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Netflix, Amazon, Facebook, AMD, Intel, Skyworks, and Gilead

Netflix, Amazon, Facebook, AMD, Intel, Skyworks, and Gilead



Netflix, Amazon, Facebook, AMD, Intel, Skyworks, and Gilead

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF NFLX AND SWKS
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Let’s get into tonight, no long-winded intros, I’m tired and grouchy and want to watch some Netflix before sleep.

Netflix

Speaking of Netflix the stock had a rough day, falling by 1.65 percent, nothing huge, but for now, the stock appears to have some strong support in place around $358.  I like the fact that the stock managed to bounce off that level twice in the day, and the stock closed well off its lows. I have owned this one for a very long time.

netflxi

Amazon

Amazon actually had nearly the same pattern today.

amazn

Facebook

as did Facebook

fb

Maybe there was a FANG Algo running today. Strange? Right!


AMD

One stock chart that looks different was the AMD chart, and maybe it is a case of filling the gap, or perhaps it is the case of a stock that is just merely overbought.  I will tell you there a lot of holes to be filled to the downside, and $13,77 is a genuine possibility.  The stock is up some absurd amount over the past couple of months, and if the stock dropped by 10 percent, it would not be the end of the world.

Relax! I’m not a hater, I’m giving you an opinion, I might even be wrong!  I am wrong from time to time. I hope I am for the sake of the longs!

amd

Intel

Intel has had a big run too, and this chart looks deadly with that rising wedge, and the odds of a stock moving back to $51 are increasing. Does that mean I’m some bear in the stock, and I think it is forever doomed, NO! It means I think it might fall over the next couple of weeks! And should the pattern complete, I shall change my outlook. intel

Skyworks

Skyworks broke out today. I’d love a rise back to $112, especially since I own it!

swks

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Gilead

Lets talk about Gilead.. you what know lets not. But if you own the stock and you can’t figure why the stock has gone anywhere in three years? I will tell you, and it has everything to do with the poor performance of the company. Just look at the at the chart below.

Any questions?

GILD Revenue (TTM) Chart

GILD Revenue (TTM) data by YCharts

That is it. Night!

-Mike


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Recent Articles By Mike:

Why AMD’s Overbought Shares Will Fall Further

Gilead’s Hot Stock May Cool Fast

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Twitter’s Stock Seen Rising 14%

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© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Join our 611 Daily Subscribers And Get This FREE Commentary In Your E-Mail! 

 

-Mike

Photo credit via Flickr

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. 

#amd #netflix #amazon #tesla #sp500 #apple

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Tesla Crushes The Shorts, While Amazon, Netflix, Apple, and AMD Climb



 Tesla Crushes The Shorts, While Amazon, Netflix, Apple, and AMD Climb

michael kramer and the clients of mott capital own shares of tsla, nflx, and aapl
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Stocks Continue To Rise

The S&P 500 continues to rise, and today, the index was up by about 80 bps, closing at 2,772, approaching a significant level of resistance at 2,800. I would imagine the sellers will greet the buyers with a considerable amount of selling pressure on the first such attempt to rise above 2,800.  So, we shall be observing 2,800.

I know how much of victory it must feel to the many who managed to hang in there and not bail out amid the volatility, but one must remember the coast is never clear when investing. Until we rise above 2,800, I will not be satisfied. The sellers will try to test the nerve of the buyers, but this market is not fragile in my opinion, and I do not believe the sellers will prevail.

For me, it is of particular importance because not many were calling for a rise to 2,800 on May 1st when we sat at only 2,640.  And I still think we had to 3,000 later this year.

SP%00


Tesla

Tesla had a big day today, and I noted in an Investopedia article that short-sellers may find themselves in trouble. But even more interesting was the market’s reaction today, and if you think technicals do not matter, the chart below should make you think again. Look at the volume in the chart explode when the price crossed above a strong resistance level at $309, and then explode again around $320. That were buyers coming, or short covering.

tesla

Volume today, was very high, there have only been a few occasions with higher volume in the stock over the past few years, I may be speaking too soon, but I think it may mark a turning point for the stock.

Shareholder Base

Let us remember, nearly 60 percent of the shares held in this stock are controlled by just 7 investors. Elon Musk with 22.5%, T.Rowe with 9.25%, Fidelity at 8.5%, Baillie Gifford 7.5%, Vanguard at 4.2% and Blackrock at 3.6%, and Tencent somewhere just below 5 %. These guys are not in their whipping shares of Tesla around daily.

