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8/15/22 A Dead Bear, Inflation Reduction, & Meme Stocks

News:

Markets surged higher again on Friday … closing out a 4th consecutive week of gains.

The Russell 2000 gained 2.1% and closed 22.2% above its lowest close of the year … Officially ending its bear market.

Photo of brown bear
Image from Scouting Magazine

The Nasdaq, also logging a gain of 2.1%, met the definition of a bull market last week.

The remaining indexes logged gains but remain in bear markets.

  • S&P 500 +1.7% (+16.7% above June’s lowest close)
  • Dow Jones +1.3% (+13.0%)

Sector Roundup

All 11 sectors ended the day in positive territory. At the top…

  • Consumer Discretionary (XLY) +2.2%
  • Technology (XLK) +2.0% 

At the bottom…

  • Consumer Staples (XLP) +0.9%
  • Energy (XLE) +0.8%

Headlines We’re Watching

The “Inflation Reduction Act” is on its way to President Biden for a signature. The bill, according to the Democrats, is designed to:

  • “Fight inflation” with “deficit reduction”
  • “Expands medicare benefits”
  • “Reduce carbon emissions by roughly 40 percent by 2030” with a $369 billion investment in “Energy Security and Climate Change”
  • Solar stocks have been outperforming … See the watchlist below for our favorites.

Consumer Sentiment continues to improve…

  • The Univ of Mich said it’s “about 5 index points above the all-time low reached in June.”
  • Expectations among “low and middle income consumers” were notably higher.

Meme Stock Mania

Photo of Bed Bath & Beyond Storefront
Image from Bed Bath & Beyond
  • Bed Bath & Beyond (BBBY^) rose 21% on Friday … It’s up 184% over the past three weeks.
  • AMC Entertainment (AMC^) is up 71% over the same 3-week period.
  • The Wall Street Journal reported retail investors poured an average of $1.35 billion into the market daily in August.
  • Retail’s top pick is Tesla (TSLA^). The stock is up more than 30% from its July low.

Technicals:

Overbought (bearish) signals from the RSI levels persist…

SPY Chart with RSI levels highlighted
SPY Daily Candles – Chart via thinkorswim

The VIX closed at its lowest level since April (bullish), and the put-to-call ratio is neutral.

The signals don’t agree… 

Despite the overbought conditions, it appears the bears have little advantage.

Timing:

This week we’ll get a look at retail earnings for Q2…

  • Walmart (WMT) reports Tuesday premarket
  • Home Depot (HD) Tuesday morning
  • Target (TGT) Wednesday morning
  • Lowe’s (LOW^) Wednesday morning
  • Kohl’s (KSS) Thursday morning
  • Foot Locker (FL) Friday morning

Watchlist:

*Low Float
^Open Position

*VEEE on watch
*VRNA resistance at $14
MAXN support at $20 ← SOLAR
AEHR resistance at $18
SUNW support at $4 ← SOLAR
COGT support at $14
SIGA support at $22 ← SOLAR
ALT on watch
AERI resistance at $12
KOD support at $10
LQDA resistance at $8
RYTM support at $20
TCDA support at $12
RAD support at $10
VUZI support at $10
VERU support at $18
RVNC support at $21
MRSN resistance at $8
PAVM support ta $2
CPRX on watch

Secondary watchlist … +100m float

PCT support at $10
DVAX support at $16
ARRY resistance at $24 ← SOLAR
BFLY on watch
ABCL support at $12
BNGO support at $3
^GERN on watch

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