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.
Otherwise, enjoy the column!
Subscribe to the Monster Stock Market Commentary to get the Weekly Monster Market Commentary and join the 3,136 subscribers getting it for FREE!
Netflix Subscriber Growth, GE’s Valuation, Incyte Rising, And Much More
Stocks were mixed today for the most part, and the market was not nearly as confident today as it had been yesterday. Is this going just be a repeat of last week? With a one or two day rally, followed by a week of retracements? The charts would seem to suggest that we have a bit further to rise, perhaps to around 2,750. That would be the next test, the big question do we breakout and continue to rise, or do we fail and fall.
Get the first two-weeks of RTM for free and watch the latest video: Tech And Biotech Look Weak, Plus Subscriber Mailbag
Gary Cohn Resigns
Then, of course, the other question, will the market react negatively to the news of Gary Cohn’s resignation? Not sure. Right now the futures are pointing to lower open, with the Dow futures down about 400, and the S&P 500 futures down about 39 points. The chart below of the S&P 500 futures shows that gap lower.
The dollar weakened initially on the news but is bouncing back some.
Subscribe to the MCM Stock Market Commentary to get it weekly and join the 3,136 subscribers getting it for FREE!
I think the Cohn resignation is likely a sign to the market the tariffs are likely to happen, and the market is fearful of the fallout. Perhaps Cohn was looking to get out, and he merely used this tariff fiasco as a way to make that happen.
Regarding the economic agenda, it will continue to be the Republican agenda, not the Gary Cohn agenda. So at the end of the day, his resignation is likely not a big deal over the longer-term.
Biotechs stocks continue to struggle and have yet to rise above $111.50 on the NASDAQ Biotech ETF (IBB). We need this group to rally, and soon. The risk-on part of the market is desperately missing.
It isn’t just in the big biotech’s either; the more evenly weighted iShares Biotech XBI is also exhibiting the same pattern as we noted yesterday.
Incyte has had terrible run since March of 2017, but the tide appears to be turning. The stock managed to finally find a bounce, but the big test comes around $93. Should it fail at $93, a move back towards the low $80 is likely. A rise above $93, likely sends the stock over $100.
Consumer Discretionary stocks are also nearing a make or break level, like the biotech stocks. You would never know how weak the set up is in the group based on Amazon and Netflix. In fact, except for Amazon and Netflix, the rest of the group is pretty terrible, and the discretionary XLY ETF would likely be down even more.
Just look at the top 25 holdings within the XLY ETF.
(Data from ycharts)
Speaking of Netflix, the stock got yet another upgrade today, this time from Pivotal. The price target was increased to $400 from $300. This is the part they I can never get, they are expecting international subscribers to hit 250 million by the year 2024! How do they come up with these things? That is six years from now. I don’t even know what Netflix will report next quarter, let alone 24 quarters from now.
You know it is kind of funny though because my model shows me the same thing! It shows Netflix hitting 250 million international subscribers in June of 2024! Wow. You think that is a coincidence? I don’t know, but if I told you I ran my model in excel with the basic trend line function on the graph, would that give you more or less confidence in the projection? Well, that is exactly how I did it.
The function actually works quiet well, when trying to predict shorter-term outlooks, but anything beyond that to me seems pretty suspect. I own Netflix, and I am more than happy to see it continue to rise, but I think looking out that far seems like a bit much.
Another interesting call this week was that GE was going to rise 50 percent back to a range of $20 to $22. That would mean GE would trade at a higher valuation than Honeywell, and I can’t comprehend that. GE is expected to earn $1.05 in 2019, while Honeywell is expected to earn $8.66. At $22 GE would trade at 21 times one year forward earnings, while Honeywell now trades at 17. Hmm..
GE PE Ratio (Forward 1y) data by YCharts
Maybe I’m missing something here, but it feels like every time you think all the bad news is out of GE’s stock more bad news follows. Should GE trade at a higher multiple than United Technologies too?
I can’t seem to wrap my head around this one.
Well that is going to be it.
Mott Capital’s Reading The Markets – An In-depth Global Macro Stock Market Commentary – In Video Format – See How Michael Dissects The Markets
Just $200 Per Year – Get Your Free 2 Week Trial
Tech And Biotech Look Weak, Plus Subscriber Mailbag
Breaking Down Acadia’s Results, Exploring Trends In Chips Stocks
Stocks In Rally Mode, More To Come
Crazy Market Reaction Following Fed Minutes, Plus Subscriber Mail Bag
Subscriber Mailbag, Plus Market Rundown
Free Articles Written By Mike:
4 Red Flags For Technology Stocks
Biotech Stock Nektar May Be Ripe For A Sharp Pullback
Macy’s May Fall 18% as Option Traders Turn Bears
Micron May Rise 12% As Analysts Grow More Bullish
Why Amazon’s Stock May Continue To Outperform Alibaba’s
AMD May Fall 17% as Bearish Option Volume Soars
Join our 3,136 Daily Subscribers And Get This Commentary In Your E-Mail! Subscribe
[vc_tweetmeme type=”follow” follow_user=”michaelmottcm” show_followers_count=”true” large_button=”true”]
Michael Kramer and the clients of Mott Capital owns shares of NFLX
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.
© 2018 Mott Capital Management, LLC. Use, publication or reproduction in any media prohibited without the permission of the copyright holder.
Tags: #sp500 #cohn #netflix #ge #incyte #biotech #consumer #stocks