broken glass texture on white background

Stocks Pop On April 19, But Then Came Netflix

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.

Otherwise, enjoy the column!

Subscribe to the Monster Stock Market Commentary and join the 2,481 subscribers getting it for FREE every day!

4/19/22

STOCKS – NFLX, DIS

MACRO – SPY, QQQ, TIP

Mike’s Reading The Markets (RTM) Premium Content – $65/MONTH OR $520/YEAR – The First 2-weeks are FREE to try.

The S&P 500 rose by 1.6%, I couldn’t tell you what the catalyst was, but that is what happened. The only thing that made sense was that the turn was expected to happen given the options cycle playing out, which I mentioned over the weekend.

Typically we can rally for a few days or consolidation sideways following OPEX. Still, we have a lot of events coming up over the next two weeks that should require investors to look to buy puts, specifically ahead of the FOMC meeting on May 4.


S&P 500 (SPY)

On top of that, the S&P 500 rose to around 4,470 and found some stiff resistance. That resistance happened to be on the Fib grid. This resistance region is on the same trend line that has acted as resistance/support at the end of January, the end of February, the beginning of March, and now. So if we stop here, it makes total sense.

Anyway, the pattern in the S&P 500 is very unstable, and in fact, I think the algo’s are on repeat mode, as the chart shows below. If so, this whole rally should vanish with a push back down to 4,380 over the next day or so.

Real Yields

The 10-Yr TIP hit 0% today, and it probably has to go much higher than that. On Thursday, there will be a 5-yr TIP auction, which will help to push these rates even higher.

TIP ETF (TIP)

Meanwhile, the TIP ETF fell to $120.53 today and the lowest level since June 2020. I don’t see why this ETF can’t drop to $117. What was even stranger was that the TIP ETF was down sharply, and the QQQ was up sharply. Someone was way off base here today, and my guess is it wasn’t the bond market.

Netflix (NFLX)

The market is trading much lower after hours following Netflix’s horrible results. At this point, we can say the growth story is over. The company reported a new loss of 200k subscribers during the first quarter; estimates were for gains of 2.5 million. Meanwhile, the guidance was worse, guiding for a loss of 2 million subscribers in the second quarter versus forecasts for an increase of 2.4 million. It just doesn’t look good at this point; subscribers seem to be rejecting the recent price hikes. The stock is trading down 25% post-earnings.

Last week, I noted that the stock looked weak and that the second quarter is typically their worse quarter. But these results and guidance even exceeded my bearish expectations. The stock is currently trading at technical support at $260, and it seems highly likely this stock is going to fill the gap from January 2018 at $227. All gaps get filled, I guess.

Disney (DIS)

Disney is trading lower in symphony with Netflix as it should. It probably has further to fall as the stock is falling below support at $127, which I mentioned last night, and should now be on its way to $117.

Anyway, until tomorrow…

 

-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.