Previous Week’s Newsletter Performance

• SPX- $4,311 projected target met as the index touched a high of $4,322.62.

• FTSE 100- 7,644.50 projected target was met last Monday when the index touched a high of 7,654.84.

• AAPL- $184.80 projected target met as the index touched a high of $184.95 on last Monday’s session before selling off.

• TSLA- It touched a high of 252.42, as projected for the continuation of the uptrend in last week’s newsletter when the stock was trading at $213.97.

• BA- It reached the projected target of $220 in last Thursday’s trading session.

• META- As projected for a price correction towards the fib levels in the last mid-week newsletter, the stock touched a low of $258.88.

• TCOM- The stock rose by 4.51% on Friday as projected for a bull flag pattern breakout.

• DOCU- As projected, the price filled the gap and touched the projected target of $64 before selling off.

Major Highlights from the Global Markets 

Highlights of US Markets

• The major US benchmarks, including the S&P 500 and Nasdaq Composite, ended the week with gains of 0.39% and 0.14%, respectively. S&P 500 Index entered the bull market territory, up more than 20% off its mid-October lows. Dow Jones finished the week on a positive note, rising 0.34%, while Nasdaq 100 declined 0.13% for the week.

• Jobless claims reached 261,000, the highest level since October 2021.

• The economic optimism index, i.e., the gauge of Americans' outlook for the next six months, fell to its lowest level since last November.

• Institute for Supply Management's gauge of prices paid for services moderated to its lowest level since May 2020, while its gauge of overall activity in the services sector fell to 50.3, indicating virtually stalled growth as levels above 50 indicate expansion.

European Markets Highlights

• The STOXX Europe 600 Index closed lower, declining 0.51% for the week, while Germany’s DAX and France’s CAC 40 declined 0.63% and 0.79%, respectively, for the week.

• ECB officials signaled potential rate increases in June but less consensus on future hikes. ECB President Lagarde and Bundesbank chief Nagel maintained a hawkish stance, citing persistent price pressures.

• Eurozone consumer expectations for inflation in the year ahead decreased from 5.0% to 4.1% in April. The eurozone economy experienced a mild recession with a 0.1% contraction in Q1 2023 and Q4 2022. Eurozone retail sales remained flat, indicating weak consumption.

• Germany's industrial sector worsened, with unexpected declines in factory orders and modest growth in industrial output.

• UK house prices fell significantly in April, suggesting a potential slowdown in the housing market recovery. May housing market survey in the UK showed some improvements in measures like house prices, new inquiries, and sales agreements, though they remained in negative territory.

  Asian Markets Highlights

• Japanese equities saw gains, with the Nikkei 225 Index rising 2.25% and the TOPIX Index up 1.91% during the week.

• Chinese equities closed mixed, with the Shanghai Stock Exchange Composite Index gaining 0.04% and the CSI 300 declining 0.65% for the week. On the other hand, Hong Kong’s Hang Seng rose 2.32%.

• The yen remained weak against the U.S. dollar, benefiting exporters and attracting foreign investors.

• Uncertainty loomed ahead of the Bank of Japan's June meeting, with expectations for changes in monetary policy diminishing.

• China's May inflation data indicated rising deflation risks, while the Caixin survey showed solid growth in the services sector.

• China's exports declined by 7.5% in May, leading to expectations of further support measures from the People's Bank of China.

  Major News/ Catalyst Events that were Market Movers

  • Saudi Arabia announced a production cut of 1 million barrels per day in July, representing about 10% of the country's production capacity. OPEC members agreed to extend their existing production limits from the end of this year to the end of 2024.

  • Oil prices reacted to reports of U.S.-Iran talks on nuclear enrichment and oil exports but later stabilized.

  • Apple unveiled a virtual reality headset with a price of $3,500, initially causing a negative investor reaction.

  • General Motors joined with Ford to use Tesla’s electric vehicle charging networks. The Tesla stock reacted positively as investors considered it a big win for Tesla as it may force the U.S. govt. and other automakers to use Tesla’s vehicle charging technology.

