The Bottom Line
Focus is on the Federal Reserveās stance on monetary policy. Next meeting is scheduled on June 14th /15th. Consensus is that the Fed Fund Rate will increase 0.50% per FOMC meeting and that the monetary base will drop by $90 billion per month.
Volatility in North American equity markets is expected to remain elevated until recently stated Federal Reserveās policy is confirmed as advertised by Federal Reserve governors.
If stated FOMC policy is extended, the stage is set for a significant recovery by North American equity indices into the summer. Otherwise, higher than average volatility will recur and downside intermediate equity index risk will become apparent.
A likely direction of the FOMCās decision is possible by watching inflation reports released prior to the FOMC meeting (i.e. May CPI on Friday and May PPI early next week).
Observations
U.S. equity indices have a history of reaching a bottom in June:
Ā· In years ending in 2 (.e.g. 2022)
Ā· In mid-term U.S. Presidential Election years (e.g. 2022)
Ā· In mid-term U.S. Presidential Election years when a change in control from Republican to Democrat or from Democrat to Republican occurs (e.g. 2022)
Consensus earnings estimates for S&P 500 companies on a year-over-year basis in the first quarter of 2022 were unchanged last week. Ninety nine percent of companies have reported quarterly results to date. According to www.FactSet.com first quarter earnings on a year-over-year basis increased 9.2% and revenues increased 13.6%.
Consensus earnings and revenue estimates for S&P 500 companies beyond the first quarter on a year-over-year basis increased slightly last week. According to www.FactSet.com second quarter earnings are expected to increase 4.1% and revenues are expected to increase 9.7%. Earnings in the third quarter are expected to increase 10.3% (versus 10.2% last week) and revenues are expected to increase 9.3% (versus 9.1% last week). Earnings in the fourth quarter are expected to increase 9.9% and revenues are expected to increase 7.1% (versus 7.0% last week). Earnings on a year-over-year basis for all of 2022 are expected to increase 10.2% (versus 10.1% last week) and revenues are expected to increase 10.3% (versus 10.2% last week).
Economic News This Week
Apple holds its annual World Wide Development Conference on Monday.
April Canadian Merchandise Trade Balance to be released at 8:30 AM EDT on Tuesday is expected to be a surplus of $3.90 billion versus a surplus of $2.49 billion in March.
May U.S. Consumer Price Index to be released at 8:30 AM EDT on Friday is expected to increase 0.7% versus a gain of 0.3% in April. On a year-over-year basis May Consumer Price Index is expected to increase 8.1% versus a gain of 8.3% in April. Excluding food and energy, May Consumer Price Index is expected to increase 0.5% versus a gain of 0.6% in April. On a year-over-year basis, May Consumer Price Index is expected to increase 6.0% versus a gain of 6.2% in April.
May Canadian Employment to be released at 8:30 AM EDT on Friday is expected to increase 55,000 versus a gain of 15,300 in April. May Unemployment Rate is expected to from 5.2% in April
June Michigan Consumer Sentiment to be released at 10:00 AM EDT on Friday is expected to increase to 61.0 from 58.4 in May.
Earnings News This Week
Only three S&P 500 companies are scheduled to release quarterly results this week.
Traderās Corner
Equity Indices and Related ETFs
Daily Seasonal/Technical Equity Trends for June 3rd 2022
Green: Increase from previous day
Red: Decrease from previous day
Commodities
Daily Seasonal/Technical Commodities Trends for June 3rd 2022
Green: Increase from previous day
Red: Decrease from previous day
Sectors
Daily Seasonal/Technical Sector Trends for June 3rd 2021
Green: Increase from previous day
Red: Decrease from previous day
All seasonality ratings are based on performance relative to the S&P 500 Index (except TSX)
Links offered by Valued Providers
Mark Leibovitās comment for June 3rd
Bear Rally, Inflation, Russia/Ukraine ā HoweStreet
Links from Mark Bunting and www.uncommonsenseinvestor.com
Why Stocks Need Time to Resolve Rampant Pessimism ā Uncommon Sense Investor
"Recession Resistant Leading Value Retailer" with Double Digit Upside ā Uncommon Sense Investor
Michael Campbellās Money Talks for June 4th
June 4th Episode (mikesmoneytalks.ca)
Victor Adairās Trading Notes for June 4th
David Keller says āLight volume screams market topā.
Lighter Volume Screams Market Top | The Mindful Investor | StockCharts.com
Martin Pring says āGold either is in a hard place or a sweet spotā.
