Last week was rough, and that is an understatement. Friday saw buyers emerge in the NASDAQ Composite and the Russell 2000, as Energy (XLE) took it on the chin as the result of profit-taking. But it’s also a reminder that a recession conquers all sectors. For the week, the only, word that comes to mind is carnage.

Market Breadth (Friday)	NYSE	NASDAQ
Advancers	1,977	3,104
Decliners	1,316	1,582
52-week high	2	21
52-week lows	566	481
Up volume	5.07 billion	5.74 billion
Down volume	3.57 billion	1.95 billion

 

Market Breadth (Week)	NYSE	NASDAQ
Advancers	384	1,169
Decliners	3,179	4,191
52-week high	21	102
52-week lows	1,562	1,957
Up volume	12.0 billion	14.58 billion
Down volume	18.59 billion	14.58 billion

Thus far, for 2022, the damage has been widespread and complete.

Technical View

S&P 500

For both the S&P 500 and NASDAQ Composite, it’s all about holding the 200-week moving average (WMA). The S&P 500 must hold 3,496 or see the next downside test at 3,253.

The NASDAQ starts the session at a key support of 10,798 and must hold or would be vulnerable to 10,000.

Heat Map

Once again, buyers materialized for the most beaten-down stocks they could find, because even the worst company can be an oversold stock.

But some of these names are actually great companies, and investors are sniffing out opportunities as they should be when the market is beaten down to this degree.

They say mega-cap won’t come back, and I say they are nuts!

Carrying the Torch

There are a number of stocks with 100% buy ratings, including Alphabet (GOOG) and Microsoft (MSFT). I get the ridicule when the herd blindly has ‘buy’ ratings on the hot names. But right now, some (former) high-flyers are very inexpensive.

Investors are not going to listen to the Wall Street mavens that are too cute these days.

Kicked to the Curb

There are a number of names with huge selling rating ratios that are being promoted as “quality” stocks these days. It’s not that these are not great companies, but on a relative basis. Names like Clorox (CLX), Church & Dwight (CHD), and McCormick& Co (MKC) are expensive.

The same is true for utility names like Consolidated Edison (ED) and Real Estate Investment Trusts (REITs) like Vornado Realty Trust, which began life as a maker of blenders.

Estimates Too High?

Everyone on the Street is complaining that earnings estimates are too high, but firms are only nudging earlier guesses slightly lower. Right now, the 15.5 forward price-to-earnings (F P/E) is below the five- and ten-year averages.

Some sectors have seen  consensus lowered, but many have seen increases, including the Energy (XLE) sector.

Flow the Money

Cash continues to pour into domestic equity exchange-traded funds (ETFs). If these are long-term buyers, they are doing the right thing.

Buckle Up, Folks.

Portfolio Approach

We have added several stocks back to our Current Buys and made a few adjustments to our weightings. 

Today’s Session

I’m looking for a massive short squeeze, but I am not convinced we get it out the gate, although stocks are poised to open much higher.  Economic data is still surprising to the downside, which ironically is what feeds the Federal Reserve’s need for more pain.

Ten Year Yield

This morning, the ten year bond yield is popping 6 basis points and this is why I’m not banging the drums on this being the short squeeze.

I do think longer term investors should be picking spots to nibble and build positions – so many great stocks are oversold.

 

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