Technical Review
This week closed with a test of the downward-sloping resistance line that formed at the beginning of this year. So far, this third test has failed to break the resistance line. A notable aspect of this test is the vicinity of the 252EMA to the resistance line. Also, with this test, we are not seeing the RSI in overbought territory. The previous test saw RSI over 70. Finally, the market seems to like what Jerome Powell said on Wednesday. We saw a sharp move to the upside, with Thursday and Friday not returning to the Wednesday low.
Week Ahead Plan
Looking at the week ahead and my current long holdings, I do not plan to sell on Monday morning. Given the market’s reaction to Jerome Powell and the vicinity of the 252EMA to the resistance line, I am waiting for a clear signal before making any changes. I would view a clear signal as a definitive close below the 252EMA for a bear case or as a definitive close above the resistance line for a bull case. In this situation, I define a definitive close as a close outside the wicks and body of the previous candle. There is talk of bear market continuing into 2023, but personally I am waiting for a confirmation from the price action before moving back into short positions.
Upcoming Reports/ Releases
The earnings this week I am most interested in is Costco Wholesale. Their earnings should provide a good picture of how inflation has affected shopping habits over the past three months. I am also interested to hear what they say about supply chain constraints coming into the holiday season.
For a free full list of earnings this week, check out Stock Card. They provide fundamental research in a quick and easy-to-understand format. If you sign up for them, use the code “ronald” for a discount.
https://stockcard.io/earnings/week
Notable Sector Mentions
Sectors that closed above their August highs:
Materials (XLB)
Communication (XLC)
Energy (XLE)
Industrials (XLI)
Health Care (XLV)
We look at the August highs because this is the last time the SP500 tested the resistance line. I would have liked to see more than half of the eleven sectors close over August highs for a continuing bull market, but it is close. A couple of industries are about even with their August highs.
This recent rally has brought Health Care and Utilities positive for their year-to-date return. Including Energy, we now have three of the eleven sectors positive for the year.
Weekly Watchlist (by sector)
Companies below are selected due to chart patterns or indicator signals.
Consumer Staples (Ticker: XLP)
Costco (COST)
Walmart (WMT)
Clorox (CLX)
Hormel Foods (HRL)
Energy (XLE)
Devon Energy (DVN)
ONEOK (OKE)
Industrials (XLI)
Utilities (XLU)
Dominion Energy (D)
WEC Energy Group (WEC)
NRG Energy (NRG)
Pinnacle West Capital (PNW)
Technology(XLK)
Mastercard (MA)
Analog Devices (ADI)
Automatic Data Processing (ADP)
CDW Corporation (CDW)
Oracle (ORCL)
Financials (XLF)
Morgan Stanely (MS)
CME Group (CME)
Marsh & McLennan Companies (MMC)
Communication (XLC)
Netflix (NFLX)
Verizon (VZ)
Materials (XLB)
Newmont Corporation (NEM)
International Paper Company (IP)
PPG Industries (PPG)
Martin Marietta Materials (MLM)
Eastman Chemical Company (EMN)
Health Care (XLV)
Danaher Corporation (DHR)
AbbVie Inc (ABBV)
Regeneron Pharmaceuticals (REGN)
Consumer Discretionary (XLY)
Amazon (AZN)
Tesla (TSLA)
Chiptole (CMG)
Hasbro (HAS)
Hilton Worldwide Holdings (HLT)
MGM Resorts International (MGM)
Wynn Resorts (WYNN)
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