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The Real Problem Arrives

It has been a tough January. I want to use a few charts to illustrate my point about why the real problem is just arriving. It might lead to a scenario across all of the charts (both growth and value) over the next six months to a year. It doesn’t have…

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It has been a tough January.

I want to use a few charts to illustrate my point about why the real problem is just arriving. It might lead to a scenario across all of the charts (both growth and value) over the next six months to a year. It doesn't have to play out this way, as it can be different this time. A long-term chart like this should help us be aware of the three prior situations when the PPO indicator has soared to this level of enthusiasm.

We got a PPO sell signal on the December close of the Nasdaq Composite. Of the three readings at this level, the pain endured was significant and long-lasting. It was also not easy to trade through, as it is a volatile series of trades with a downward-sloping trend.

Let's look at the examples where the PPO momentum indicator ran up to a euphoric level near 15 closely, to see what happened in history. For comparison, the COMPQ fell 30% in March 2020 and has rallied 130% over 21 months.

1980

In early 1980, the Nasdaq fell 26% in a month. It subsequently rallied 85% over the next year. It took two months to fall below the 200-DMA but a series of three volatile waves followed for the next year. Each were significant trading opportunities, but you had to sell your positions to make gains on the year.

1982

From the 1982 low, another rally started. And it was also a massive rally. After rallying over 100%, the market pulled back 30% in an unrelenting wave lower. I'll let all the other chartists bring in the bond market, the US Dollar, the price of oil, the energy crisis, Iran, etc. The world always has something going on!

The Year 2000

There was nothing like it. The internet was a thing. Companies were measured on how many eyeballs were looking at their websites. New companies came out with outlandish valuations and promises of the future revenue stream. Alternative energy was also a big theme.

The Asian Financial Crisis had happened in 1997-1998. In 1998, we had a three-month pullback of 30% as LTCM imploded. The follow-on rally soared 250% in 18 months to the internet top. Trading volume skyrocketed 50% in the last quarter of 1999. The downstroke to the 200-DMA was quick. The market wobbled for six weeks. After the wobble, the Nasdaq Composite lost all of the investor support as they sold and sold and sold. The $SPX made a final high in September 2000 (not shown) just below the $SPX March high, but relented to the selling pressure as well.

2022

Fast-forward twenty years to the market run of 2021.

We have seen volume in late 2021 pick up meaningfully from the September levels. There have been three volume surges of note; one when COVID-19 started, the SPAC boom in February 2021 and during the final highs that we had before the PPO sell signal on the monthly chart above. The Nasdaq made the highest closing high in November 2021.

Conclusion

As the title of the article implies, we are at a turning point. The optimistic folks will suggest that this is a pullback on a road to euphoria as the world economies open up. I think Cathie Wood called a value-investing approach "Pavlov's dogs", as investors expect everything she invests in to continue cratering but value to hold up. She thinks the value stocks are way overvalued! It is an interesting paradigm where each person's bias shows up! Optimists say the bubble we had gave consumers money, and they will be out in full force to spend it. Back to growth!

Will the damage we saw in the three historic similarities create the same sort of market response? That is the real problem and it has arrived in a similar fashion. There are 75 stocks on the S&P 500 with price-to-sales ratios of 10 or higher. That is a staggering number. Our world has a global energy crisis that we are slamming into. Fund managers have supported market valuations at levels well above the long-term average. Consumer confidence numbers are declining. The world of optimism has created at least 150 cryptocurrencies, apparently all worth something. Investors can buy NFTs that double after you buy them, while people playing games are buying land in virtual reality games with crypto converted from US Dollars. I could go on. None of it matters until it does. We can have a lot slower year trading 2022 than 2021, but I need to wait for the opportunities. Most importantly, capital preservation is the key to winning after having such a massive run.

For me, I am an energy bull, a mining bull and starting to think about becoming a gold bull. But the cracking of this market has made me reel in my trading size and number of positions. I penned an article discussing the potential for the market to bounce as the $SPX hits the 200-DMA, which happened Friday morning. My videos for Market Buzz and Your Daily Five from this week also talked about the market setup. You might enjoy watching my entry for StockCharts TV's end-of-year review, 2021's Most Influential Charts. Stay safe, and be aware of the prior instances of euphoria. It may play out differently this time, but the previous three examples have a lot of similarities to the current setup.

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Economics

5 Top Consumer Stocks To Watch Right Now

Are these consumer stocks a buy amid the earnings season?
The post 5 Top Consumer Stocks To Watch Right Now appeared first on Stock Market News, Quotes,…

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5 Trending Consumer Stocks To Watch In The Stock Market Now         

As we tread through the earnings season, consumer stocks could be worth watching in the stock market this week. This would be the case since a number of big consumer names such as Costco (NASDAQ: COST) and Macy’s (NYSE: M) will be posting their financials for the quarter. As such, investors will be keeping an eye on these reports for clues on the strength of consumer spending amid this period of high inflation.

