected jobs data. The Dow Jones Industrial Average took the brunt of it, falling more than 300 points and shaving nearly 1% off its value. The S&P 500 was down half a percent while the Nasdaq managed to eke out fractional gains.
Investors were spooked by an ADP jobs report, which revealed that jobs are being added to the private sector at a slower pace than expected. In July, companies added 330,000 payrolls while economists were looking for something along the lines of 690,000. In addition, the outlook for the delta variant isn’t getting any better, and investors are watching and waiting to see if renewed lockdowns will be implemented.
Stocks to Watch
Uber shares are getting punished in extended hours, falling nearly 4% at last check. The ride-share company narrowed its Q2 loss to USD 509 million, but it was still steeper than Wall Street was expecting. Uber and Lyft are both facing driver constraints that have been exacerbated by the resurgence of the virus. On the bright side, Uber had record bookings while revenue grew twofold.
Robinhood shares rallied 50% during the regular session, and according to reports, it was retail investors driving the price higher. Fidelity reportedly had close to 10K buy orders by individual investors early in the session, far outpacing the second most in-demand stock at the broker, GM.
Shares Etsy, an e-commerce site for handcrafted items, dropped 13.5% in extended hours amid signs that the pandemic-fueled shopping boom is winding down. Etsy’s Q2 sales increased by a double-digit percentage but it was less robust than recent quarters. Meanwhile, the company’s Q3 revenue outlook came in below consensus estimates.
Roku’s stock fell more than 8% in the after-hours. The video-streaming hardware company’s Q2 results fell short of estimates as the opening of the economy cut into users’ streaming time. Roku had 55.1 million active users in the quarter across more than 17 billion hours of streaming. The company continues to operate in an uncertain environment while comps from the pandemic year will remain a challenge for the rest of 2021.
Investors will be on pins and needles until Friday when the employment report for the month of July is released. In the interim, stock futures are barely moving in the after-hours on Wednesday evening, with the three major stock market indexes leaning toward green.
After a pandemic-driven surge in sales over the last year, Etsy, among the world’s best known e-commerce platforms for handmade goods and vintage items, estimates the U.S. second-hand clothing market alone will be worth $64 billion by 2024.
Chief Executive Officer Josh Silverman said in statement he saw Depop as “the resale home for Gen-Z consumers” and believed there was significant potential to scale up its business as he seeks to offset the return of consumers to more traditional mall and high street shopping over the next year.
London-based Depop, founded in 2011, is known for its vintage and streetwear collections and has more than 26 million users from over 147 countries.
About 90% of its users are under the age of 26 and it is the 10th most visited shopping site among Gen-Z consumers in the U.S., according to the company.
Surveys show that greater awareness of the impact of the apparel industry on the environment is also driving younger audiences towards second-hand apparel, while “thrift haul” videos on YouTube and TikTok, which show cheap purchases by people, have accumulated millions of views.
The boom has prompted companies including Gap Inc, Vera Bradley and celebrities including Serena Williams to partner with other sector players Poshmark and ThredUp.
Etsy’s revenue more than doubled to $1.73 billion last year, as shopping shifted online and consumers sought handmade pandemic-related items like masks, but the company has warned that growth would slow as consumers return to malls and physical stores.
(Reporting by Nivedita Balu in Bengaluru;Editing by Vinay Dwivedi)
The Commerce Department last week reported that the U.S. economy grew at a +6.4% annual rate in the first quarter, slightly below estimates but still strong. If it would have come in real hot and much higher bears would have pointed to fanning the inflation flames even further.
This mindset of “bad-news-could-be-good-news” is helping to keep the stock market at or near all-time highs. If economic data somewhat disappoints it means the Fed stay dovish and accommodative for longer.
That might be important to keep in mind as April data starting this week is expected to be extremely good. The April Employment Report is due next Friday and with upper-end of Wall Street estimates look for upwards of +1 million new jobs being added. Other key April data next week includes the ISM Manufacturing Index on Monday, and the ISM Non-Manufacturing Index on Wednesday.
If the data comes in better than expected the bears will win the nearby battle and have the upper hand when talking higher inflation and the Fed perhaps tightening sooner than anticipated. So this week could be a bit tricky whereas “disappointing-data” could actually be digested as a win for the bulls and “strong data” a win for the bears.
Checking in on U.S. progress against Covid-19, the number of adults that have received at least one dose is around 60%-65%, depending on the source. Global cases continue to rise led by India, where new infections have been hitting new record highs every day for weeks now. The country reported a staggering 380k new infections and 3,645 new deaths on Thursday while less than 10% of the population has been vaccinated.
Bottom line, the global restart will not be synchronized like many bulls had hoped would be the case and global growth may continue to struggle. At the moment the U.S. market doesn’t seem to care. It will be interesting to see if increasing inflation and continued global headwinds will eventually come home to roost.
SP500 technical analysis
Earnings season can bring volatility to the stock market. At the beginning of May, cycles turn to the downside. Note, this is only a timing tool and it never shows the amplitude or strength of the move. When cycles are topping, it means we can expect a move down or choppy trading. This is it.
But relying on cycles only is not a good idea. Insider Accumulation Index shows bearish divergence on a daily chart. At the same time, Advanced Decline Line is still strong. The key resistance is around 4250 at the moment. I believe earning season can bring a profit booking to the stock market. If that happens, watch 4000 – 39500. It was a massive resistance and now it might turn into support. Intermarket Forecast is neutral. But if it turns to the downside, we will finally see a pullback in SP500.