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The Stock Market Is A Battle of Good and Bad As Uncertainty Runs Wild

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MICHAEL KRAMER OWNS XLF PUTS
Michael Kramer and the clients of Mott Capital own shares of NXPI

Stocks continued the see-saw action today we have seen for most of 2018. I think the Fed minutes today demonstrate rather well why there is so much back and forth in the marketplace this year. For the most part, it goes back to what we were discussing in our road to nowhere story.

Good vs. Bad

The ebbs and flows of good and bad news, are two forces that the market is entirely undecided about, and for the most part, it keeps a lid on the stock market. A strong US economy points to strong earnings growth, which should be fueling equity prices higher. But the risk of a global trade war and the impacts that it may have on earnings and profits in the second half of the year weigh on stocks, preventing them from getting too far ahead of themselves.

It is a battle of the haves, and the have not’s, with technology, consumers, and biotech falling into the “have’s”, being insulated from a trade war, except for the chip stocks. With industrials, materials, and staples being on the front line for tariffs. Just look at the separation in the performance for these six groups.

XLK Chart

XLK data by YCharts

A Barometer for Trade Wars

In fact, there has been no better barometer for the pending trade wars than NXPI and Qualcomm, still awaiting approval from the regulators in China on the proposed $44 billion deal, that was first announced in the fall of 2016, nearly two full years ago. The deal clock is ticking, and if not approved by the end of July, NXPI will be free to go its separate way, and Qualcomm will pay NXPI a fee for the cancellation of the deal. NXPI is trading nearly $20 below the proposed takeover price of $127.50

NXPI Chart

NXPI data by YCharts

It leaves the market not comfortable enough to go all in, and not uncomfortable enough to walk away. So, we have a stock market that has virtually gone nowhere in 2018.

S&P 500

Moving on to other trading topics, the S&P 500 appears to have broken free of its latest downtrend, and that may mean we finally see a rise back to 2,800, over the coming days. Whether or not we can rise above 2,800 is another story. But it would be the market’s third such attempt at a breakout over 2,800.
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S&P 500

CHIPS

Chip stocks rebounded some today, and we will need to continue to watch this group. The SMH ETF has managed to bounce three times off support at roughly $101, a big positive.

chips

Intel

Intel is at a pretty big resistance level just trading just below $51, should it rise above it, shares go higher on towards $53.

Intel

Texas Instruments

Texas Instruments looks like it breaking out.

txn

Biotech

Big name biotech stocks also look like they may getting into it again. The IBB appears to be trying to break out.

biotech

Gilead

Gilead is rebounding nicely. Even though it didn’t pull back as far as I thought it might, it did fall about $68, and now it is breaking out to the upside, with the potential to rise to $76.50.

I still would not want to own this stock long-term, but it does make an excellent stock to trade.

gilead

Biogen

Biogen is nearing a breakout at $300, and it may rise to about $325 should that break ou occur.

Banks

The banks continue to look weak, and today I broke down and bought myself some XLF puts for expiration in September.

Morgan Stanley

Morgan Stanley fell below support $47.25 and could be looking at a drop to $44.10.

ms

That is going to be it for today, remember the big jobs number is tomorrow.

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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.

#sp500 #biotech #gilead #biogen #intel #xlf

 

 

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