Stocks Drop On August 9: One And Done or More Pain To Come?

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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August 9 – Stock mentions: SPY, AMZN, SHOP, AAPL, ACAD, NFLX

Michael Kramer and the clients Mott Capital own AAPL, ACAD, NFLX

It was a sleepy summer week in the middle of August. Stocks were little changed with the S&P 500 slipping by a measly 46 basis points. If you were on vacation, no worries you didn’t miss much.

Of course, this week past resembled something more of a Casino, with the stock market plunging on Monday and working its way higher the rest of the week. It makes one wonder how you are supposed to invest in this market. Not easy. You have two choices, do nothing or sit in cash and wait. The one thing that almost always seems wrong is to react and get caught up in the moment.

Today was no different from the S&P 500 plunging at the start of the day only to rally back throughout the rest of the day.

S&P 500, spx

Bonds and the dollar hardly moved today, which was a clear signal that whatever it was that bothering the equity market, wasn’t a big deal. It’s too hard to get worried when stocks are plunging as bond yields, and the dollar is unchanged.

bonds and the dollar

That is what I explained in a premium video today, giving a checklist of things to check for daily, looking for confirmation signals.  Let The Market Be Your Guide In Times Of Confusion

Anyway, the lack of confirmation today makes me believe that today’s sell-off was a one-off. The one minor concern I would have from today’s session is the look of the chart at the 2,935 level in the S&P 500. I will look at the scenario more this weekend.

Earnings

Not much was accomplished this week with the S&P 500 trading around 16.1 times 2020 earnings estimates of $181.84 per share, based on S&P Dow Jones estimates. Earnings estimates for 2020 did fall slightly again this week from $182.09 on July 31. Since the beginning of the year, earnings estimates for 2020 have dropped by about 6%, which is why the PE ratio continues to rise despite the equity market going nowhere.

 

Apple (AAPL)

Apple seems to be acting ok, despite rising tariff worries. Then again, the yuan has devalued some, so that should offset some of the cost to Apple. It will be interesting to see what the company sets the price for its new phones when they launch in September.

It seems like we are back to where we were throughout most of July, working our way higher to $209.

apple, aapl

Shopify (SHOP)

Shop had a solid day and continues to find itself working its way higher towards $400.

shopify

Amazon (AMZN)

Amazon had a reasonably strong day holding on to support at $1800. I still think AMZN heads towards $1900.

amazon, amzn

Netflix (NFLX)

It looks like Netflix has broken free of a downtrend it has been in and retested that breakout today. Perhaps that sets up an increase back to $321.

netflix, nflx Stocks Drop On August 9: One And Done or More Pain To Come?

Acadia (ACAD)

Acadia was powerful today in a weak tape and is it still on a path towards $31.

acadia, acad Stocks Drop On August 9: One And Done or More Pain To Come?

Have a relaxing Friday night!

-Mike

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 results.

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