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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September 7, 2020
STOCKS – DBD, AAPL, SNOW, BA
MACRO – SPY, IEF
Mike’s Reading The Markets (RTM) Premium Content – $45/MONTH OR $400/YEAR
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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL
Stocks finished the day mostly lower, with the S&P 500 falling by roughly 35 bps. The Qs managed a slight gain to finish up 14 bps. It could have been worse if not for the rotation into Apple; the S&P 500 Equal-Weight RSP ETF finished the day lower by 84 bps, while the Russell dipped by 72 bps.
The advance-decline line for the S&P 500 continues to struggle; it got really close to breaking out late last week but failed to do so. Today’s drawdown is nothing to get overly excited about yet. We will have to see how it goes from here. There are plenty of reasons why the market should drop, peak valuations, slowing growth, a Fed taper, to name a few, but so far, these threats have been ignored. Today, Goldman downgraded their GDP growth forecast for the third quarter to 3.5% from 6.5%. Not a surprise to me, as we have been aware of the slowdown in the US economy for some time now. Based on current consensus estimates for overall GDP estimates, more reductions will be coming from others.
The curious thing I’m waiting to see is when earnings estimates start dropping. Many analysts raised earnings estimates and targets on the S&P 500 due to the economic recovery. The slowdown in the third quarter from the second quarter is huge, and it should result in lower earnings estimates and downgrades.
I am still looking for a move lower to that lower Bollinger band for now, around 4,400.
US 10-Yr (IEF)
The 10-Year is again challenging resistance at 1.38%; I think it will break out here and rise to around 1.55%. There are too many challenges, with low rates globally to push the 10-year much higher, and with GDP growth moderating, I don’t see any move higher in yields lasting for too long.
Boeing (BA)
Boeing finds itself at the point of no return, for if it should fall below $210, it could be lights out for this stock, with the potential to fall back to $172, maybe even $155. The market loves to fill gaps, and unfortunately, there is no expiration date on when they get filled. So this is a huge price point for the stock.
Snow (SNOW)
Snow is pushing higher still and getting really close to that resistance at $322. It was back on July 12 I first noted the potential reverse head and shoulders pattern. Once it gets to that resistance level, we will have to see if the run is over. But considering the run it has, we could even consider the current price of $312 to be close enough.
Apple (AAPL)
Apple got a boost today after it announced its next event, which is scheduled for September 14. Obviously, this will be when they announce the new line-up of iPhones. The stock is again overbought, and the move higher into the event is nothing unusual—generally, the stock sells off after the event. So maybe the move lower I have been looking for is delayed, but I don’t think the outcome changes, which would be a push down to $130.
Diebold (DBD)
The break-out attempted on Diebold appears to have failed miserably. Sometimes having an interesting product doesn’t translate into a good stock. That may be one of those times.
Have a good one.
Mike
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