Thanksgiving: 3 Assets That Can Be Grateful for 2022

This year has been a tumultuous one for global financial markets, to say the least. War, soaring inflationrate hikes, recession, bear market – these terms have been flung about for much of this year, sending fear coursing through many investors and traders.

However, certain assets have flourished even amidst the doom and gloom, enjoying year-to-date gains as we head into the final month of the year.

Here are 3 of them:

US Dollar (DXY) = 10% year-to-date Gains

King Dollar asserted its grip across the FX world, being the preferred safe haven (an asset which investors hope will protect their wealth in times of great fear).

The ongoing Fed rate hikes have also contributed to the US dollar strength, much to the anguish of most of the FX world.

The DXY has pulled back significantly from recent heights, as markets grow to expect that the worse of the Fed rate hikes are now behind us.

As long as the Fed hikes again at its next FOMC meeting on December 14th and signals that more rate hikes are in store for 2023, while inflation and job hiring doesn’t fall off too drastically, the DXY should still be able to close out 2022 with an annual gain.

NOTE: The DXY, which is the benchmark US dollar index measuring the buck’s performance against six other major currencies.

Brent Oil = 16.3% year-to-date Gains

Since Russia invaded Ukraine, Western economies have ramped up sanctions against Russian exports of the precious commodity, leaving buyers around the world scrambling for oil, bidding up prices along the way.

Oil’s year-to-date advance has also swept up other oil-linked assets with it:

  • Occidental Petroleum Group is the best performer on the S&P 500 so far this year: +145.3% year-to-date
  • The Russian Ruble is the world’s best-performing currency so far this year: +24.15% year-to-date

However, markets now fear the prospects of a global recession in 2023, which would constrict demand for oil, especially as China continues to battle with Covid Zero lockdowns.

Such fears have seen Brent drop considerably from its year-to-date peak above $130.

Still, oil prices remain very much in a position to end the year with an annual advance.

Much would depend on whether global supplies are further tightened by another OPEC+ supply cut and the ramp up in the EU’s ban on Russian shipments, both set for early December.

Turkish Stocks = 87% year-to-date Gains (in US Dollar Terms)

The Borsa Istanbul 100 reached a new record high in 2022, while becoming the world’s best-performing stock market.

After all, double-digit gains are in stark contrast to the double-digit declines for global stocks, as measured by the MSCI ACWI Index which is down by 17.4% so far this year.

And this isn’t a one-off.

The Borsa Istanbul 100 Index has posted double-digit annual gains in 4 out of the past 5 years!

Why Have Turkish Stocks Soared?

Turkey’s central bank has been cutting its interest rates, at a time when central bankers around the world have been frantically hiking their own rates. And stocks generally love lower interest rates.

This asset class has also been a hedge against other economic turmoil:

  • Turkey’s inflation hit 85.5% in October – its highest CPI print since 1998
  • The Turkish Lira is the 8th-worst performing currency in the world against the US dollar so far in 2022

Hence, Turkish stocks have been seen as a hedge (a way to offset risks) against such woes.

And there’s a fundamental reason for these double-digit gains as well.

Turkish companies are still raking in the dough, where profits have risen by 234% in the first 9 months of the year.

And there’s your “Turkey” connection this Thanksgiving.

In the spirit of being grateful, we truly appreciate you reading our Daily Market Analysis.

And may you find gratitude in all of life’s blessings.

S&P 500 Moves Towards 4000 As Risk Appetite Grows

Key Insights

  • The strong performance of energy and tech stocks pushed S&P 500 towards new highs. 
  • The weak U.S. dollar provided additional support to stocks.
  • A move above the 4000 level will push S&P 500 towards the resistance at 4015.

Stocks Are Moving Higher Ahead Of The Weekend

S&P 500 made an attempt to settle above 3990 but lost momentum and pulled back towards the 3970 level as traders decided to take some profits off the table. The tech-heavy NASDAQ Composite was up by roughly 1.5% as tech stocks continued to move higher.

It looks that the weak Consumer Sentiment report provided additional support to markets as the slowdown in consumer activity may lead to a less hawkish Fed.

Basic materials and energy stocks were moving higher today as the rebound in commodity markets continued. Occidental Petroleum, Phillips 66, and Devon Energy were among the biggest gainers in the energy segment.

Tech stocks continued to move higher, and Amazon managed to get to the psychologically important $100 level.

Treasury yields rebounded after yesterday’s pullback, but this rebound was not strong. In addition, the U.S. dollar found itself under strong pressure against a broad basket of currencies, which was bullish for S&P 500.

From a big picture point of view, the continuation of yesterday’s rally is somewhat surprising. Yesterday’s gains were big, and some traders may have preferred to take some profits off the table ahead of the weekend.

However, tech stocks enjoyed strong support in today’s trading sesssion, which indicated that risk appetite continued to grow.

S&P 500 Settled Above The 3960 Level

WTI Oil

S&P 500 managed to settle above the resistance at 3960 and is trying to get to the test of the next resistance level at 4000. RSI remains in the moderate territory, so there is plenty of room to gain additional upside momentum in the upcoming trading sessions.

In case S&P 500 gets above the 4000 level, it will head towards the resistance at 4015. A successful test of this level will push S&P 500 towards the resistance at 4040.

On the support side, the previous resistance at 3960 will serve as the first support level for S&P 500 In case S&P 500 settles back below this level, it will head towards the support at 3920. A move below 3920 will open the way to the test of the next support level, which is located at 3885.

