My Weekly Stock Debrief (May 16 - 20)
Dear subscribers,
Welcome to My Weekly Stock’s debrief for week #19 of 2022 (May 16 -20), our weekly newsletter reviewing the stock market performance.
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1. Market Performance
The equity markets were down for the week, with the SP500 losing 3.0%, the Dow Jones 2.9%, and the NASDAQ 3.8%. The Dow posted an 8th consecutive weekly loss, its longest streak in 90 years. Inflation and disappointing earnings from major retailers like Walmart and Target further weighed on market sentiment and increased concerns about an upcoming economic recession.
SP500 briefly entered a bear market on an intraday basis this week (20% down vs. all-time high) but managed to avoid by a short margin. While a short-term bounce could be on the horizon, the market needs to break out of its 8-month downtrend channel before we can feel comfortable we won't see another low.
2. SP500 Sector Performance
Only 3 of the 11 SP500 sectors closed the week higher. This week, Energy and Health Care led and were up around 1%. Consumer cyclical and defensive lagged and declined by 7.8% and 8.1%, respectively.
Only 2 sector is positive year-to-date. Energy remains the indisputable winner of 2022 with a 47% gain. Communication Services and Consumer Cyclical are the worst performers in 2022, and the latter now down more than 30%.
3. SP500 Top / Bottom Stock Performers
Paramount (PARA) and Synopsys (SNPS) were the best performers of the SP500 this week. PARA rallied after Berkshire Hathaway announced a position in the company, while SNPS gained after a solid quarterly earnings release.
Meanwhile, retail stocks sold off after Walmart (WMT), and Target (TGT) reported worse-than-expected earnings. Both companies struggled with rising operating costs, driving the retail sector and the whole market down.
4. SP500 Breadth
Momentum remains poor, with 3 stocks out of 4 in the SP500 trading under their respective 200-day moving averages, declining 6 points vs. the previous week. 85% of the index is still in correction territory vs. their 52-week highs.
5. SP500 Daily Chart
The SP500 technical indicators are overall bearish. The index is trading below its 20, 50, and 200-day moving averages. We cannot rule out another new low for the year until the index reclaims its key trend lines.
6. Market Sentiment
Fear & Greed Index
CNN's Fear & Greed Index tracks seven sentiment indicators and is published daily.
On Friday, the indicator closed at the “Extreme Fear” level (11), a 1-point decrease vs. the previous week, and the VIX traded most of the week around 30.
AAII Investor Sentiment Survey
The American Association of Individual Investors surveys each week its members on the direction of the stock market for the next six months. The results are published weekly on Wednesdays.
The last AAII survey reported that 50% of the respondents had a bearish market outlook, remaining 20-points higher than the historical average.
7. Our Chart of the Week
Nvidia (NVDA) is reporting earnings next week. In the past 12 quarters, the 1-day stock performance post-earnings were positive in 58% of the time, for a 0.6% return and an average daily move of 4%.
8. Our Favorite Analysis of the Week
Energy is the best sector in 2022 and delivered excellent returns for our weekly stock picks. Since March, the sector has been consolidating, but it seems poised to break out to further new highs.
9. The Week Ahead
Next week, earnings releases are expected from more retailers, with Costco (COST) and Best Buy (BBY) reporting, as well as Technolgy stocks like Nvidia (NVDA) and Zoom (ZM).
Key economic reports for the week ahead include estimates for May PMI and the Consumer Sentiment Index. We can expect inflation to remain in the headlines next week with the release of the FOMC minutes on Wednesday and the PCE index on Friday, the FED’s preferred measure for inflation.
10. My Weekly Stock Pick
This week, our stock pick was Merck (MRK), and the stock closed up 3.0% (Monday open to Friday close) despite another negative week for the indexes. In 2022, My Weekly Stock’s picks are up 27% cumulatively (no leverage, buy and hold five days), and our options trading is up 165%.
Access our performance tracking here.
We will trade a stock in the health sector again for the week ahead. Our stock pick will be released later on Sunday, and in the meantime, you can learn more about our trading approach in the article below:
Read more about our trading approach here.
And remember to subscribe to My Weekly Stock to receive our stock picks, trading plan, and buy/sell alerts directly in your mailbox.
That’s all for My Weekly Stock’s debrief for week #20 of 2022 (May 16 -20).
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Have a lovely trading week,
My Weekly Stock
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