To The Moon

Public Holidays

There are no holidays in Singapore, Hong Kong, China and America for the coming week.

Economic Calendar (15 Apr 2024)

Notable Highlights

• In the coming week, US core retail sales and retail sales data will be released. These data will highlight the current state of consumerism in the USA.

• There will be an important GDP update coming from China. This is important data not just for China but also for the rest of the world as China is still deemed to be the world's factory.

• Philadelphia Fed manufacturing index will be released in the week. This data highlights the expansion or contraction of the manufacturing sector.

• Existing home sales data will be a good barometer of real estate status.

• Initial jobless claims will also be a key macro data that the Federal Reserve will look into as they ponder the next interest rate decision

• Crude Oil Inventories can be seen as forward indicators of market demand and consumption. If the trend of excess inventories continues, demand erosion can lead to reduced production & weakening consumer spending.

Earnings Calendar (15 Apr 2024)

There are a few earnings of interest in the coming week with the likes of Goldman Sachs, Bank of America, United, Johnson & Johnson, ASML, Netflix and American Express.

Let us look into the recent performance of Intuitive Surgical ($ISRG).

ISRG has hit its 52-week high recently and is ranging near the top price.

The stock price has gained over 44% from a year ago. Investing has a recommended “Strong Sell” rating for this stock.

Observations:

• Revenue growth $2.1B (2014) to $7.1B (2023)

• The gross profit margin is 68.4% based on the 10-year median.

• FCF is a strong 26.3% based on the 10-year median.

• Operating profits growth $0.5B (2014) to $1.7B (2023)

For the coming earnings, the forecast is 1.42 and $1.87B respectively for its EPS and Revenue. Can ISRG break the ceiling to hit a new high?

Market Outlook of S&P500 - 15Apr24

Technical observations of the S&P500 1D chart:

• The MACD indicator is on a downtrend from the past week and this should continue into the coming week.

• Chaikin Money Flow (CMF) has hit below the zero line. This can be seen as a bearish signal with more selling volume.

Interpretation of CMF from the CFI website:

When there is a continuous buying period (when the CMF value is sustained above zero), the trend is considered bullish and indicates that price will continue to rise with the trend. When there is continuous selling pressure (CMF value below zero), this points to a bearish trend, indicating price will continue downward.Higher readings, either positive or negative, indicate a stronger trend. Increasing readings indicate gaining momentum.Crosses may be bullish or bearish. Bullish crosses occur when the CMF crosses the zero line from below, and stock prices continue on an upward trend. Bearish crosses occur when the CMF crosses the zero line from above, and prices continue to fall.

• Moving Averages (MA). Both the MA50 line and the MA200 line are on an uptrend. The last candle is above both the MA 50 line and the MA 200 line. Thus, it could be read as bullish for the long-term and mid-term. However, the candle is due to touch the MA50 line. The mid-term trend could change in the coming days.

• Exponential Moving Averages (EMA). The 3 EMA lines are starting to converge. This implies a coming reversal of the current uptrend. However, this is yet to be completed until all 3 EMA lines have crossed and commence a downward pattern.

• I have replaced Stochastic with CMF to incorporate consideration of volume. Stochastic and MACD are similar with Stochastic being “more active” and more capable for “false” signals.

News and my thoughts from the last week (15 Apr 2024)

• U.S. large caps saw $15.8 billion of outflows in the week, while stocks in general saw outflows of $19.6 billion, Bank of America said in its weekly round-up of flows in and out of world markets using EPFR data. - Yahoo Finance

• IRAN BANS ALL SHIPS LINKED TO ISRAEL “Starting today, all vessels linked to the Zionist regime are banned from operating in the Oman Sea and the Persian Gulf. Any such vessels found in these waters will be confiscated.” - From X user ShaykhSulaiman

• Iran launched dozens of drones at Israel on Saturday but they will take hours to reach their targets. An attack that may trigger a major escalation between the regional archenemies, with the U.S. pledging to back Israel. - Reuters

• MSC Aries was taken by Iran. This would cause supply chain disruptions. This is inflationary and could cause other commodities like crude oil to increase as shipping lines steer away from these hot spots - BBC

• Iran's Revolutionary Guards seized an Israeli-linked cargo ship in the Strait of Hormuz on Saturday. They could close the crucial shipping route and warned it would retaliate for an Israeli strike on its Syria consulate.

