May 18 pre market analysis (today is RED, should have worn a red shirt)

By: Jeffrey Cohen, Investment Advisor Representative
US Advanced Computing Infrastructure, Inc.

Today’s pre market action in US Equities


There are two stories to tell. Two markets.


We normally work in the top-line market. The headlines. Macro-economics, money flows, fixed income, US equities, and look at the major indices (S&P 500, NASDAQ Composite and Russell 2000).


Today, we also looked at the bottom end of the market. The stocks that are down, and trading higher and lower seemingly on emotion or inside baseball. There is more to that story as you will find out.


Retail stocks are falling in pre market.


Our CQNS UP model picked fewer stocks and we see a smaller edge. Our model ran very deep, reached equilibrium, and picked 7-10 stocks.


Weakness in the markets. SPY at 404.60, and IWM at 181. WMT at 129.26.
Twitter was negative this morning.
Gasoline is down $0.06 to $0.08 since yesterday.
Markets are flat to down globally.
US dollar is ok, but USD/EUR is 105.3 and was as low as 103.9 recently. US dollar is strong.


Fixed Income (corporate) had a very bad day today.
We found news.
Retail sales update by the US Census:

• General merchandise down (problematic)
• Auto sales up

Bureau of Labor Statistics publishes the Consumer Price Index. Energy is up 30%, and food is 9.4%, with overall inflation (all items) at 8.3%.


Walmart $WMT Stock Price analysis
Originally during this market correction, the discount retailers went up significantly. This seemed a safe place in the market.


Walmart had flat number of transactions, with average ticket up 3%.
However, earnings fell 23%, and Walmart lost $3.8B in cash flow from operations.
Why, the cost of gasoline to transport goods is up, the price of goods themselves are up, and the cost of labor went up. Walmart lost ground vs. inflation, which means customers either substituted cheaper goods, or they bought fewer items. They cut back.


Was Walmart a good buy this morning? Our answer:


Is Walmart a good buy at $129.50?


It might be, but the odds are that the price will drop further in the next 1-2 weeks.


FOMO is a cost effective strategy in this market. It doesn’t hurt to wait before you buy a downtrodden stock.




US dollar is up slightly, and the VIX is under 30. We expect a small move. God help us if we get a big move (when VIX is low).
Crypto is down pre market, which means crypto-related stocks will be down too.


Fixed Income
Fixed Income is an important part of everyone’s portfolio and investment plan. Everyone over 18 years of age should hold some fixed income.


The US Treasury yield curve looks healthy and upward sloping. Short-term money has lower rates, but longer-term debt (bonds) are getting cheaper, with higher yields.


Corporate Issues Traded:
3:1 declines to advances
5:1 declines to advances IG
High Yield and Convertibles were around 1:1.


The highs to lows are still dramatically skewed to new lows. Corporate IG bonds 1:100 new high/low ratio. This is extreme. Fear of missing out (FOMO) is a cost effective strategy for down-trodden fixed income issues too. New lows beget new lows.  It pays to wait for the stock and bond market crash to play out.


Fixed income, corporate, investment grade was the worst performing grade yesterday.


News of the day:


First item of substance is negative.


US Housing starts and permits plunge, down ~3% (0.2% in April, and -3.0% in March)
This does not bode well for construction labor, lumber, and home improvement stores.
This is partially due to inflation, partially due to mortgage prices, and partially due to Main Street weakness.


COVID 19 is up in the US, but not dramatically. Trending higher.


Global Markets:
Asia was down, mostly.
Europe is down.
Turkish stock market is a model for equities in a country with high interest rates.


Major US equity indices are up, generally, on lower volume these past few days. When markets rise on lower volume, it is a lack of conviction.  Also, all three US indices (the ETFs) are down for the year (excluding dividends).


Did you know $KKR has negative cash flow from operations.
That’s super interesting.


Same with $ARES Ares Management Corporation.


Discount retailers:
Target down 25%
Dollar Tree down 6%
Dollar General
Costco
Walmart
All down pre-market. This is a Main Street bloodbath. QED


Other pre-market industries:
Trucking RED
Semiconductors and Chips RED
Money Managers RED
Crypto and Mining RED


The US indices are down pre-market (futures are down).




We also checked out our ‘shitcos’ or stocks that have fallen significantly in this market.


$AUTO Autoweb, we like the business. Going bankrupt or




MEME: Good list today for shorting?
BBAI BigBear.ai Holdings, Inc
Low Volume, 100 shares available to short. Been unshortable for the past few days.
Low volume today


BBIG Vinco Ventures, Inc.
High Volume: No shares available to short, solid volume, especially in FINRA dark pool. Today, it is running up 12%, and no ability to short it down.
High volume today.




INDO Indonesia Energy Corporation Limited
Big dark pool volume lately, and shorts > 50% the past 2 days on high volume.
Low volume today


EAR
RGC
IMPP
LWLG Lightwave Logic, Inc.
Reasonable volume. Short available to borrow down to 200k from one million yesterday.
Low volume today


Overall strategy: Be careful in stocks today. Be careful. Don’t get drawn in by a stock that is down in price.