Need to Know: 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.

need-to-know:-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 say signs of a durable bottom are still missing.

Enter our call of the day, from 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 quant and fundamental analysis to determine market direction, sees the S&P 500 SPX, -1.07% 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, toward 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, +2.71%, which hit a five-year low on Friday. Eventually, the company that has invested $20 billion in a new U.S. plant will come roaring back alongside rivals like Advanced Micro AMD, +2.71%. “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.”

For the S&P 500 as a whole next twelve months price/earnings is currently 16.13 times, so Intel’s would be less than half of the broader index, according to FactSet

As for retail, he’s been looking at Urban Outfitters URBN, +7.13%, Macy’s M, +7.52% and Nordstrom JWN, +7.84%, 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, +3.06% 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, +4.60% or the Technology Select Sector SPDR ETF XLK, +3.36%.

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.”

“Everbody’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, -1.14% YM00, -1.13% NQ00, -1.29%, and bond yields TMUBMUSD10Y, 3.714% TMUBMUSD02Y, 4.146% are up, along with the dollar DXYN, -6.43%. Silver SI00, -3.74% is retracing some of this week’s big gains, and bitcoin BTCUSD, -2.24% is also off, trading at just over $20,000. Hong Kong stocks HSI, +5.90% surged 6% in a catch-up move following a holiday. New Zealand’s central bank hiked rates a half point, the fifth increase in a row.

The buzz

Oil prices CL.1, +0.45% BRN00, +0.62% are softer ahead of calls for a big production cut by OPEC +, with a decision is expected at 8 a.m. Eastern. Some say don’t be too impressed by any output reduction.

Amazon AMZN, +4.50% 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 latest week.

The ADP private-sector payrolls report showed 208,000 jobs added in September. The trade deficit narrowed, which should be good news for third-quarter GDP. The Institute for Supply Management’s services index is due at 10 a.m. Atlanta Fed President Raphael Bostic will also speak.

Expect the spotlight to stay on Twitter TWTR, +22.24% after Tesla TSLA, +2.90% CEO Elon Musk committed to the $44 billion deal. But will it feel like a win once he owns it?

Plus: Elon Musk’s legal battle with Twitter may be over, but his war with the SEC continues

EU countries agreed to impose new sanctions on Russia after the illegal annexation of four Ukraine 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.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m. Eastern:

Ticker Security name
TSLA, +2.90% Tesla
GME, +8.75% GameStop
AMC, +13.81% AMC Entertainment
TWTR, +22.24% Twitter
NIO, +8.01% NIO
AAPL, +2.56% Apple
APE, +12.30% AMC Entertainment preferred shares
BBBY, +9.02% Bed Bath & Beyond
AMZN, +4.50% Amazon
DWAC, -5.26% Digital World Acquisition Corp.
The chart

More market-bottom talk:

Twitter

Random reads

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

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