Gold: Either in a Hard Place or a Sweet Spot | Martin Pringās Market Roundup | StockCharts.com (for StockChart members only).
Editorās Note: Seasonal influences for GDXJ turned positive on May 28th
See https://charts.equityclock.com/vaneck-vectors-junior-gold-miners-etf-nysegdxj-seasonal-chart
Seasonal influences for XGD.TO turn positive on June 14th
See: https://charts.equityclock.com/ishares-sptsx-global-gold-index-etf-tsexgd-to-seasonal-chart
Greg Schnell asks āWhy stress out nowā?
Why Stress Out Now? | The Canadian Technician | StockCharts.com
Tom Bowley says āThereās a lot to like about this rallyā. Closing comment says āIt would seem the closer we get to 12300, the bigger the short-term downside risk. But even if we sell off from here, I believe the groundwork is being laid for a MAJOR market bottom ahead and thatās important to keep in mindā.
Thereās A Lot To Like About This Rally | Trading Places with Tom Bowley | StockCharts.com
Editorās Note: A sentiment shared by Tech Talk.
Technical Scoop for June 6th from David Chapman and www.EnrichedInvesting.com
Comments on Gold
U.S. Mint sells 147k ounces of gold last month, a sign of growing investor anxiety ā Kitco
"While gold prices appear to be trapped in neutral below $1,850 an ounce, physical demand for the precious metal appears to tell a different story, one of growing investor anxiety, according to some market analysts.
In its monthly sales data, the U.S. Mint sold 147,000 ounces of gold in various denominations of its American Eagle Gold bullion coins, the best May performance since 2010. Compared to April, sales are up 67%. For the year, bullion demand is up a massive 617%.
Even taking COVID-19-related production issues out of the equation, U.S. gold bullion sales are up more than 400% from the five-year average between 2015 and 2019ā¦.
āBullion sales better reflects the anxiety investors are feeling right now. When you hear economists talk about a recession, it starts to make sense why bullion sales are so strong,ā he said. āGold will always be a long-term store of value.ā
Daniel Pavilonis, Senior Commodities Broker with RJO Futures, also said bullion sales better capture the current sentiment in the marketplaceā¦.
āGold futures are capped by rising interest rate, but people having been going out to buy the physical metal to have some āreal money stashed away,ā he said.
Pavilonis added that he is ultimately bullish on gold as there is solid demand for the precious metal. He said that he sees gold as undervalued given where inflation is and how persistent it will be through 2022."
Technical Notes from Friday
Nil
Technical Scores
Calculated as follows:
Intermediate Uptrend based on at least 20 trading days: Score 2
(Higher highs and higher lows)
Intermediate Neutral trend: Score 0
(Not up or down)
Intermediate Downtrend: Score -2
(Lower highs and lower lows)
Outperformance relative to the S&P 500 Index: Score: 2
Neutral Performance relative to the S&P 500 Index: 0
Underperformance relative to the S&P 500 Index: Score ā2
Above 20 day moving average: Score 1
At 20 day moving average: Score: 0
Below 20 day moving average: ā1
Up trending momentum indicators (Daily Stochastics, RSI and MACD): 1
Mixed momentum indicators: 0
Down trending momentum indicators: ā1
Technical scores range from -6 to +6. Technical buy signals based on the above guidelines start when a security advances to at least 0.0, but preferably 2.0 or higher. Technical sell/short signals start when a security descends to 0, but preferably -2.0 or lower.
Long positions require maintaining a technical score of -2.0 or higher. Conversely, a short position requires maintaining a technical score of +2.0 or lower
Changes Last Week
S&P 500 Momentum Barometers
The intermediate term Barometer dropped 7.41 on Friday and 9.22 last week to 37.27. It returned to Oversold on a move below 40.00. Trend is up.
The long term Barometer slipped 2.61 on Friday and 4.21 last week to 34.47. It remains Oversold. Trend is up.
TSX Momentum Barometers
The intermediate term Barometer dropped 6.03 on Friday, but gained 4.29 last week to 36.89. It remains Oversold. Trend is up.
The long term Barometer dropped 4.69 to 40.44 on Friday and slipped 0.53 on Friday to 40.44. It remains Neutral. Trend is up.
Disclaimer: Seasonality and technical ratings offered in this report and at
www.equityclock.com are for information only. They should not be considered as advice to purchase or to sell mentioned securities. Data offered in this report is believed to be accurate, but is not guaranteed.
