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A Look At The Stock Market For The Week Of April 16 – Calm Is Returning
It is anyone’s guess just where the stock market goes this week; now with the addition of geopolitical risk from the airstrike over the weekend in Syria, it is one more thing investors can fret over. The S&P 500 finished the week around 2,656, and the stock market has virtually gone nowhere since the end of February.
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Volatility Measures
The S&P 500 put to call ratio is at 1.49, which means there are currently more open puts than calls, and that ratio is in the middle of the range and surely doesn’t seem alarming.
SPX Put/Call Ratio data by YCharts
The VIX index is below 18, and all of the indicators continue to indicate the fear level is continuing drop. We can see when exploring the options market for the $SPY, that the term structure for implied volatility is normal, and fell on Friday as well.
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A Rise To 2,691
So if the events from the weekend are viewed as a one-off, which I think it will, then it should have no impact on trading. With fear levels continuing to fall, it would suggest that stock market will continue to stabilize around current levels and begin to work higher back towards 2,691.
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Technology
Technology stocks will continue to be the focus this week, and with earnings for many of the big companies coming next week, we will want to watch how these companies are performing in the days leading up to these results.
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Microsoft
Microsoft continues to look weak and has a relative strength index (RSI) that continues to trend lower, despite a stock price that is still trending higher, and that is bearish divergence signal to me. In fact, volume levels haven’t been that strong either, a sign that perhaps interest in the name has been declining.
While shares are nearly 4 percent off their 2018 highs, they are still up 8 percent on the year. Shares are trading at their highest one-year forward price to earnings multiple in years, and that one-year forward multiple comes to nearly 24 times 2019 earnings estimates of $3.95 per share. For that multiple you get earnings growth of only 8.55 percent in 2019, if it seems like the stock is expesnive, you are not alone, I feel the same way.
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Cisco
Cisco doesn’t seem different Microsoft, with a technical chart that looks relatively bearish. Cisco comes at a fair better valuation, and believe it or not, on better earnings growth. Cisco is expected to grow earnings in 2019 by nearly 11 percent to $2.87, while only trading at 15 times those estimates.
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Biotech
The XBI Biotech ETF has to this point avoided a massive double top formation, not breaking the neckline, and is managing to stage a relatively strong rebound. The next real test comes at $93.60, and we will need to watch closing for that to happen.
If the group is to continue to rise it is going to need to come from the Agios, Spark, and Sarepta’s, three of the top performing stocks in the XBI, because it surely isn’t coming from Biogen and Amgen or the likes.
Agios
I had written in an Investopedia article, that Agios looked primed to fall to around $72, and sure enough, it did and then rebounded sharply off of support. It sure does have a strong uptrend in place, but the RSI continues to trend lower, and that makes this one’s further rise questionable.
More tomorrow.
That is going to be it. Good Luck this week.
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Michael Kramer and Clients of Mott capital own shares of NFLX, TSLA
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Tags: #stockmarket #sp500 #microsoft #cisco #biotech $agios
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Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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