Market review 22.05.22
Market review 22.05.22
Canada, materials, health care, oil, and tankers.
Hello everyone,
Let’s look at what stands out in this choppy market.
Broad Market
Among the ~1,900 US-listed stocks that have a market cap over $2B, there’s only 28 within 3% of their 52-week highs. Almost half of these are oil, utilities, and health care stocks. We’ll discuss these leading sectors as well as materials in today’s post.
But first, I want to point out that the S&P 500 is breaking 22yr support relative to the TSX:
In other words, Canada is holding up better than the US during this correction. And history suggests what falls less in a bear market tends to gain more in the subsequent bull market:
During the ’00-03 tech bust, Canada held up better than US stocks before leading higher.
During the ’20 Covid crash, growth stocks held up the best before leading to the upside.
Materials
While oil stocks continue to dominate, materials (shown in purple) are something to keep an eye on.
REMX monthly. A little over a week ago, Rare Earths retested this 8-year support before rallying 15%.
And that rally has painted a false breakdown on the weekly chart:
When REMX hit support on the monthly, that was a good place to initiate a starter position. And now that we’re recovering a breakdown on the weekly, we can take a full position.
SQM Quarterly. 12yr base breakout in Q1. Commodity stocks enjoyed a bull market from 2002-2011. Have we entered act 2?
Before I sound too bullish, one point of caution is that materials are also showing very thin leadership. This chart below reminds me a lot of what the one for the tech sector looked like last summer.
Health Care
MRK Quarterly. Coming out of a 22yr base.
MCK Monthly. Made a 6yr breakout in Dec, and is up over 30% since. On the weekly chart, it’s been consolidating for the past 6 weeks.
Oil & Dry Bulk Shipping
Of course, oil stocks continue to look excellent. Last week, we looked at a quarterly chart of Suncor making a 2-decade breakout. Here’s oil pipeline stock ENB in a steady uptrend after awakening from a 7yr slumber:
Enbridge’s dividend has been growing at an average 10% annually for the past 27 years. It’s current dividend yield is 6%. It’s one of the more stable stocks in the energy sector - acting a bit more like a utility stock.
Another strong sector is the marine shippers, with many stocks making new 52-week highs including: SBLK, TNK, INSW, and NVGS.
In Closing
As we looked at a lot of long-term charts, here’s something to remember:
That’s all for this week! If you found this post useful, please give it a like and share. Thanks for reading.
Twitter: @alphacharts.
Important Disclaimer: This blog is for educational purposes only. I am not a financial advisor and nothing I post is investment advice. The securities I discuss are considered highly risky so do your own due diligence.