Netflix Jumps, While IBM Slumps, Roku For Real?
If the stock market needed the narrative changed then Netflix did just that. The S&P 500 jumped by over 1 percent on the day. The jump helped to the fill the gap at 2,713 was filled today in the S&P 500, closing at 2,706. We got right up to that resistance level in late trading and managed to back off by the end of the day. It will not surprise me if we retest the 2,691 level again tomorrow, before moving higher again. The next significant resistance level comes at the downtrend around 2,740.
The good news is that the VIX continues to decline and is back to 15. We want to see the VIX continue to fall, and I think as strong earnings continue to roll-out and the narrative in the marketplace shifts, that will be the case.
Netflix was a prime example of that today with shares of the stock soaring above its old high, and rising to $334 up 9.2 percent on the day. $333 will now serve as support, and we can see that held today when tested.
Interestingly IBM posted what on the surface looked like substantial numbers. But if you want to be picky, gross profit margins slipped by 60 bps, to 43.8 percent. Total expenses were up; net income was down versus last year. Even on non-GAAP basis gross profit margins were down to 43.7 percent from 44.4 percent a year ago.
When adjusting for currency IBM’s revenue was mostly flat on the year, and this strategic imperatives part of the business, that is supposed to be the big growth engine, only grow by 10 percent on the year adjusted for currency. That cloud number seems awful low? 20 percent growth? 14 percent adjusted for currency? Amazon’s AWS only grew 42 percent last quarter. How does that 20 percent sound now? I guess we will know how good or bad that number is when Alphabet, Microsoft, Amazon start reporting next week.
I hope for Amazon’s sake cloud didn’t slow to mid-teen growth rate, if so watch out. The chart is in an interesting spot here, we never entirely made it to $1,250, but we got to about $1,360. The stock finally firmly crossed over $1,440, and now the next big test comes around $1,500, where a downtrend meets a resistance level. Breakout and jumps quickly to $1,578. Fail, and you fast fall back to $1,440. Which way do I think it goes? Well, I believe it sees $1,440 again before it sees $1,578. We’ll see.
So I want to know did Roku go up to because it launched the ESPN app on its platform, or because Point72 has a 5 percent in it; because neither was a good reason for the stock to rise by 9 percent. I’m sure if ESPN + isn’t on other platforms, it will be soon. But yet the stock was up how much? 9 percent? That is a joke right? I never said the market made sense.
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