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July 18 – SPY, NFLX, MSFT, MU, AMD
Michael Kramer and the clients of Mott Capital own NFLX and MSFT
- S&P 500 futures -5 points
- US 10-Year 2.06%
- VIX 14.17
- Dollar Index 97.18
- Oil $57.23
- Japan Nikkei -1.97%
- Shanghai -1.04%
- Hong Kong -0.46%
- KOSPI -0.31%
- FTSE -0.28%
- DAX -0.45%
The odds for a 50 basis point rate continue to climb, and the FedWatch tool is now pricing in a 36% chance it happens at the July meeting. That is up from 20% last week. So we will need to continue to watch this. I had noted earlier this week in a premium video that there appears to be a disconnect between Fed Fund futures and the 3-month overnight eurodollar rates, which would suggest to me the whole market still doesn’t believe a 50 bps rate cut is coming. 2 Rate Cuts In July Back On The Table?
Not sure how long this will last given the better than expected Empire State reading earlier last this and a very strong Philadelphia Fed Business Outlook that came in 21.8 versus estimates of 4.5
Trading Session for July 18
S&P 500 (SPY)
The S&P 500 broke the uptrend on July 17, putting the rising wedge in place. The next level of support comes at 2,975, with another gap to fill at 2,940. My feeling, let’s go down, fill the gaps, and move on with life. It’s going to happen eventually, so why not get it over with, when the damage will be minor. I’m sure there will be some bs about trade-related or some other ridiculous, meaningless headline that can get things moving lower.
Netflix is falling some on July 18 but is it is off the after-hours lows. Nearly all of the commentary I am reading from the sell-side suggest the quarter is a one-off. Again, after sleep on it overnight, the trends in the gross adds in the quarter suggest it is not a demand problem, while my google trends suggest it was merely a timing issue. In English, people knew that shows like Stranger Things were coming in July and were not a rush to sign up until June.
My hunch is that NFLX doesn’t stay down for long, and finds support/resistance around $342.
Just in case the market feels as if it didn’t inflict enough damage on my portfolio, it gets another chance to take a swipe at me tonight when MSFT reports. For Microsoft, it all about cloud growth. The stock has had a monster run and is hitting resistance at $140 while breaking an uptrend. Watch for a pullback to $130.
Regardless this stock may be too cheap given it is trading at what will become a one-year forward earnings estimates of 23 times. Consider that SAAS cloud peers such as ADBE trade at 31 and INTU at 37.
Micron’s price target was increased to $60 from $45 at Bofa Merrill today noting an improving DRAM spot market. The stock is testing resistance at $44.10, and a break above that price would send the shares higher towards $45.50.
AMD was downgraded to a Neutral at Mizuho on July 18, but its price target was hiked to $37 from $33. I’m surprised the stock didn’t break out at $34.50. I guess we can find out the next move when after it test support at $32.20.
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