  • The US Securities and Exchange Commission (SEC) has filed two lawsuits against major cryptocurrency exchanges, Binance and Coinbase, which could have significant implications for the future of cryptocurrency. The SEC has been actively asserting its jurisdiction over the crypto industry and has filed around 130 crypto-related lawsuits so far, leading to closures and settlements.

  Bond Market Changes

• Treasury yields saw a modest increase over the week. The market speculated on the impact of increased short-term bill issuance following the raising of the federal debt ceiling. New issuances and municipal bond sales by the FDIC saw adequate demand.

• The U.S. 10-Year Treasury yield closed higher at 3.743% for the week, while the U.S. 2-Year Treasury yield ended higher at 4.596%.

   

  Commodity Market Changes

• Gold closed higher for the week at $1,960.97 per ounce, and silver too closed higher at $24.286 per ounce.

• The Crude Oil WTI Futures - Jul 23 (CLN3) closed lower for the week at $70.35. Oil prices rose briefly after Saudi Arabia's production cut announcement but ended the week lower.

Technical Analysis of Major Indices

Dow Jones Industrial Average (DJI)

The Dow Jones index touched a high of 33,975.32 in the last week and has been facing resistance near the 34,000 mark. If the index is unable to sustain above Friday’s high and cross 34,000, then it could correct to its fib levels of .382 at 33,755.43 and .50 level at 33,687.51.

NASDAQ 100 (NDX)

The index touched a high of 14,672.85 last week and corrected to close the week at 14,528.36. The hourly RSI is around 53, and the MACD divergence indicates the index is losing momentum in the hourly timeframe and can correct towards its .50 and.618 fib levels around 14,478.37 and 14,432.47, respectively.

S&P 500 (SPX)

The index managed to cross the 4,300 mark to touch a high of 4,322.62 but failed to close above it. The hourly RSI is around 57, and MACD divergence indicates the fading momentum in an hourly timeframe, which can make the index correct to its.618 fib level at 4,284.58, which also coincides with the trend line.

FTSE 100 Index (UK100)

The index traded in the range of 7,650-7,550 and managed to close the week at 7,562.36. The hourly RSI below 40 and the MACD trending downwards indicate bearishness in the hourly timeframe. Hence, if the index fails to defend 7,550, then it could be heading toward 7,525.44 and 7,490.26, the .618 and .782 fib levels of the previous uptrend.

Technical/Fundamental Analysis of Mega Cap Stocks

Exxon Mobil Corporation (XOM)

The stock has been in the rising channel for over a year now and currently trading at $107.39, just marginally above its 200 DMA. Its daily RSI is at 50. If the stock manages to cross above its 50 DMA, which stands at $110.29, then the price could be heading towards the fib levels at $112.79 and $115.93 in the coming days.

Johnson & Johnson (JNJ)

The stock formed a head and shoulders pattern on a daily timeframe over a period of two years. The price broke the neckline to touch a recent low of $153.15, and have managed to bounce back to retest the neckline. The stock is currently trading at $160.01, just below its 50 DMA, which stands at $160.53. A price rejection hereon can pull the stock downwards to its recent low and more.

Technical/Fundamental Analysis of Large Cap Stocks

Netflix Inc. (NFLX)

The stock has been on a rising trend after the price touched a low of $162.71 in May 2022. The stock has gained more than 25% over the last five weeks, and the daily RSI is above 76. The strong bullish momentum in the stock could see the price heading towards its next .50 fib level at $431.85.

Caterpillar, Inc. (CAT)

The price has managed to break out of its descending trendline after creating a recent low of $204.04. The stock has also crossed above its 50 and 200 DMA and gained over 10% in the past two weeks. The daily RSI around 67 suggests bullish momentum, indicating the price could be heading towards its next target near the .618 fib level at $242.36.

Last Week and Upcoming Geopolitical Events

• 6 June 2023- 2023 UN Security Council elections.

• 7-8 June 2023- 8th Annual Global Conference on Energy Efficiency.