• Will the productivity gains from technological breakthroughs like AI and innovation be sufficient to tank the debt spiral? Is the recession pushed back due to AI?

• AI empowers and replaces some roles in the current environment as a co-pilot. AI can also act as an independent agent in the coming days. Previously, it was automation for blue-collar. Now, it is the automation of the white collar. Thanks to the all-in podcast.

• Total bankruptcies – including consumer, small business and big corporates – have been climbing steadily for 20 months, said Michael Hunter, vice president at Epiq. The trend reflects higher interest rates and a pullback in consumer spending. - The Star

My Investing Muse (15Apr24)

Layoffs & Closure news

• ConvergeOne blamed rising interest rates and a downgraded credit rating as reasons for its recent financial struggles. The company has $1.8 billion in debt, and it reported $1.525 billion in revenue for 2023. - Reuters

• A popular West Coast pizza chain Mod Pizza shuttered five of its California locations shortly before the state enacted its new minimum wage law this month that raises fast-food workers’ pay from $16 an hour to $20. - NYPost

• More layoffs hit logistics which is the blood of the economy. over 1300 layoffs hit logistics companies across US - FreightWaves

• The Associated Press (AP) reported last week that 614 Apple employees were notified in late March that they would be laid off effective May 27. - HCAMAG

• The job eliminations are separate from a restructuring programme which could lead up to 8,000 of Novartis's 78,000 global workforce being cut, it said. - Reuters

• In a bid to claw back $2.15 billion, the struggling pharmaceutical giant Bayer CEO is doing away with middle managers and 99% of the company’s 1,362-page corporate handbook, allowing nearly 100,000 employees to self-manage. - Yahoo Finance

• Citi's 7,000 laid-off staff were paid an average of $214k each - E Financial Careers

We continue to learn of more layoff and closure news in the past weeks and we can expect more to follow in the coming weeks.

Iran launched waves of attacks towards Israel

As per the news article above, Iran launched rockets towards Israel. This further escalated the tension in the Middle East. There are Iranian claims that the retaliation is over as we await to see if Israel would respond to this attack. Should this take place soon, we should see a volatile market in the coming days.

Iran has warned of all vessels linked with Israel. After storming MSC Aries, they could do so to other vessels that have links with Israel. The shipping community will need to reroute vessels and look for other routes to service the clients in the region. Unfortunately, the impact will cause supply chain delays and inflate different costs, especially shipping. One of the expected results would be a surge in the price of oil as it is one of the commodities that use this route.

The shipping industry would be one of the beneficiaries of this indirectly. Though there will be operational changes and delays, that would be more costs chargeable to clients in lieu of such threats in the region.

CPI (inflation)

CPI (index referencing inflation) in the US came in much hotter at 3.5% year on year. This was much higher than what the market anticipated, leading to concerns about the Fed pivot in the coming months. If inflation continues to surge, it would be difficult for the Federal Reserve to conduct any interest rate cuts. Larry Summers the former US Secretary of the Treasury has suggested that an interest rate hike could be back on the cards if the coming inflation results continue to trend unfavorably.

While President Biden promises interest rate cuts, this would seem more political than probable unless inflation is brought under control.

Conclusion

The geopolitical tensions in the Middle East will be the main mover of the market in the coming days. Iran has concluded its retaliation towards Israel. No, the eyes of the world rest on Israel and her response to this provocation. This is not a good start for the new Q1/2024 earnings season. Even if the earnings turn out to be good, the geopolitical tension can continue to bring fear to the market.

There is a possibility of this escalating to a much bigger conflict. Iran has warned America to stay away and America has promised Israel backing and support. It seems like the joint efforts of the UK, America and Israel have successfully brought down most of the missile & drone threats.

These are good reasons for the price of crude oil to climb when the market opens in a few hours. Should the tension persist, crude oil prices can surge. With danger in this region, shipping companies will be forced to divert vessels away from this hotspot. This would be inflationary in price impact and bring more supply chain disruptions to the rest of the world.

Let us hope that the leaders are willing to head to the negotiating table instead of the battlefield. Let us continue to tread cautiously in the coming days.

$Intuitive Surgical(ISRG)$

$S&P 500(.SPX)$

$Goldman Sachs(GS)$

$ProShares Ultra VIX Short-Term Futures ETF(UVXY)$

@TigerStars