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

S&P 500 Retreats As Traders Reduce Risks Ahead Of U.S. Inflation Reports

Key Insights

  • S&P 500 moved towards the support level at 3760 amid unclear results in U.S. elections. 
  • Traders have also paid attention to the major sell-off in crypto markets, which hurt market sentiment towards riskier assets. 
  • Energy stocks declined as WTI oil pulled back towards the $86 level.

Disney Falls As Quarterly Report Misses Estimates

S&P 500 is under strong pressure as traders evaluate the unclear results of the U.S. midterm elections and worry about the huge sell-off in crypto markets.

The sell-off is led by energy stocks, which are moving lower due to the strong pullback in oil markets. Stocks like Occidental Petroleum, Hess Corporation, and Devon Energy are down by 5-7% in today’s trading session.

Disney is down by 13% as its quarterly report missed analyst expectations. The market is also disappointed by the near-term outlook for the company’s business.

Tesla is down by 6% as traders react to Elon Musk’s sales of the stock. To raise money for his Twitter deal, Musk sold roughly $4 billion worth of Tesla stock in recent days.

NVIDIA is down by 5% as traders are worried that the sell-off in crypto markets will reduce demand for company’s products.

From a big picture point of view, the sell-off is broad, and all market segments have found themselves under material pressure.

Traders Prepare For U.S. Inflation Reports

S&P 500

Traders should keep in mind that the U.S. will release inflation data tomorrow. Analysts expect that Inflation Rate declined from 8.2% in September to 8% in October. It looks that some market participants have decided to reduce their risks ahead of this important report.

S&P 500 is currently trying to settle below the support level at 3760. In case this attempt is successful, S&P 500 will move towards the next support at 3725. A move below this level will open the way to the test of the support at 3690.

On the upside, the nearest resistance level for S&P 500 is located at 3805. If S&P 500 climbs back above this level, it will move towards the resistance at 3835. In case S&P 500 manages to settle  above 3835, it will head towards the resistance level at 3885.

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

S&P 500 (SPY) Declines As Treasury Yields Rise

Key Insights

  • S&P 500 found itself under pressure as Treasury yields continued to rebound. 
  • Higher yields pushed REITs to new lows. 
  • Energy stocks gained strong upside momentum as WTI oil made an attempt to settle above the resistance at the 50 EMA. 

REITs Remain Under Strong Pressure

S&P 500 is moving lower after an unsuccessful attempt to settle above the 20 EMA near the 3800 level.

Today, traders focused on the Initial Jobless Claims report, which showed that 219,000 Americans filed for unemployment benefits in a week, compared to analyst consensus of 203,000.

Tomorrow, traders will take a look at the Non Farm Payrolls report, which is expected to show that the economy added 250,000 jobs in September. This report will likely have a material impact on S&P 500 dynamics.

Meanwhile, Treasury yields moved higher, which was bearish for stocks. The yield of 10-year Treasuries is currently trying to settle above the 3.80% level. In case this attempt is successful, it will move towards the recent highs at 4.00%, which will put more pressure on the stock market.

Energy stocks like Marathon Oil, Occidental Petroleum, and Halliburton continued to move higher today as WTI oil tested the important resistance level at the 50 EMA at $88.40.

Meanwhile, REITs remained under strong pressure. Traders look at higher Treasury yields and sell everything that is related to the REIT segment. Digital Realty Trust, Crown Castle, and American Tower Corporation are testing new lows.

While S&P 500 is down by about 0.5%, today’s pullback is broad as energy stocks are the only group in the positive territory. This is not surprising as Treasury yields have quickly rebounded after the recent pullback, indicating that traders remain worried about aggressive rate hikes from the Fed.

S&P 500 Failed To Settle Above The 20 EMA

S&P 500

From a technical point of view, S&P 500 needs to settle above the 20 EMA to have a chance to continue its rebound. S&P 500 has already made several attempts to settle above the 20 EMA near the 3800 level, but these attempts yielded no results.

If S&P 500 stays below the 20 EMA, it may soon find itself under significant pressure. In this scenario, S&P 500 will likely test the 3700 level.

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

Hurricane Ian Spells Trouble for the Fed and Its Inflation Goals

Today, the US State of Florida woke up to the devastation of Hurricane Ian. As residents of the worst-hit parts make the journey home, residents and businesses will begin to assess the financial impact of a storm that peaked at a category four before heading back out to sea.

With parts of the State of Florida still under water and facing high winds and heavy rain, news media outlets report that more than two and a half million are without electricity.

President Joe Biden declared a major disaster, releasing federal-level disaster relief funds to help the State tackle the destruction.

While businesses in the path of Hurricane Ian will face the battle of rebuilding, there will be the indirect effects of the storm on some of the country’s largest multinationals.

Supply Chain Disruption, Fuel Prices, and Inflation

One immediate effect of Hurricane Ian will be on supply chains in and out of Florida.

Across the State, fuel terminals are closed, with oil companies evacuating employees ahead of the storm’s arrival. As reported by Reuters, BP Plc (BP), Chevron Corp (CVX), Occidental Petroleum Corp. (OXY), and Hess Corp (HES) shut down operations in the State.

