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1/23/24
#Stocks – $NFLX
#Macro – $SPX,
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The S&P 500 finished the day higher but just stayed within yesterday’s trading range, but technically, it finished up and increased by 28 bps. Rates were also higher, as were the dollar and credit spreads. Typically, we do not see all four trading in the same direction, coupled with the VIX oddly moving lower.
But it comes down to which market to trust more, and typically, I always tend to trust bonds and currencies over stocks more, just because the value of rates matters much more to valuing stocks than the value of stocks to valuing bonds. But at this point, the divergent moves between the CDX high yield spread and the VIX do not seem meaningful enough to matter. If the high yield spread shows signs of rising, the VIX will not be far behind.
Netflix (NFLX)
Netflix reported significantly better than expected results, with Net Additions blowing away expectations, coming in at 13.1 million versus 8.9 million. It doesn’t matter that earnings missed estimates. What matters is the net addition beating and the higher-than-expected 1Q earnings guidance of $4.49 versus estimates of $4.09 per share. The positioning in the options was so that the stock had to beat expectations by a wide enough margin to be propelled above $500; otherwise, calls would quickly lose value. However, the results were good enough for the stock to rocket past $500. The shares are trading up 7% to around $525, filling the gap from January 2022.
People often get hyped or think that Netflix is some gauge for the rest of the “tech” sector; it is just not anymore. Maybe in the heyday when “FANG” was the thing, but I feel things have changed materially since then, and it is just another company reporting results. At this point in the game, Netflix is the 14th in size in the QQQ ETF and is sandwiched between Pepsi (13) and Cisco (15).
S&P 500
The S&P 500 is testing an uptrend from the October 2022 lows. This trend line has served as support and resistance several times over the past two years. Meanwhile, the index remains above its upper Bollinger band with an RSI over 70, which tells us it will either pull back or consolidate sideways. The overbought conditions, coupled with the trend line, should offer substantial resistance and keep the index from moving much higher at this point.
Remember, the window for weakness is still open. Just because the index has consolidated sideways doesn’t mean the view was wrong. The window at this point is growing stronger the more the dollar and rates rise.
That will be all for today.
-Mike
Charts used with the permission of Bloomberg Finance L.P. This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.