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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July 29 – Stock mentions: SPY, AMZN, AMD, NFLX, FB, AAPL
Michael Kramer and the clients of Mott Capital own AAPL and AMD
S&P 500 (SPY)
Stocks had a modestly lower day with the S&P 500 falling about 15 basis point. It certainly could have been much worse. The index tested support very early in the day around 3014, and that level held firmly. It seems possible the index trades sideways between 3014 and 3025 until Wednesday afternoon.
As we get closer to the FOMC meeting, one constant fear I have is what the Fed has to say about future rate cuts. The market, according to the CME Group, is now pricing in a 57% chance for a rate cut in Septemeber, It would put the benchmark rate in a range of 1.75 to 2%.
My biggest concern is what happens when Powell starts talking. Sometimes the FOMC statement and his commentary have been confusing, which has been the start past problems The December 2018 and May 2019 meetings come to mind. This remains the most significant risk to the market and the bull thesis.
The risks get even more prominent the closer and closer the S&P 500 is to trading at near full valuation. As of today, my model shows the S&P 500 2020 earnings estimates at 181.30, giving the index a PE of 16.7.
On June 3, the S&P 500 was trading at 14.7 times 2020 estimates. Should the Fed screw up, the market could very quickly find itself back at 2,710 or so, about 10% lower than its current level.
Is this meeting important? Very.
Amazon continues to decline, and my expectations are for that remain unchanged. I moved support for Amazon down from $1903 to $1890. Still, this region is of utmost importance. A decline below $1890 is likely a signal for a drop to $1850 for AMZN.
Netflix held support at $329 all day long, and I have to think that is a positive sign. I still believe the stock can see $342.
Resistance at $34.50 for AMD is far more challenging then I thought. It means that earnings will be the make or break moment for AMD. If AMD doesn’t rise over $34.50 following results, it seems that the only way AMD is going is lower. Premium content: Chip Stocks May Be Running Too Hot
Facebook is getting closer and closer to $194.50, and should that level break; I fear a decline to $186 may be on the way.
Apple will report tomorrow after the close, and the stock continues to look at like $217 is possible.
Have a good night
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