Stocks Fumble, Failing to Breakout as Trade Anxiety Grows
MICHAEL KRAMER AND CLIENTS OF MOTT CAPITAL OWN SHARES OF GOOGL, V, MA
Stocks gave back some of the significant gains of the past couple of days; trade tensions and tariffs got in the way today. So it makes things a bit murky to me. Would the market have pulled back regardless today? Or is it a direct result of the tariff talk. So that makes it hard for me to decide if to action is the start of a more significant pullback or a one-day distraction.
So we shall now have to wait and see to some extent what happens next, but I can assure you I am not happy with the action.
It was the general trade tension sectors that dragged the markets lower today, with industrial and materials declining. The usual group of stocks suffered in that group, with Boeing and Caterpillar falling.
Let’s move on; I’m getting tired of these trade tariff days.
I’m questioning myself with my call on Amazon and wondering what I have done wrong in assessing the technical chart. It seems to be pretty evident to me that it was a rising wedge in the pattern, and the stock did decline a bit at first. Did I merely overestimate the amount the stock could fall? Did I draw the chart wrong? I’m not sure, but clearly, if the stock breaks meaningful over $1,760 then apparently I am wrong, and with the stock trading at $1753, my margin is minimal.
Alphabet is rising nicely, but the significant level for Alphabet doesn’t come again until $1200, so we still have some time to wait before we can think about it breaking out.
VISA & MasterCard
Visa and Mastercard continue to rise and I still own and love both of these companies. They are in the heart of everything happening in the world of e-commerce. Want to watch Netflix, guess what you are using to pay. Buying on Amazon, using your debit card, charging groceries, the list goes on an on. With the merchant just paying the toll for the use of the network.
I think it might have been last year, that I said I would gladly pay 25-times earnings to own Visa and MasterCard. Visa’s one-year forward PE today is 26, and MasterCard is now just over 27. The stocks continue to deliver strong growth with earnings for both stock seen rising by about 30 percent this year for Visa, and 38 percent for MasterCard.
The semis continue to look lousy, and that is a bit of a concern for me because it is such a “risk-on” group. The SMH Semi ETF has gone nowhere since November.
Anyway, since we are talking about trade, have you noticed the Shanghai composite, smoked! On January 29 it was at 3,500 -today it is at 2,777, a drop of nearly 21 percent! The index doesn’t have much further to fall before things get ugly. The trade war is having a significant impact on Chinese stocks and companies
Oil got slammed today, falling about 5 percent and is now back below $73. So we will see where it goes. I haven’t changed my stance that oil is likely to fall.
That is going to be it.
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.