However, despite the soaring prices across the economy, it seems that consumers are surprisingly showing resilience. According to the Commerce Department, retail sales in April outpaced inflation for a fourth straight month. This could suggest that consumers as a whole were not only sustaining their spending, but spending more even after adjusting for inflation. Ultimately, it could be a reassuring sign that consumers are still supporting the economy and helping to diminish the narrative of an incoming recession. With that being said, here are five consumer stocks to check out in the stock market today.

Consumer Stocks To Buy [Or Sell] Right Now

Nordstrom

retail stocks (JWN stock)

Starting off our list of consumer stocks today is Nordstrom. For the most part, it is a fashion retailer of full-line luxury apparel, footwear, accessories, and cosmetics among others. The company operates through multiple retail channels, boutiques, and online as well. As it stands, Nordstrom operates around 100 stores in 32 states in the U.S. and three Canadian provinces.

Yesterday, the company reported its financials for the first quarter of 2022. Starting with revenue, Nordstrom pulled in net sales worth $3.47 million for the quarter. This marks an increase of 18.7% from the same quarter last year. Its Nordstrom banner saw net sales rise by 23.5% year-over-year, exceeding pre-pandemic levels. Next to that, its Nordstrom Rack banner saw a 10.3% increase in net sales from last year. Besides, net earnings were $20 million, with earnings per share of $0.13 for the quarter. Considering Nordstrom’s solid quarter, should you invest in JWN stock?

[Read More] Best Stocks To Invest In Right Now? 5 Value Stocks To Watch This Week

The Wendy’s Company

best consumer stocks (WEN stock)

Next up, we have The Wendy’s Company. For the most part, it is the holding company for the major fast-food chain, Wendy’s. Being one of the world’s largest hamburger fast-food chains, the company boasts over 6,500 restaurants in the U.S. and 29 other countries. The chain is known for its square hamburgers, sea salt fries, and the Frosty, a form of soft-serve ice cream mixed with starches. WEN stock is rising by over 8% on today’s opening bell.

According to an SEC filing, Wendy’s largest shareholder, Trian Partners, is looking into making a potential deal with the company. Trian said that it is considering a deal to “enhance shareholder value.” Also, the firm adds that this could lead to an acquisition or business combination. In response, Wendy’s stated that it is constantly reviewing strategic priorities and opportunities. It added that the company’s board will carefully review any proposal from Trian. Given this piece of news, will you be watching WEN stock?

[Read More] 4 Semiconductor Stocks To Watch In The Stock Market Today

Foot Locker

FL stock

Another stock investors could be watching is the shoes and apparel company, Foot Locker. In brief, the company uses its omnichannel capabilities to bridge the digital world and physical stores. As such, it provides buy online and pickup-in-store services, order-in-store, as well as the growing trend of e-commerce. Some of its most notable brands include Eastbay, Footaction, Foot Locker, Champs Sports, and Sidestep. Last week, the company reported its results for the first quarter of the year.

For starters, total sales came in at $2.175 billion, a slight uptick compared to sales of $2.153 billion in the year prior. Next to that, Foot Locker reported a net income of $133 million. Accordingly, adjusted earnings per share came in at $1.60, beating Wall Street’s expectations of $1.54. CEO Richard Johnson added, “Our progress in broadening and enriching our assortment continues to meet our customers’ demand for choice. These efforts helped drive our strong results in the first quarter, which will allow us to more fully participate in the robust growth of our category going forward.”  As such, is FL stock one to add to your watchlist? 

Tyson Foods 

TSN stock

Tyson Foods is a company that built its name on providing families with wholesome and great-tasting protein products. Its segments include Beef, Pork, Chicken, and Prepared Foods. With some of the fastest-growing portfolio of protein-centric brands, it should not be surprising that TSN stock often comes to mind when investors are looking for the best consumer stocks to buy. 

Earlier this month, Tyson Foods provided its fiscal second-quarter financial update. The company’s total sales for the quarter were $13.1 billion, representing an increase of 15.9% compared to the prior year’s quarter. Meanwhile, its GAAP earnings per share climbed to $2.28, up 75% year-over-year. According to Tyson, these financial figures are a reflection of the increasing consumer demand for its brands and products. To top it off, the company was also able to reduce its total debt by approximately $1 billion. Thus, does TSN stock have a spot on your watchlist?

