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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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN APPLE, NXPI
Today is Thursday, January 17
- S&P 500 futures are pointing to a lower opening of 11.5 points as of 8:30 AM
- The US 10-year rate is at 2.71%
- Dollar Index is at 96.04
- WTI Crude Oil is $51.62
- VIX: 19.26
- Critical events for today: Netflix Reports 4Q Results, Consensus EPS Est. $0.24, Revenue Est. $4.207, Netflix guided 4Q Sub Adds at +9.4 Million. More ZTE/Huawei Concerns
Recap of International Trading:
- Hong Kong Hang Seng Index 0.54%
- Japan – 0.20%
- China Shanghai Comp.-0.42%
- UK FTSE – 0.50%
- Dax -0.31%
Rate Hike Watch
The odds of no rate hikes through January 2020 have increased to roughly 67%. Meanwhile, the odds of rate cut in 2019 is at 21%
In economic news, Jim Foote CEO of CSX noted on the company’s conference call: Over the past few days, I have spoken to a number of large customers across different industries. General customer feedback has been positive and it’s consistent with the demand levels we are seeing today. While it’s hard to ignore the volatility in equity markets, I cannot call out any trend in our business today that would point to a significant slowdown in our business.
S&P 500 (SPY)
Stocks are pointing to a lower opening on January 17, a reflection of the weakness in the global markets. There is an unfilled gap in the S&P 500 chart down at 2,610, and that could offer technical support. But the next major level of support doesn’t come until around 2,595.
The semiconductor sector is breaking down, and the SMH is falling below support $89.70. This sector is likely to weigh on the broader market. There is also an unfilled gap around $88.
Weak revenue guidance out of Taiwan Semiconductor (TSM) is not likely to help the group either. The company gave first quarter revenue guidance of $7.35 billion at the mid-point, below estimates of $8.08 billion. The company cited a slower economy, mobile seasonality, and high inventory levels in the supply chain.
Apple shares are falling slightly in the premarket on reports the company would reduce hiring in some division due to weak iPhone sales. It doesn’t sound as bad as the first reports nor does it feel like a big deal to me. $155 continues to be resistance.
Morgan Stanley (MS)
Morgan Stanley is falling sharply today after reporting weaker than expected fourth quarter results. The company reported earnings of $0.80 versus estimates of $0.89 on revenue of $8.55 billion versus estimates of $9.32 billion. These results follow what were already sharply reduced estimates. Those expectations were not lowered enough.
Back into the downtrend, this stock shall go, and where it stops, no one shall know…but it could be $34 though.
NXP Semiconductor (NXPI)
NXP was upgraded today by Nomura to a buy from a neutral with a $95 price target. The upside for now seems to be at about $89.
Finally, I can’t help but notice that some have seemed to identify the current level of the “market” as being critical. So I am not unique here.
Not sure what it means, but it does give me pause that perhaps the market is due to rise further. Expect the unexpected.
— Peter Brandt (@PeterLBrandt) January 16, 2019
From a technical perspective, we care about these pivot ranges because traders are often “anchored” to those price levels and are prone to make changes at that same level. As you can see in the following chart, the $2640 range is also the 50% retracement level of last year’s decline. If we were trying to project where the market will pause (even temporarily) that price range would be a good estimate. News that looks bad for the housing market could make traders even more jumpy, which increases the potential for a reversal at this level.