This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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The Banks Break With More Downside To Come, Plus Netflix, Amazon, Chips
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF NFLX
It certainly has become clear what happens to the stock market now when technology, biotech, and discretionary are not involved, and it is not good. If these sectors do not rally soon than my viewpoint for at least the balance of the summer may drastically change. Because the bank stocks are broke, and industrials are right behind them, as the Trump trade continues to deflate. (See: The Reflation Trade Is Dead)
The banks stock broke today. I have been writing for weeks, how sad this group looked, how the flattening yield curve and slowing earnings growth was going to break them. How the technical chart was one of the ugliest around. Today the XLF and BKX broke, and they are key barometers of the group.
The BKX broke a long-term uptrend, which has been in place since February of 2016. Could the BKX drop to 102 and stop? It could, there is some mild support there on the chart, but I see a drop to 97 as being more likely.
The XLF ETF broke technical support today at $104.60, while also the long-term uptrend. Now it appears a drop to $25.26 seems likely.
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JP Morgan not only fell below support $106.50 but failed when it tried to rise back above it, another bad indication. Again, JPM looks headed towards at least 101.30
Bank of America
Bank of America fell below essential support, with the potential for a drop to about $26.
Morgan Stanley already hit my target of $47.25; maybe we should watch Morgan, and see if it bounces here, or see if it is a harbinger for more pain to come. (See: Morgan Stanley Stock May Fall 9% as Profits Sputter)
Everyone has been hoping the banks would start raising dividends and increasing buy-backs. But these stocks should be rising in anticipation of the significant catalysts; instead, they are falling. The reason the banks are falling, as I have said over and over, slowing growth and yield curve that will continue to flatten.
The yield curve will continue to flatten, as long as the Fed is intent on raising the short end of the curve. Rates on the long-end will not rise, put merely; our rates are too attractive to foreign buyers. Would you rather own a German Bund at 30 bps or a US 10-year at 2.85? It Seems evident to me.
Look at the hourly chart of the 10 Year Bond and 10-year Bund; they mimic each other pretty closely. So as global rates fall, so shall our rates fall. Draghi made it clear he is dragging his feet with ending QE, so rates in Europe shall likely continue to drop.
Moving on Netflix fell below $392, and that setups a retest of $382.
Amazon look to be set to restest $1650 if not $1620.
Intel is very close to $48, and that will be big tested, I’m looking for a bounce.
The semiconductor ETF SOXX is getting closer to an unfilled gap at $176.
Anyway, that is enough for one day.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
#sp500 #amazon #netflix #intel #banks #jpmorgan #bofa #morgan $MS