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 owns shares of AAPL, TSLA, NFLX
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I wanted to start with some thoughts on tariffs. I do believe they are having some effect on global growth as I have noted, there are obvious signs of slowing. But the good news when you think about this over the longer-term is that effect of the tariffs is a one-time event. In a sense, once the taxes are put into place, the prices on items will rise as a result. But once that rise happens, it is over. So, it may result in some company’s posting bad or troubling results for a couple of quarters compared to 2018, but after that, the effects of the tariff will basically “normalize.” It is no different from the tax cuts we got earlier this year. The tax cuts led to significant earnings growth in 2018. Now next year those results will normalize, and as results, we have slowing earnings growth, think 20ish% growth in 2018 slowing to 10ish% in 2019.
So, while tariffs, for now, are troubling they will normalize. Do I think short-term the tariffs are disruptive, sure? But over the longer-term, the effects of the taxes should normalize. Additionally, companies will adjust if it seems these tariffs may be longer-lasting. Maybe I’m looking at the wrong way, but those are my thought, you can agree or disagree.
S&P 500
The stock market rallied some on Monday recovering some of the losses last week, but still, much work needs to be done over the near-term to sustain the rally. What I find most striking about this most recent sell-off is the similarity it has had to the October 11 to October 29 sell-off. We can see in the chart below that the two resemble each other, peaking around 2813 followed by the steepness of the declines. Interestingly, the S&P 500 is setting itself up for a similar bottom or potential rebound.
With that said the S&P 500 might be on its way higher should it rise above technical resistance around 2,675. The next level of resistance comes around 2,686. But the level of more significant interest and what seems more likely is at 2,720, about 2% higher.
That is because the RSI is now firmly trending higher. To me, it does suggest that the recent bottom from last week, maybe just that. I want a couple of more days to confirm this, but as you will continue to see there are more bullish signs emerging.
NASDAQ
The NASDAQ as I noted in the midday write-up also suggests that higher prices are on the way. The index rose firmly above support at 7025. Now the next level of resistance comes again around 7,176.
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Oil
Oil even went up today, but notice that it failed at resistance around $52. For now, I think it is easy to see the trend is lower.
Apple (AAPL)
Apple still has a lot of work to do, and it will take a rise above $180 to get the change in trend.
Amazon (AMZN)
Amazon is now off death’s door and is rising. The next big test will come at $1620.
Netflix (NFLX)
Netflix is also attempting to find its footing, but again the real test will come at $272.
Read more in the premium room: Netflix Stock May Rise 15%
Facebook (FB)
Facebook sees some signs of life too. I’m watching for a rise to $140.
Tesla (TSLA)
Tesla is attempting to make a run back to $359.50. I still happen to think this one could be at or above its all-time highs by year-end.
JD
JD.com is also starting to shows of a rise, and resistance comes around $22.80.
Twitter (TWTR)
Twitter is also showing some lift, but for its rally to continue, it will need to break above the downtrend around $33.25.
Nvidia (NVDA)
Nvidia is up today, but resistance is strong at $160. This may merely be a dead cat bounce. There are no catalysts in the near term to lift the stock other than a potential change in market sentiment.
More tomorrow-
Mike
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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 results
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