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No Love For Facebook, As Amazon Continues Global Conquest

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Well, that came out of left field. I was surprised by the broader market sell-off today. The Facebook sell-off, not so much. Afterall, I wrote on Saturday, that Facebook had been troubled now for some time, and I think this may only be beginning of a further decline.

But the S&P 500 falling by nearly 1.5 percent, what was that about? We stopped going down right our support level at 2,691. As long as the decline does not go lower than the previous drop around 2,660, then the trend is still higher. Albeit directionally it has shifted, but the pattern is what concerns me the most.

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Yields continue to creep lower as well, so indeed no flight to safety in the 10-year treasury market.

The VIX is in backwardation as well, which tell us the volatility is likely not to last much longer.

^VIX data by YCharts

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Facebook

Facebook was apparently the headliner today, and I went through my thoughts about the event in the premium section, (See: Why Facebook Has Further To Fall), and I also talked about the technical setup in an Investopedia article today, (See: Why Facebook Shares Could Fall 20%). But to be brief, I think there is a real risk to Facebook having some form of regulation being thrown at it, and all the social media companies for that matter. If we use biotech as an example and the overhang drug pricing has had, it could cause investors to be wary of these stocks until it becomes more clear what the outcome is.

The stock closed right at the support level around $172.50, and I think the next stop could be around $166, and potentially all the way down to $148, should the overhang and threat grow.

Also, eMarketer had an article out today that didn’t get much attention, but it noted that Facebook and Alphabet would capture 56.8 percent of digital ad investment in 2018, but the problem is that will be down from 58.5 percent last year. The article noted that Amazon and Snapchat have seen accelerating growth.

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Amazon

Wasn’t it just last week that Jefferies noted, it saw accelerating ad growth as a critical driver for Amazon? Yeah, it was, you think they get their data from the same source?

Then news comes tonight that now Amazon is looking to buy some Toys ‘R Us locations. A purchase of some stores would surely be in an interesting play for Amazon, and I think it changes the playing field again in Amazon’s favor. Should Amazon pursue such a thing, it could acquire some great real estate and would immediately make it an unstoppable force in retail. The store could also serve as a distribution center, making same day delivery or perhaps even 2 hours delivery a genuine possibility. I’d imagine it being something similar to what Costco is currently doing with Instacart. The locations could also serve return centers for those items you do not want to keep.

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Technology

The overall technology ETF ($XLK) doesn’t look too bad. I think it just depends on what path it happens to take. In the worst case scenario, for now, I see downside risk to about $64.75.

Apple

Apple looks pretty solid too…

Ok, that is going to be it for today.

Mike

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Tags: #sp500 #facebook #amazon #apple #technology

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