In the aftermath of the storm, infrastructure is an issue. Reportedly, fuel trucks can’t reach affected parts of the State, with lengthy waiting times likely to impact businesses reliant upon diesel-fueled generators. Shortage concerns were significant enough for the White House to issue a warning to Oil Companies. President Biden reportedly said,

“Do not – let me repeat, do not, do not – use this as an excuse to raise gasoline prices in America.”

According to the US Joint Economic Committee, gasoline prices surged by 46 cents a gallon immediately after Katrina. The JEC noted that ‘some consumers paid almost twice what they paid the year before.’ Higher gasoline prices would spell more trouble for the US economy and the FED grappling with inflation.

Elevated prices would extend beyond the pump, with businesses having to pass on running costs to consumers. The JEC report noted that ‘fuel prices increased quickly after the supply disruption. However, the JEC also observed that prices decreased more slowly after capacity was restored.’

One other area of interest is the Sunshine State’s citrus industry. According to a CNN report, Ian threatened 75% of the citrus belt with heavy rain and floods. With citrus production reportedly under pressure ahead of the storm, supply shortages would lead to higher food prices, another headache for consumers and for the Fed.

Retailers and the Services Sector Likely to Bear the Brunt of the Pain

Reuters reported that Amazon.com (AMZN) paused operations in some sites, with Walmart (WMT) and Sam Clubs closing down more than 100 stores. Walt Disney (DIS) also shut down theme and water parks on Wednesday and Thursday.

With food and fuel prices keeping US inflation at four-decade highs, retailers will likely add to the inflation problem. As water levels decline, supply issues, and strong demand, will drive prices higher.

While the global equity markets may not have reacted to news updates from the State of Florida, the impact may be evident in the months ahead. Florida is among the top five US states by GDP, with a GDP equivalent to Mexico.

US Equity Markets Tumble as Inflation and Economic Woes Hit Sentiment

At the time of writing, the Dow and the S&P 500 were down 1.64% and 1.88%, respectively, with the NASDAQ 100 sliding by 3.01%.

Amazon.com was down 3.34%, with Disney and Walmart seeing losses of 1.73% and 0.50%, respectively. Oil companies were also in the red, with Chevron down 1.41% and BP PLC falling by 1.28%.

S&P 500 (SPY) Moves Lower As Traders Focus On Weak Economic Data

Key Insights

  • Weak Services PMI report and disappointing New Home Sales data pushed S&P 500 to new lows. 
  • Energy stocks enjoyed healthy demand amid strong rally in the oil markets. 
  • Twitter retreated as a whistleblower suggested that the company misled regulators about spam accounts. 

S&P 500 Remains Under Pressure

S&P 500 moved lower today as traders reacted to the disappointing Services PMI report and weak New Home Sales data. Dow Jones finished the day below the 33,000 level.

Interestingly, the market made an attempt to gain upside momentum after the release of the Services PMI report as some traders were ready to bet that the Fed would be more dovish due to problems in the services sector.

However, Treasury yields have quickly started to move higher, putting additional pressure on stocks. At this point, traders are not ready to increase purchases of stocks. Most likely, trading will stay choppy and volatile ahead of the Jackson Hole Symposium, which starts on August 25.

S&P 500

S&P 500 managed to settle below the 20 EMA at 4160. Today’s attempt to get back above this level was not successful, which is a bearish sign.

The nearest support level for S&P 500 is located at the recent lows at 4115. In case S&P 500 declines below this level, it will head towards the 50 EMA at 4080. A move below the 50 EMA will open the way to the test of the support at 4040.

On the upside, a successful test of the resistance at the 20 EMA will push S&P 500 towards the next resistance level at 4190. If S&P 500 manages to settle back above this level, it will head towards the resistance at 4220.

Energy Stocks Outperform As Oil Moves To New Highs

It’s a good day for energy stocks, which were led by big names like Exxon Mobil, Chevron, and Occidental Petroleum. Traders look ready to bet that WTI oil has bottomed, so they increase purchases of leading energy stocks.

The basic materials sector also moved higher today. Strong copper markets provided significant support to shares of copper producers like Freeport-McMoRan, Teck Resources, and Hudbay Minerals.

Tech stocks had a mixed session. However, it looks that market sentiment towards tech stocks remains bearish due to higher yields and disappointing news from Zoom and Twitter.

Zoom released an earnings report which indicated that the company’s growth was slowing down. The market was merciless, and the stock lost more than 15% of its value.

Twitter found itself under significant pressure after a whistleblower complained that the company misled regulators about spam accounts and defenses against hackers. The news is great for Elon Musk who is using the topic of spam accounts as he tries to walk away from his deal to buy Twitter.

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

Best Energy ETFs to Buy Now for June 2022

Big Money is still flowing into energy. There are several ETF plays within energy, many of which contain powerhouse stocks. Inflows have been strong, so there could be some overextension at play and maybe a pullback. Still, the longer-term outlook remains strong.

Markets and Big Money in the Last 6 Months

My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. Our research shows Big Money moves markets.

We created the Big Money Index (BMI), which is a 25-day moving average of large-scale investor buy and sell activity. The BMI has been on a big downward trend since April. Generally, money has been flowing out of market, presumably into “safer” assets that have become more attractive of late. But buying is ticking up of late:

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On May 24, the BMI hit oversold territory. It stayed there for a couple days and buying has since pushed it higher, at least momentarily. The key takeaway is when the BMI hits oversold, forward-looking returns stretching from one to 24 months are positive, on average. An oversold BMI is a hugely bullish signal.

