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Could Netflix Move Into Music? The Daily Rundown

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF nFLX AND TSLA

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Netflix

I thought Netflix may have broken out early in the day but was unable to hold the gains.  It has a solid uptrend in place, and the RSI certainly looks like it too is ready to breakout.

Into Music

I have been thinking a little bit about Netflix and wondering if it makes sense for them to get into a music service. They have 125 million subscribers, and maybe for an extra $5 a month they can bundle in a streaming music service. The Netflix app is already on my phone, making it easy to likely get conversions.

Yes, the streaming music space is getting crowded, but how many people would gladly pay $20 a month for music and content.  I’m sure a lot.

Doing some back of the envelope math, even if you consider the 55 million US subscribers, and a conversion rate of 30 percent, it could easily add about $250 million in extra revenue a quarter, and just further solidify the company’s dominance, in streaming media.

Broader Market

It was a pretty quiet day all around, stocks couldn’t build any positive momentum all day long, and the sellers just came in at the end of the day.  When it comes down to it, the S&P 500 was only down about 30 bps, certainly nothing to fret over, and refilling some of the gap created yesterday.

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Industrials

Industrials had a great day yesterday, and today we gave back a portion of that significant gain.  Again, some investors blame trade tension; I blame the Algo’s playing a game of fill the gap.

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Boeing

The same thing happened with Boeing.

Chips

The setup in the chip stocks still looks strong.

Micron

Micron has a lot to do with the chips being strong; the stock jumped by about 6.5 percent today.  But, be mindful of that gap, just like the other charts above show us.  A fall back to $56 or even $54 is entirely possible.

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Tesla

Tesla certainly has an unusual setup, with the stock sitting at support around $272, while the RSI continues to trend lower.  It is the stock that everyone loves to hate. It needs to find a bounce off this support level. Otherwise, things might get difficult for the longs. The short interest as of April 30 was at the highest level ever in the stock’s history at 39 million.

Now on to some boring, but very important stuff

Dollar Index

The dollar index has stopped rising for now, and where the dollar goes can have ramification on other parts of the market. For now, it struggles around $94, and should it break above $94, then is going to be a significant problem for commodities and multinational stocks. Should it managed to reverse and head lower, that is going to help fuel Oil rise even higher.

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Eurodollar Rates

The Eurodollar deposit rate is perhaps telling us that demand for dollars abroad may be easing, and that may be a sign that the recent rise in the dollar is nearing an end. Back on March 20, I speculated that the rising Eurodollar rates were a sign the US dollar would begin to surge, and indeed since that time, the dollar index has climbed from 90.50 to a high of 94 yesterday, a climb of about 3.8 percent. So indeed, we should pay attention to the cost to borrow dollars aboard.

Libor

Additionally, 3-month libor rates are stalling out, and perhaps that is a sign that expectations for future Fed rate hikes are cooling. It would surely be nice if that were the case.

 

For the most to think we are in a low inflation environment with strong earnings growth and a robust economy. Hard for me to bearish in this type of situation, I continue to see more and more signs of sectors breaking out, and individual stocks as well.  Outside of some unforeseen geopolitical event, I think the most significant risk to the economy and the markets is an over aggressive Fed. Nothing would make me happier than the Fed to leave things alone at this point.

That is it for today.

-Mike

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Tags: #netflix #music #tesla #sp500 #industrials #boeing #dollar #eurodollar #libor