Market Insights

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Sizing Up the S&P 500

• S&P 500 stayed 3 points above August 2022 high so far this week
• Momentum slowing but members above 20-day MAs still exceed members above 50-day MAs
• Rotation under the surface as more companies under $100bln of market cap make new 52-week highs
• S&P 500’s move is relatively extended with index up in 6 of last 7 weeks but no reversal patterns are evident
• Transports gaining, potential “Dow Theory” signal
• April 21, 2022, high of 4513 may remain in play

Key News

• Carnival (CCL) earnings, revenue beat estimates
  • Vertical call spread followed the report
• Consumer confidence jumps to 17-month high as views of current situation improves
• Generac (GNRC) gains amid Texas grid worries
• Nvidia (NVDA) drops as The Wall Street Journal reports on potential export restrictions
• Micron Technology (MU) earnings, revenue beat
• Crude-oil inventories -9.6mln barrels vs -1.757mln estimate
  • SPR lowest since July 1983

Mover of the Week: Zillow Group (Z & ZG)

• Real-estate marketing stock jumps as housing comes to life
• Earnings, revenue and guidance surprised to the upside on May 3
• Z +63% YTD
• Still down about 75% from 2021 high
  • Z= non-voting shares
  • ZG=voting shares
• Discovered using last week’s “non-index runners” scan.
• Similar companies: EXPI, RDFN

Upcoming Events

• Friday (6/30): PCE inflation
• Monday (7/3): ISM Manufacturing
• Tuesday (7/4): Market losed
• Wednesday (7/5): OPEC meeting
• Thursday (7/6): ADP payrolls, initial jobless claims

A Floor Under Crude?

Leveraged Cyclicals in Focus

• Interest costs are fixed, allowing potential leverage if operations improve.
• Non-recessionary “soft landing” can support demand. That can help pricing and margins.
• Eventual peaking of interest rates can reduce interest expense in coming years.
• Investors see potential double-benefit of margins and credit
• Recent examples:
  • Cruise ships: CCL, RCL, NCLH
  • Airlines: AAL, UAL, DAL
  • Rental cars: CAR, HTZ
• Is the opposite process working on consumer staples like GIS?

Using the Platform

Find leveraged cyclicals:

• EV/MktCap custom indicator: Higher values = more leverage. Results must be sorted by sector because banks have leveraged business model.
• EV/MktCap can be used in RadarScreen (see “MT Main” workspace: “fundamentals” tab) and Scanner
• Potential Scan Criteria:
  • Indicator → EV/MktCap > 2 (finds leveraged stocks)
  • Indicator → Sector <> “” (displays sector)
  • Price → Last > Indicator → MovAvg 1 Line (Length = 50) (finds stocks above 50-day MA)
  • Price → %Chg → %Chg (5 day) < 10 (hides stocks up 10%+ in last week)

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