But in the face of doubt, investors have flocked to energy this year, making the traditionally defensive sector look appetizing for growth. Given these conditions, we’ve identified some energy ETFs we think have great long-term potential: FCG, FTXN, FXZ, PXE, and FFTY.

Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best energy ETF opportunities for June 2022.

First Trust Natural Gas ETF (FCG) Analysis

Natural gas is becoming more popular as a potential “bridge” energy source between heavy reliance on fossil fuels to a cleaner energy future. Big Money believes in it as it’s been buying, especially since October of last year, which always helps:

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FCG holds several big stocks. One example is Coterra Energy Inc. (CTRA), which has phenomenal one-year sales growth of 161.2% and a profit margin of 31.6%. It’s one of the biggest holdings in FCG and is becoming a Big Money magnet:

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First Trust Nasdaq Oil & Gas ETF (FTXN) Analysis

Thanks to the geopolitical situation right now, oil and gas are back. Consequently, prices for energy are up. That bodes well for energy ETFs with fundamentally sound stocks. The FTXN chart reflects the energy boom:

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One great stock FTXN holds is Marathon Oil Corporation (MRO). It has one-year sales growth of 80.9% and a profit margin of 16.9%. As you can see, Big Money has been buying MRO in chunks over the past year, with heavy buying starting in late summer 2021 and really ramping up this year:

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First Trust Materials AlphaDEX Fund (FXZ) Analysis

While not a pure energy fund, FXZ is squarely within the energy/industrials/materials mix and has rock-solid fundamentals. It’s been on an upward trend since last summer and saw Big Money action back in March:

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A fantastic stock within FXZ is Westlake Chemical Corporation (WLK), an international manufacturer and supplier of petrochemicals, polymers, and building products. It’s jumped since the new year, which isn’t surprising given its growing sales (one-year sales growth of 57.0%) and three-year EPS growth of 143.4%. WLK has been attracting lots of Big Money:

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Invesco Dynamic Energy Exploration & Production ETF (PXE) Analysis

As always with ETFs, fundamental strength within underlying assets is a high priority. PXE is loaded with great stocks. It’s been progressing well since last year, and jumped nearly 11% in the last month:

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A great stock within this ETF is Occidental Petroleum Corporation (OXY). Warren Buffett recently disclosed big buying in OXY. One of the best investors of all time buying in is a good sign. It’s had one-year sales growth of 51.5% and sports a profit margin of 10.7%. The Big Money has been scooping up OXY all year and the stock has more than doubled:

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Innovator IBD 50 ETF (FFTY) Analysis

Investors Business Daily releases an “innovator list” every year and this ETF tracks those names. While it’s not a dedicated energy ETF, but many of its top holdings right now are energy stocks. In fact, the top five holdings are all energy firms. It’s down right now, but that may prove to be a big bargain for long-term investors:

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One great stock in FFTY is Matador Resources Company (MTDR), an oil and gas exploration firm. It’s seen Big Money buying because MTDR is fundamentally strong – it has one-year sales growth of 117.7% and a profit margin of 31.4%. But it’s possibly overextended and may pull back:

Here’s a Big Money recap:

  • When Big Money buying heats up, stocks and ETFs tend to rise
  • Deep selling on great quality can be a phenomenal opportunity
  • Repeated buying usually means outsized gains

Bottom Line and Explanatory Video

FCG, FTXN, FXZ, PXE, and FFTY are my top energy ETFs for June 2022. While they’re not all pure energy plays, they all have sizeable stakes in energy companies and solid fundamentals. These picks can rise higher, in my opinion, largely because they each hold great stocks and energy is in demand.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in FCG, FTXN, FXZ, PXE, FFTY, CTRA, MRO, WLK, OLK, or MTDR at the time of publication.

Contact:

https://mapsignals.com/contact/

Best ETFs to Buy Now for June 2022

Investors continue to weather the market storms as volatility has become the norm. Selling is rampant, frightening investors with the uncertainty. Naturally, they’re seeking safety.

But money is flowing into certain sectors, which I’ll show you in a bit. First, let’s talk about Big Money – what it is, how it moves markets, and what it’s been doing lately.

Markets and Big Money in the Last 6 Months

My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. Our research shows Big Money moves markets. And right now, Big Money has been selling stocks and ETFs, driving markets downward:

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That’s making major indices dip along with the Big Money Index (BMI), which is a 25-day moving average of large-scale investor buy and sell activity. It’s nosedived recently and could be headed for more of the same:

In the face of uncertainty, investors seek safety. It’s coming in certain sectors, like energy, staples, utilities, and other traditionally defensive areas. Given these conditions, we’ve identified some ETFs we think have great long-term potential: IYE, FCG, FTXG, FXU, and XLP.

Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.