[Read More] Stock Market Today: Dow Jones, S&P 500 Rise, Wendy’s Stock Gains On Potential Deal

DoorDash

food delivery stocks (DASH Stock)

DoorDash is a consumer company that operates an online food ordering and delivery platform. In fact, it is one of the largest delivery companies in the U.S. and enjoys a huge market share. The company connects hundreds of thousands of merchants to over 25 million consumers in the U.S., Canada, Australia, and Japan through its local logistics platform. Accordingly, its platform allows local businesses to thrive in today’s “convenience economy,” as the company puts it.

On May 5, the company reported its first-quarter financials for 2022. Diving in, it posted a revenue of $1.5 billion, growing by 35% year-over-year. This was driven by total orders that grew by 23% year-over-year to $404 million. Along with that, it reported a GAAP gross profit of $662 million, an increase of 34% year-over-year. The company said that it added more consumers than any quarter since Q1 2021, due in part to the growth of its DashPass members. The growth in Monthly Active Users and average order frequency has helped it gain share in the U.S. Food Delivery category this quarter as well. Given DoorDash’s performance for the quarter, should you watch DASH stock?

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The post 5 Top Consumer Stocks To Watch Right Now appeared first on Stock Market News, Quotes, Charts and Financial Information | StockMarket.com.

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Economics

Finding Shelter in an Inverse ETF

As the old saying goes, “What goes up must come down.” Indeed, up until the recent selling wave caused by Russia’s war against Ukraine and the continued…

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As the old saying goes, “What goes up must come down.”

Indeed, up until the recent selling wave caused by Russia’s war against Ukraine and the continued effects of supply chain disruptions amid the COVID-19 pandemic, tech stocks, including semiconductors, were the darlings of the investment world. That is, it seemed as if the sky-high valuations of some tech stocks were sustainable in an atmosphere of seemingly perpetual growth.

That, of course, was not the case, and the too-good-to-be-true valuations were quickly brought down to earth by the forces of inflation and tight monetary policy. As a result, the tech-heavy Nasdaq entered a free-fall that has not yet found a bottom.

At the same time, that does not mean that we should abandon the sector as a lost cause. One such way to play the sector during its downhill slide is the exchange-traded fund (ETF) Direxion Daily Semiconductor Bear 3X Shares (NYSEARCA: SOXS).

As its title suggests, this is an inverse ETF, meaning that it is built to go up in value when its parent index goes down. Specifically, SOXS provides three times leveraged inverse exposure to a modified market-cap-weighted index of semiconductor companies that trade in American markets by using swap agreements, futures contracts and short positions.

While the index’s holdings are weighted by market capitalization, the fund’s managers cap the weights of the top five securities in the portfolio at 8% each. The weight of the remaining securities is capped at 4% each.

As of May 24, SOXS has been up 0.37% over the past month and up 24.73% for the past three months. It is currently up 60.47% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $258.15 million in assets under management and has an expense ratio of 1.01%.

In short, while SOXS does provide an investor with a way to invest in an inverse ETF, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

The post Finding Shelter in an Inverse ETF appeared first on Stock Investor.

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Stocks

Will Albertsons outperform due to its high return on equity for low beta?

Albertsons Companies Inc. (NYSE:ACI) is trading at $29. The stock has risen 81.25% from the IPO in the last quarter of 2020. In the two years since going…

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Albertsons Companies Inc. (NYSE:ACI) is trading at $29. The stock has risen 81.25% from the IPO in the last quarter of 2020. In the two years since going public, Albertsons Companies paid dividends each quarter. The annual dividend currently stands at $0.48, with a yield of 1.64%.

Albertsons is rated high on both value and growth. The company’s heritage has been built over the years since its founding in 1939. Today, the company is the second-largest traditional grocer in the US.

The company went public during a pandemic to fund new growth opportunities. However, it faces the headwinds of inflation and bear markets. Despite pressures, Albertsons will be among the few stocks that will outperform the market.

The ROE stands at 74.48%. This is a fundamental strength that should make investors troop to Albertsons. The EPS is at $2.8 and growing at more than 6.13%. At the valuation of $29, the PE is just about 10. All this for a beta of only 0.3, indicating a low risk.

Albertsons has support at $26.80 and resistance at $36.75

Source – TradingView

Albertsons has support at $26.80. This week, the stock has been bullish, having gained 7.82%. It is among a handful of stocks that have been braving the bear markets. This analysis projects that the stock will face some resistance at $36.75. However, it would break out at the next earnings release on July 28. If an investor were to take a position today, there is the likelihood of enjoying significant gains by the next earnings call.

Summary

Albertsons is an attractive value and growth stock. The share is trading at $29 with a price target of $36 by the end of July. Albertsons is also emerging as an attractive dividend stock.

The post Will Albertsons outperform due to its high return on equity for low beta? appeared first on Invezz.

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