• 13-15 June 2023-Gavi (the Vaccine Alliance) high-level summit.

  Upcoming Economic Calendar for the Week

  • Monday, June 12- Consumer Inflation Expectations (May).

  • Tuesday, June 13- Inflation Rate and Core Inflation Rate MoM and YoY (May).

  • Wednesday, June 14- Producer Price Index (May) and Fed Interest Rate Decision.

  • Thursday, June 15- U.S. Retail Sales (May), Empire State Manufacturing Survey (May), and Philadelphia Fed Manufacturing Survey (May).

  • Friday, June 16- University of Michigan Consumer Sentiment Index, Preliminary Reading (June).

Companies Reporting Earnings for the Week

Oracle Corporation (ORCL)

Oracle is expected to release its fiscal Q4 '23 earnings on June 12th after the market close. The company is expected to report earnings per share (EPS) of $1.58 on revenue of $13.7 billion. The acquisition of Cerner has influenced revenue estimates positively, although it has resulted in a lower operating margin and slower EPS growth for Oracle.

Last quarter, Oracle reported a 7% year-over-year (YoY) organic revenue growth, but thanks to the inclusion of Cerner and currency fluctuations, the growth was 20% in constant currency terms. Cloud services have been a bright spot for Oracle, and this trend is expected to continue in Q4 '23 and beyond.

Oracle Corporation's balance sheet has deteriorated due to recent mergers and acquisitions (M&A) activities aimed at expanding its addressable market. However, if Oracle's investments materialize as planned, the company could generate substantial cash flows.

Oracle operates in the cloud market, with a focus on Data as a Service (DaaS). The cloud computing market is projected to grow at a rate of 16.3% from 2023 to 2026, with DaaS expected to experience the most significant growth at 24% annually.

While Oracle's balance sheet has experienced deterioration, the core cloud services segment remains profitable, with a margin of 83% in 2022. The financial challenges stem from discretionary expenses, such as M&A and increased spending on research and development.

Oracle's cash flow coverage of net income raises concerns. Compared to other major software giants like Microsoft, Oracle's cash flow coverage appears less robust. The company's large acquisitions, such as NetSuite in 2017 and Cerner in 2022, have been dilutive to shareholders and require time for integration. The integration of the Cerner acquisition will likely be the focus for fiscal 2024, and investors may prefer to see the stock at a lower price. It is worth noting that Oracle's performance can be influenced by currency fluctuations, and a weaker dollar can have a positive impact on the company.

Technically, the stock is in a strong uptrend with a weekly RSI of just below 80. The stock has been trading at $109.87, near its all-time high. The stock rose more than 2% in each of the last two trading sessions of the week, breaking out of the bull flag pattern on the hourly timeframe. A price consolidation between $109-110 would help for the continuation of the uptrend towards $113.60; otherwise, the price would be heading for a correction towards fib levels at $107.11.

Grupo Aeroportuario del Pacífico, S.A.B. de C.V.(PAC)

Grupo Aeroportuario del Pacífico (GAP) is expected to report its earnings on June 12. The consensus projected EPS for the quarter is $2.36, up from $2.29 from the year-ago quarter. It is an airport operator in Mexico that owns and operates 12 airports in the country, including five of the top 10 airports. The company benefits from a diverse passenger profile, with a mix of leisure, visiting friends and relatives (VFR), and business travelers. It generates revenue from aeronautical services like landing fees and passenger charges, as well as non-aeronautical services such as car parking, retail, and food and beverage.

In the first quarter of 2023, the company reported strong results, with passenger numbers growing by 24% and revenues increasing by 38.7%. The company's margins remained stable, and it continues to invest in expanding its airport capacity and commercial offerings to cater to the growing demand for air travel in Mexico. However, there are risks associated with the dependence on air travel demand and the potential impact of gang violence in certain parts of Mexico.

As per the company, its passenger traffic for May reached 5.2M, up 10.4% YoY. The airport group stated that domestic traffic for May was 3.0M passengers, an 11.5% YoY rise. International traffic for May added 8.8% YoY to 2.1M passengers.