Let’s get to the five best ETF opportunities for June 2022.

iShares U.S. Energy ETF (IYE) Analysis

The current geopolitical situation has brought oil and gas back to the forefront while driving up prices for energy. As you can see, Big Money has been buying IYE in chunks over the past year, with heavy buying starting in October 2021 and really ramping up this year:

IYE holds several big stocks. One example is Occidental Petroleum Corp. (OXY), which has 1-year sales growth of 51.5% and a profit margin of 10.7%. Investing legend Warren Buffett recently announced a big stake in OXY too. Here is the one-year Big Money action for OXY:

First Trust Natural Gas ETF (FCG) Analysis

Natural gas is seen by some as a bridge energy source between fossil fuels and cleaner sources like wind, partly because of its ample supply. As global energy markets continue to shift, natural gas is becoming more popular. Big Money has been buying too, which always helps:

One great stock FCG holds is Coterra Energy Inc. (CTRA). This independent oil and gas company has seen big three-year sales growth of 41.5% and sports a profit margin of 31.6%. Earnings have been strong too, growing 106% over three years. The Big Money is jumping in on CTRA:

First Trust NASDAQ Food & Beverage ETF (FTXG) Analysis

We can always count on food demand, right? It’s biological. Well, in all seriousness, global demand for food as well as the products and services used to create it is strong and made stronger by geopolitical issues. That’s reflected in FTXG. While there have been some dips, the trend on this one points up:

A fantastic stock within FTXG is Archer-Daniels-Midland Company (ADM), the food processor and producer of agricultural commodities. It’s rocketed since the new year, which isn’t surprising given its growing sales (one-year sales growth of 32.4%) and three-year EPS growth of 19.1%. ADM has been drawing in lots of Big Money:

First Trust Utilities AlphaDEX Fund (FXU) Analysis

When investors seek safety, that often means utilities that pay dividends. As always with ETFs, fundamental strength within underlying assets is a high priority. We see that with FXU, which has peaks and valleys along the way, but an overall positive trajectory:

One rock-solid dividend stock within this ETF is NRG Energy, Inc. (NRG), an energy producer, seller, and distributor. Big Money has been all over it recently, with nine buy signals in the last month alone. NRG grew sales in one year by 200% and EPS by 314% over three years. It pays a nearly 3.1% current dividend and has jumped in price significantly since a year ago:

Consumer Staples Select Sector SPDR ETF (XLP) Analysis

It’s rare to get excited about consumer staples, but it’s justified right now. XLP holds huge household names and has seen Big Money lifting its price recently. It’s clear that in the past year, buying at the low points has worked out:

One great stock in XLP is Costco Wholesale Corporation (COST), the bulk warehouse retailer. COST is fundamentally strong – it has one-year sales growth of 17.5% and a three-year EPS growth rate of 16.7%. But it’s down 24% this year so far. However, it wouldn’t surprise me to see this one rise again (it’s had 48 Top 20 Big Money buy signals since 1991):

Here’s a Big Money recap:

  • When Big Money buying heats up, stocks and ETFs tend to rise
  • Deep selling on great quality can be a phenomenal opportunity
  • Repeated buying usually means outsized gains

Bottom Line and Explanatory Video

 

IYE, FCG, FTXG, FXU, and XLP are my top ETFs for June 2022. They cover mostly defensive sectors where money is flowing in as investors seek shelter. These picks can rise higher, in my opinion, largely because they each hold great stocks. With markets rocky, safety is at a premium, and these ETFs are proving to be havens right now.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds no positions in IYE, FCG, FTXG, FXU, XLP, OXY, CTRA, ADM, or NRG in at the time of publication, but holds long positions in COST in managed accounts.

Contact:

https://mapsignals.com/contact/

Volatility Retreats As Stocks & Commodities Rally

The CBOE Volatility Index (VIX) is a real-time index. It is derived from the prices of SPX index options with near-term expiration dates that are utilized to generate a 30-day forward projection of volatility. The VIX allows us to gauge market sentiment or the degree of fear among market participants. As the Volatility Index VIX goes up, fear increases, and as it goes down, fear dissipates.

Commodities and equities are both showing renewed strength on the heels of global interest rate increases. Inflation shows no sign of abating as energy, metals, food products, and housing continues their upward bias.

During the last 18-months, the VIX has been trading between its upper resistance of 36.00 and its lower support of 16.00. As the Volatility Index VIX falls, fear subsides, and money flows back into stocks.

VIX – Volatility S&P 500 Index – CBOE – Daily Chart

VIX

SPY Rallies +10%

The SPY has enjoyed a sharp rally back up after touching its Fibonacci 1.618% support based on its 2020 Covid price drop. Money has been flowing back into stocks as investors seem to be adapting to the current geopolitical environment and the change in global central bank lending rate policy.

Resistance on the SPY is the early January high near 475, while support remains solidly in place at 414. March marks the 2nd anniversary of the 2020 Covid low that SPY made at 218.26 on March 23, 2020.

SPY – SPDR S&P 500 ETF TRUST – ARCA – Daily Chart

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Berkshire Hathaway Record High $538,949!

Berkshire Hathaway is up +20.01% year to date compared to the S&P 500 -4.68%. Berkshire’s Warren Buffet has also been on a shopping spree, and investors seem to be comforted that he is buying stocks again. Buffet reached a deal to buy insurer Alleghany (y) for $11.6 billion and purchased nearly a 15% stake in Occidental Petroleum (OXY), worth $8 billion.

These acquisitions seem to be well-timed as insurers and banks tend to benefit from rising interest rates, and Occidental generates the bulk of its cash flow from the production of crude oil.

As technical traders, we look exclusively at the price action to provide specific clues as to the current trend or a potential change in trend. With that said, Berkshire is a classic example of not fighting the market. As Berkshire continues to make new highs, its’ trend is up!

