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Stocks Drop On Disappointing Earnings And A Stronger Dollar

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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10/27/22

#STOCKS – $AMZN, $AAPL, $SHOP

#MACRO – $SPY

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL AND SHOP

Stocks dropped today, as the S&P 500 finished down around 60 bps. The index just couldn’t find a meaningful direction most of the day, mainly trading lower as the dollar rose sharply following a wish-washy ECB press conference.

We will get the BOJ tonight, and I can’t imagine they will come off their current yield curve control policy. That likely means we will see further dollar strengthening in the following days. The yen has been stronger this week due to FX intervention by the ministry of finance. But nothing much has changed; as long as Japan doesn’t rush to intervene again and it can hold support around 146, the dollar is likely to strengthen.

Rates

Also, tomorrow we will get the PCE report in the morning, which may help drive the dollar and yield higher. Yields did fall sharply today, but probably not as you think. The dovish rate hike from the ECB sent rates in Germany plunging, with the 2-Yr and 10-Yr dropping by 19 and 16 bps, respectively. This drop in European rates drove rates lower here. It is essential to realize this is not a signal from the bond market on the Fed, just global markets at work. The PCE report is likely to move yields tomorrow, and my belief is they will come in hotter than expected, and rates will continue to climb in the US.

 

S&P 500 (SPY)

At least currently, the chart of the S&P 500 futures continues to look bearish after the big run-up on air. For the moment, it appears that a Head And Shoulders pattern is breaking lower. I am still looking for a move back to 3,640 and 3,600.

Markets are trading lower tonight after Amazon gave disappointing guidance. The shares were trading sub $100 after hours. Right now there is technical support for Amazon around $94.50 to $95. If those levels break, then we are likely looking at a stock that trades around the pandemic lows.

Apple (AAPL)

Apple is trading higher after it reported better-than-expected results. The quarter looks like it was saved by the MAC, which delivered but then expected revenue. The company seemed to give even less guidance this time than usual. The only thing I got was that they would see 10 points of FX impacts and expect revenue growth to decelerate from the September quarter. Revenue in September grew 8%. So, I don’t know how the market gives them so much room, maybe because they deliver. Not complaining; I have owned the stock for years, just surprised. Support is at $140, so there is plenty of room here to play with at this point.

Sho

Shopify (SHOP)

Shopify broke out today after it reported results, moving above the falling wedge. The RSI broke higher too. If the stock can push past $36, it probably has room to run to around $40. I own it, so I’d be happy to see it.

 

-Mike

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