The company’s growth potential, driven by increasing passenger numbers and the role of other airports in Mexico due to the capacity constraints of the Mexico City airport, makes it an attractive investment. Its forward P/E (GAAP) ratio stands at 16.20 against the sector median of 18.69.

The stock has been consolidating over a wide range ever since it touched an ATH of $200.85 in February. The stock has been trading at $177.95, below its 50 DMA, which stands at $182.36. The daily RSI is below 50, and the stock has been finding support near $172-170.

Sigma Lithium Corporation (SGML)

Sigma Lithium (NASDAQ: SGML) is expected to report its earnings on June 12th. The company is poised to become one of the world's largest low-cost producers of battery-grade lithium concentrate, positioning itself in the growing electric vehicle (EV) market. Global EV penetration is expected to exceed 60% by the end of this decade, with lithium-ion batteries for EVs projected to triple in gigawatt hours (GWh) between now and the end of the decade.

Despite not generating revenues or profits at present, Sigma Lithium is set to kickstart commercial production in Q3 of 2023. The company has made significant progress, with milestones reached for its Grota do Cirilo project. Phase 1 of the project aims to produce around 37,000 tonnes of lithium carbonate equivalent (LCE), scaling up to a capacity of approximately 104,000 tonnes of LCE by the end of Phase 3.

Sigma Lithium's technology prioritizes environmental sustainability, with a focus on carbon neutrality by 2025. The company employs a purification process without the use of chemicals, and water from the Jequitinhonha River Valley, where the project is based, is treated and recycled.

The institutional interest in the stock remains strong, with the number of institutions owning SGML shares doubling since July 2022. The stock has been in the rising upward channel since January this year and touched its all-time high of $42.79 last month. It is currently trading above its 50 DMA with a daily RSI above 60, suggesting a bullish trend. The near-term target of the stock can be $44-45.

Sibanye Stillwater Limited (SBSW)

Sibanye Stillwater, the South African mining and metal processing group, is expected to report its earnings on June 13th. The company faced operational challenges and macroeconomic headwinds in 2022 but has a diverse portfolio of projects and a wide geographical presence.

Sibanye is one of the largest recyclers of Platinum Group Metals (PGMs) auto-catalysts and produces various metals, including platinum, gold, palladium, rhodium, nickel, and more. The acquisition of Stillwater in 2017 expanded its reach. The company's largest revenue segment is South African underground PGM operations, and it also has lucrative US PGM recycling and mining operations.

Sibanye is involved in gold operations in South Africa and has controlling stakes in international mining and processing operations. It has diversified into battery metals mining, including lithium and nickel. Financially, Sibanye has a 5-year average ROIC of 16.31% and ROE of 18.51%. In 2022, its total revenues decreased by 20% compared to 2021, and EBITDA fell by 46%. Despite challenges, Sibanye has a strong liquidity position with $1.54 billion in cash, and its forward P/E (GAAP) stands at 4.32. Moreover, its forward EV/EBITDA of 2.29 and EV/Sales (ttm) of 0.62 seems to be quite low, making the stock attractive for significant upside potential.

The stock touched its 52-week low of $6.96 recently and has been presently trading at $7.26 with a daily RSI of around 36. If the stock manages to consolidate and find support near the recent low, then it could retrace to its .38 and.50 fib levels at $8.08 and $8.42, respectively.

Forex Analysis

EURUSD

The EURUSD currency pair has retraced to 1.07427, coinciding near the .382 fib level of the previous uptrend in the hourly chart. If the price finds support near 1.0742, then it could head toward 1.07590 and 1.07870. On the downside, the break of the support can make the price reach 1.07277 and 1.07136.

USDJPY

The USDJPY currency pair has been trading in the range of 138.750-140.450. The hourly RSI is at 49, and a price move above 139.672 can make it head toward 139.920. On the downside, the price breaking the 139.105 level can make it move towards the next target at 138.757.

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