BRK.A – Berkshire Hathaway Inc. – NYSE – Daily Chart

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Commodity Demand Remains Strong

Inflation continues to run at 40-year highs, and it appears that it will take more than one FED rate hike to subdue prices. Since price is King, we definitely want to ride this trend and not fight it. It is always nice to buy on a pullback, but the energy markets at this point appear to be rising exponentially. The XOP ETF gave us some nice buying opportunities earlier at the Fibonacci 0.618% $71.78 and the 0.93% $93.13 of the COVID 2020 range high-low.

Remember, the trend is your friend, as many a trader has gone broke trying to pick or sell a top before its time! Well-established uptrends like the XOP are perfect examples of how utilizing a trailing stop can keep a trader from getting out of the market too soon but still offer protection in case of a sudden trend reversal.

XOP – SPDR S&P Oil & Gas Explore & Product – ARCA – Daily Chart

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Knowledge, Wisdom, and Application Are Needed

It is important to understand that we are not saying the market has topped and is headed lower. This article is to shed light on some interesting analyses of which you should be aware. As technical traders, we follow price only, and when a new trend has been confirmed, we will change our positions accordingly. We provide our ETF trades to our subscribers, and somewhat surprisingly, we entered five new trades last week, four of which have now hit their first profit target levels.

Our models continually track price action in a multitude of markets, asset classes, and global money flow. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list.

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Furthermore, successfully trading is not limited to when to buy or sell stocks or commodities. Money and risk management play a critical role in becoming a consistently profitable trader. Correct position sizing utilizing stop-loss orders helps preserve your investment capital and allows traders to manage their portfolios according to their desired risk parameters. Additionally, scaling out of positions by taking profits and moving stop-loss orders to breakeven can complement ones’ success.

What Strategies Can Help You Navigate the Current Market Trends?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe.

We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

 

Shares of Occidental Rise After Company Swung to Profit; Target Price $60

U.S. shale producer Occidental Petroleum swung to profit in the fourth quarter on higher revenue, thanks to higher energy prices.

The oil and gas producer said adjusted earnings of $1.48 per share, beating the Wall Street consensus estimates of $1.04 per share. The company reported a profit of $1.34 billion, or $1.37 per share.

That was better compared to a loss of $1.31 billion, or $1.41 per share, seen in the same period a year ago. Occidental said its revenue surged to $8.01 billion, up from $3.35 billion in the same period last year.

Oil and gas pre-tax income on continuing operations for the fourth quarter was $2.1 billion, compared to pre-tax income of $1.5 billion for the third quarter of 2021.

Occidental Petroleum stock rose over 1.5% to $39.52. The stock rose over 34% so far this year after surging more than 67% in 2021.

Analyst Comments

Occidental Petroleum (OXY) provided a refreshing update on a return of capital program that includes a new $3bnbuyback (10% of market), a 1.3% fixed dividend and a $20bn absolute debt target that inevitably progresses the mission towards investment grade. 4Q EBITDAX beat on chems/midstream that carries over into FY22 while production and capex guidance were line with corp over rage driven by low-carbon venture spend,” noted David Deckelbaum, equity analyst at Cowen.

Occidental Petroleum Stock Price Forecast

Thirteen analysts who offered stock ratings for Occidental Petroleum in the last three months forecast the average price in 12 months of $46.33 with a high forecast of $60.00 and a low forecast of $34.00.

The average price target represents a 19.04% change from the last price of $38.92. Of those 13 analysts, nine rated “Buy”, three rated “Hold”, while one rated “Sell”, according to Tipranks.

Morgan Stanley’s base target price was $213 with a high of $474 under a bull scenario and $34 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the biotechnology company’s stock.

“Compelling risk-reward. Rebounding margins and strong FCF allowed Occidental Petroleum (OXY) to continue making good progress on debt reduction with its high-quality upstream assets and above-average FCF/equity yield (although FCF/EV still lags peers),” noted Devin McDermott, Equity Analyst And Commodities Strategist at Morgan Stanley.

“High-quality assets and differentiated exposure to a low carbon future. In addition to operating high-quality upstream assets, Occidental Petroleum (OXY) has achieved peer-leading emission reductions and maintains investments in low carbon technologies.”

Several analysts have also updated their stock outlook. Credit Suisse raised the target price to $35 from $33. Susquehanna lifted the price target to $46 from $41. Piper Sandler upped the target price to $44 from $43. Citigroup increased the price objective to $40 from $38.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator gives a strong buying opportunity.

Check out FX Empire’s earnings calendar

Nasdaq Ekes Out Record Finish as Wall St Ends Higher

The energy sector rose, reversing most of the losses suffered during the first three days of the week. Thursday’s performance was fueled by U.S. crude prices jumping 2% on a sharp decline in U.S. inventories and a weaker dollar.

Cabot Oil & Gas Corp and Occidental Petroleum Corp were among the largest risers, with oil majors Exxon Mobil and Chevron Corp also posting solid gains.

The technology index slipped into negative territory, as some of the industry’s largest companies saw their recent upward momentum stall.

Amazon.com Inc, Microsoft Corp, Facebook Inc and Google-owner Alphabet Inc were all under water. A notable exception was Netflix Inc, which hit an all-time high intraday.

U.S. stocks have regularly hit record highs over the past few weeks as a solid corporate earnings season and hopes of continued central bank support underpinned confidence as data showed the country’s post-pandemic economic growth was beginning to slow.

Data on Thursday showed the number of Americans filing new claims for jobless benefits fell last week, although the focus will be on the Labor Department’s monthly jobs report on Friday to set the stage for the Fed’s policy meeting later this month.

