He nailed three big S&P 500 moves this year.  Here's where this strategist sees stocks headed next, with beaten down names to buy.

He nailed three big S&P 500 moves this year. Here’s where this strategist sees stocks headed next, with beaten down names to buy.

A Wall Street hat trick may not be on the cards, with stock futures in the red ahead of an OPEC meeting and more data.

A two-day rally was never a guaranteed exit out of the bear woods anyway, as some few signs of a durable bottom are still missing.

Enter our call of the dayfrom the chief market technician at TheoTrade, Jeffrey Bierman, who has made a string of prescient calls on what has been a roller coaster year for the index thus far.

Bierman, who uses quantitative and fundamental analysis to determine market direction, sees the S&P 500 SPX
finishing the year between 4,000 and 4,200, maybe around 4,135. “Fourth-quarter seasonality favors bulls following a weak third quarter. Not to mention most stocks are priced for no growth,” he told MarketWatch in a Monday interview.

In December 2021, he forecast the S&P 500 might see a 20% decline within six months, towards 3,900 — it hit 3,930 in early May. In June, he forecast a rally and recovery to 4,300 — the index hit 4,315 by mid-August.

Speaking to MarketWatch on Aug. 25, Bierman saw a retest of around 3,600 for the index, citing an often rough September for stocks. It closed out last month at a new 2022 low of 3,585.

“I think we’re going to end up for the quarter. [The market is] deeply oversold and some stocks are completely mispriced in terms of their valuation metrics,” said Bierman, who is looking squarely at retail and technology sectors.

“The valuations on half the chip stocks are trading below a multiple of seven. I’ve never seen that ever…but what that means is when the semiconductor sector comes back, the multiple expansion is gonna be like a volcanic eruption to the upside,” he said of the sector known for its boom/bust cycles.

For example, he owns Intel INTC,
which hit a five-year low on Friday. Eventually, the company that has invested $20 billion in a new US plant will come roaring back alongside rivals like Advanced Micro AMD.
“People will look back on this and go ‘Oh, my God, I can’t believe Intel was at five times earnings,’ which is insanity for this stock.”

As for retail, he’s been looking at Urban Outfitters URBN,
Macy’s M
and Nordstrom JWN,
all places where millennials don’t shop, but the middle class does, with the all-important holiday shopping period dead ahead.

“There are 100,000 people being hired to work part time at these companies, and their margins are not coming down at all,” with no markdowns and decent sales, he said, noting those companies are being priced at a multiple of 5 times forward earnings .

“It means that you don’t think that Macy’s can put together for the Christmas quarter a comparative quarter, year over year of greater than 5%? If you don’t then don’t buy it, but I do,” said Bierman. “That’s why I’m willing to stick my neck out and buy these things. I bought Abercrombie & Fitch ANF
at 10 times earnings…I’ve never seen it that low.”

For those who aren’t comfortable picking stocks, he says they can still get exposure through exchange-traded funds, such as SPDR S&P Retail XRT
or the Technology Select Sector SPDR ETF XLK.

Bierman adds that investors need to be careful not to be overly concentrated in the top stocks, given “10 stocks accounted for 45% of the Nasdaq and the fact that 25% of the S&P almost accounted for about 50% of the S&P movement.”

“Everybody’s concentrated in 10 stocks that can still fall another 30% or 40%, like Apple and Microsoft. The idea of ​​concentration risk is that everybody owns Apple, everybody owns Amazon,” he said.

And that could force the hand of passive and active managers heavily invested in those big names, driving a 10% drop for markets that “washes away all other stocks.”

The markets

Dow futures are down over 200 points, ES00

YM00

NQ00,
and bond yields BX:TMUBMUSD10Y

BX: TMUBMUSD02Y
are up, along with the dollar DXYN.
Silver SI00
is retracing some of this week’s big gains, and bitcoin BTCUSD
is also off, trading at just over $20,000. Hong Kong stocks HK:HSI
surged 6% in a catch-up move following a holiday. New Zealand’s central bank hiked rates by half a point, the fifth increase in a row.

The buzz

Oil prices CL

BRN00
are softer ahead of calls for a big production cut by OPEC +, with a decision expected at 8 am Eastern. Some say don’t be too impressed by any output reduction.

Amazon AMZN
will reportedly freeze corporate hires in its retail business for the remainder of 2022.

Mortgage applications fell to the lowest pace in 25 years in the last week.

The ADP private-sector payrolls report showed 208,000 jobs added in September. The international trade balance is due at 8:30 am, followed by the Institute for Supply Management’s services index at 10 am Atlanta Fed President Raphael Bostic will also speak.

Expect the spotlight to stay on Twitter TWTR
after Tesla TSLA
CEO Elon Musk committed to the $44 billion deal. But will it feel like a win once he owns it?

EU countries agreed to impose new sanctions on Russia after the illegal annexation of four Ukrainian regions. Those moves will include an expected price cap on Russian oil.

South Korea’s missile fired in response to North Korea’s weapon launch over Japan, crashed and burned.

Best of the web

Russians fleeing Putin’s mobilization are finding haven in poor, remote countries.

Consumers are throwing away perfectly good food because of ‘best before’ labels.

The CEO of an election software company has been arrested on accusations of ID theft.

Ball tickers

These were the top-searched tickers on MarketWatch as of 6 am Eastern:

Ticker

Security name

TSLA

Tesla

GME

GameStop

AMC

AMC Entertainment

TWTR

Twitter

NIO

NIO

AAPL

Apple

APE

AMC Entertainment preferred shares

BBBY

Bed Bath & Beyond

AMZN

Amazon

DWAC

Digital World Acquisition Corp.

The chart

More market-bottom talk:

Twitter

Random readings

All about the investment manager who caught Yankees’ superstar Aaron Judge’s record-breaking home run.

An iPhone in a 162-year-old painting? The internet is stumped.

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