The report is likely to show job growth slowed to 750,000 in August from 943,000 the previous month.

“You have to see very wide beats or misses in this data to really change people’s minds,” said Greg Boutle, U.S. head of equity and derivative strategy at BNP Paribas.

“Investors are either in this renormalization camp that thinks inflation will not happen, or they believe there will be some persistence to inflation. Really, it will be a collection of beats or misses that will move the needle for investors and the Fed, rather than a single data point.”

Unofficially, the S&P 500 gained 12.92 points, or 0.29%, to end at 4,537.01 points, while the Dow Jones Industrial Average  gained 129.38 points, or 0.37%, to 35,441.91. The Nasdaq Composite  rose 21.15 points, or 0.14%, to 15,330.53.

Despite deadly flash floods in New York City, trading on Wall Street was operating normally.

Wells Fargo rose after three straight sessions of losses. The lender had been weighed by a report it could face further regulatory sanctions over the pace of compensating victims of a years-long sales practice scandal.

Contracting services company Quanta Services Inc jumped to a record high after saying it would buy privately held Blattner Holding Company in a deal valued at about $2.7 billion.

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

(Reporting by Shashank Nayar in Bengaluru and David French in New York; Editing by Aditya Soni and Lisa Shumaker)

A Post-Covid Hangover – Should You Worry About Your Portfolio?

Amazon executives noted shifting consumer habits as the pandemic eases and people become more mobile. Amazon forecasted the next quarter’s sales at between $106 billion and $112 billion, compared to Wall Street expectations for right around $119 billion.

Amazon’s projections would still represent growth of +10% to +16%. Keep in mind, bears are also pointing to ongoing fears of supply chain hiccups, higher-trending inflation, and new coronavirus outbreaks. Earnings come at a busy pace again today with results from Caterpillar, Cerner, Chevron, CNH Industrial, Colgate Palmolive, Enbridge, Exxon Mobil, Johnson Control, and Procter & Gamble.

The worry on Wall Street is that this new normal rate of growth will be slower than many analysts and trading firms are forecasting coupled with higher inflation and or supply chain dislocations corporate profits could fall under some pressure or in this case be less than Wall Street is forecasting for the next few quarters. Bulls expect more consumer spending will shift from goods and pandemic-related services (delivery, video games, cloud/collaboration software) but are still betting on pent-up demand for things people missed out on during lockdowns, as well as goods and services that are currently in short supply.

Data to watch

Updated inflation data is also on tap with the ISM Manufacturing Index on Monday and the Services Index on Wednesday.

There will be plenty more earnings next week too, including Simon Properties and Zoom on Monday; Activision Blizzard, Alibaba, Amgen, Clorox, ConocoPhillips, Eli Lilly, Fidelity, Match Group, Monster Beverage, Occidental Petroleum, and Phillips 66 on Tuesday; Allstate, CVS, Etsy, General Motors, Kraft Heinz, Marathon Petroleum, MetLife, MGM Resorts, Rocket Companies, Roku, Trane, and Uber on Wednesday; Adidas, AMC, Carvana, Cigna, Cloudflare, Corteva, Duke Energy, Kellogg, Moderna, Nintendo, Novo Nordisk, Siemens, Square, Wayfair, Zillow, and Zoetis on Thursday; and Dish Network, Dominion Energy, and DraftKings on Friday.

Insider Accumulation

ES ##-## (Daily) 2021_08_01 (19_25_02)

I have mixed feelings about SP500. There are a few signs of weakness. However, it might be the result of low summer activity. Advance-Decline Line is clearly bearish. Insider Accumulation is also not that strong. Moreover, the Volatility Index is very low and potentially it could bring a pullback. In any case, SP500 futures failed to close the week above Gann resistance. And that is also a negative sign.

The Federal Reserve policy is still supportive. But keep in mind, that SP500 has rallied around 100% since the pandemic bottom without any pullback. And the retest of key support zones near 4200 and 4000 is realistic.

On the other hand, the continuation of the rally is also possible but only if price sustains above 4400. If that happens, bulls will target 4500 and 4600 in extension.

Occidental Petroleum Shares Drop About 4% as Q3 Earnings Disappoint

Occidental Petroleum, an international oil & gas exploration and production company, reported a worse-than-expected loss in the third quarter as the ongoing COVID-19 pandemic hammered demand for fuel, sending shares down about 4% in after-hours trading on Monday.

The oil and gas producer said its net loss came in at $3.8 billion, or $4.07 per diluted share, and an adjusted loss attributable to common stockholders of $783 million, or $0.84 per diluted share. That was worse than the market expectations for a loss of $0.73 per diluted share.

“Occidental Petroleum (OXY) beat 3Q FCF estimates on 38% lower capex and better results from chems and midstream, while production was in line with the street. FY20 capex is unchanged, as 4Q spend is guided 24% above ests driven by activity additions, and adjusted production guide is 6% below ests, hurt by GOM downtime/Permian timing, even as OXY adds another 15 wells in the Permian this year and 1 rig in the DJ,” said David Deckelbaum, equity analyst at Cowen and Company.

Occidental Petroleum shares plunged about 4% to $11.75 in after-hours trading on Monday; the stock is down around 70% so far this year.

Occidental Petroleum Stock Price Forecast

Thirteen equity analysts forecast the average price in 12 months at $12.82 with a high forecast of $19.00 and a low forecast of $8.00. The average price target represents a 4.82% increase from the last price of $12.23. From those 13 analysts, three rated “Buy”, eight rated “Hold” and two rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $11 with a high of $29 under a bull-case scenario and $1 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the oil & gas exploration company’s stock. UBS lowered the stock price forecast to $10 from $12 and Mizuho decreased the target price to $11 from $16.

Several other analysts have also recently commented on the stock. Occidental Petroleum had its price target dropped by equities research analysts at Bank of America to $29 from $30 in Sept. The firm currently has a “buy” rating on the oil and gas producer’s stock. JP Morgan cuts target price to $12.50 from $13; Simmons Energy lowered the target price to $12 from $19; Capital One Securities cuts target price by $2 to $12.

Analyst Comments

“Leverage remains elevated, but maturity outlook is manageable. Occidental Petroleum (OXY) has continued to extend maturities following the recent opening of the high-yield debt market. High-quality assets and differentiated exposure to a low carbon future. In addition to operating high-quality upstream assets, OXY has achieved peer-leading emission reductions and maintains investments in low carbon technologies,” said Devin McDermott, equity and commodities strategist at Morgan Stanley.

“Reasonable valuation. Since the oil price collapse on March 6, OXY has meaningfully underperformed large-cap and integrated peers. We now forecast an above-average FCF yield and see a more balanced risk-reward,” McDermott added.

Check out FX Empire’s earnings calendar

Occidental Petroleum Posts Loss of $8.35 billion in Q2 as COVID-19 Batters Oil Demand; Target Price $7

Occidental Petroleum, an international oil & gas exploration and production company, reported a loss of $8.35 billion in the second quarter, largely affected by the steep decline in energy prices due to significant drop in demand amid COVID-19 pandemic, sending its shares down about 6% in after-hours of trading on Monday.

The oil and gas producer said its net loss came in at $8.35 billion, or $9.12 per share, in the quarter ended on June 30, 2020, down from $635 million earnings, or 84 cents per share, a year earlier. Excluding one-time items, Occidental Petroleum lost $1.76 per share, compared with analysts’ average estimates of $1.68, according to Refinitiv IBES, Reuters reported.

“Occidental Petroleum’s 2Q EBITDAX was below our estimates on pricing but exceeded consensus. The focus will be on 2H20 guide that includes 3Q production 7% below our estimates given larger domestic declines and 4Q that is 10% below,” said David Deckelbaum, equity analyst at Cowen.

“Without asset sale clarity, Occidental’s declining asset base will be in focus, particularly as capex shifts domestically heading into 2021 w/ guided maintain capex of $2.9 billion that is in-line with our model.”

Occidental expects its oil and gas production to decline 13% in the ongoing quarter over last, and more 5% in the last quarter, to 1.16 million barrels per day. The average price Occidental received for crude oil plunged over 60% to $23.17 per barrel in Q2 as the coronavirus outbreak crushed demand for fuel.

Occidental shares slumped about 6% to $15.55 in after-hours of trading on Monday. The stock is down over 60% so far this year.

Executive comment

“We continue to make progress on our debt structure and have significantly exceeded our cost savings targets while delivering operational excellence across our business,” President and Chief Executive Officer Vicki Hollub said in a press release.

“These decisive financial and operational actions reflect our leadership as a low-cost operator, positioning us for success when market conditions improve.”

Occidental Petroleum stock forecast

Sixteen analysts forecast the average price in 12 months at $18.58 with a high forecast of $33.00 and a low forecast of $8.00. The average price target represents a 12.74% increase from the last price of $16.48. From those 16, four analysts rated ‘Buy’, six analysts rated ‘Hold’ and six rated ‘Sell’, according to Tipranks.

Morgan Stanley target price is $7 with a high of $29 under a bull scenario and $1 under the worst-case scenario. JP Morgan raised its price target to $19 from $17.

Several other equity analysts have also updated their stock outlook. Occidental Petroleum had its price target boosted by Piper Sandler to $20 from $13.00. Piper Sandler currently has a neutral rating on the oil and gas producer’s stock. Barclays decreased its price objective to $20 from $21 and set an equal weight rating on the stock. At last, SunTrust Banks increased their price objective to $25 from $13.

We think it is good to hold for now as 100-day Moving Average and 100-200-day MACD Oscillator signal a selling opportunity. However, can sell with a target price of $7 in a worst-case scenario.

Analyst comment

“Onerous debt maturity schedule. Occidental Petroleum has $11 billion of debt due over the next three years in a backdrop of limited free cash flow and capital markets access. The risk to asset sale execution. At current commodity prices, we see risk to additional proceeds from asset sales,” said Devin McDermott, equity analyst and commodities strategist at Morgan Stanley.

“Meaningful leverage reduction is challenged at current commodity prices. We project elevated leverage (includes 100% of preferred equity) of 5-6x net debt/EBITDAX over the next two years and 4.5-5x thereafter,” the analyst added.

Upside and Downside Risks

1) Higher commodity prices. 2) Service cost deflation. 3) Asset sale execution. 4) Upside to synergies associated with the acquisition of Anadarko Petroleum, Morgan Stanley highlighted as major upside risks to Occidental Petroleum.

1) Lower commodity prices. 2) Service cost inflation. 3) Regulatory risk in Colorado and global geopolitical risk. 4) Limited asset sale execution. 5) Potential to not achieve synergy targets associated with APC acquisition, are the major downside risks.