That leaves about 40 percent of the float trading on any given day and even less than that because we know plenty of other long-term holders, like Ron Baron and such hold shares as well.

So, let’s say on any given day there are 35 percent of the shares are available to trade. How many shares are short? Well, 33 percent of the float! Notice in the chart, that as short positions were increasing the price of the stock was decreasing, that is because the short-sellers were the only ones pushing it down. We already know that 60-65 percent of the holders weren’t selling. Short-sellers borrow shares from the long-term holders, push the shares lower, no problem. But now they want to cover, but from whom will they buy their shares from, good question.

Also notice where the price of the stock was when the short interest started jumping, well most of the shooting took place below the stock’s current price. So, are they losing money? probably!

Where will shares go, I do not know for sure. But I do know that what was resistance at $309, now becomes strong support, and if the shorts are desperate to get out, then the stock is going in one direction. Up!

TSLA Chart

TSLA data by YCharts

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Amazon

Amazon’s continues to rise, after its break out.

amazon

Apple

Apple broke out as well, rising above resistance easily, and now trading at $194.

apple

Netflix

Somebody wanted to get into Netflix badly at the end of the day, enough so that to take the stock up nearly 3 bucks, on good volume no less.

nflx

AMD

Can you believe that AMD was $9.6 at the start of April! Holy Sh*t! Not only that but the rise is coming on strong volume.

amd

JP Morgan

JP Morgan filled the gap, tomorrow will be a good test. Do we continue to rise or revert to the downtrend?

jpmorgan

That’s it!

-Mike


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Recent Articles By Mike:

Tesla: Shorts’ Bets Are Going From Bad to Worse

Square’s Overbought Shares May Plunge in Short Term

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Technology Stocks Are Primed To Go Higher (paywall member area)

Salesforce Seen Soaring Higher on Explosive Growth

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Why Broadcom’s Stock Is Poised For Bigger Gains

Tech Stocks Seen Rising to New Record Highs

Twitter’s Stock Seen Rising 14%

Tectonic Shifts In The Stock Market (paywall member area)

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Join our 611 Daily Subscribers And Get This FREE Commentary In Your E-Mail! 

 

-Mike

Photo credit via Flickr

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. 

#amd #netflix #amazon #tesla #sp500 #apple

 

The Stock Markets Rise May First Be Starting - Daily Run Down June 5

The Stock Markets Rise May First Be Starting – Daily Run Down June 5



The Stock Markets Rise May First Be Starting – Daily Run Down June 5

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Well, the Nasdaq closed at another record high and took out its old intraday high from back in the middle of March. It is surely feeling different these days, isn’t it? It is like all the doom and gloom just melted away with the summer heat. But ask yourself has anything changed since let’s say February? I do not think much has changed at all if anything we have received more confirmation over the past couple of months about what I have been trying to communicate about every day. Earnings are strong, the economy is strong, jobs are strong, and inflation is low. To me, that seems like a perfect recipe for a stock market that is likely to continue to rise.

A Strong Economy Lift All Boats

Do you want evidence of this? Is the chart below proof enough for you? Just eyeballing it, you see the correlation that exists. A healthy economy garners strong corporate earnings and a strong stock market.

US Real GDP Chart

US Real GDP data by YCharts

I know everyone focuses these days on things like inflation or rates, but why? What is the big deal if rates are 3 percent on the 10-year. Does it even matter?


The Days of Crazy Inflation and High Rates

I’m not even old enough to remember, but I have heard stories from my parents about them getting mortgages at 10 to 12 percent in the early 1980’s! It turns out rates went as high as nearly 17 percent at one point. Imagine borrowing a 30-year mortgage at 17 percent!

But despite all those crazy interest rates, the median home price in 1971 was $25,800, and by 1983 it was nearly triple at $73,300. Just look.

 

How can that be you ask? Because income levels were rising at a much higher pace. In fact, in 1981, personal income rose at nearly 13.8 percent. Today it grows at 3.8 percent.

Despite all the crazy inflation rates and economic malaise, the S&P 500 managed to rise an astonishing 44 percent from 1970 to 1982. Was it a smooth ride? No. But still

^SPX Chart

^SPX data by YCharts

Why? Because corporate profits were rising, and from 1970 until 1982, corporate profits nearly tripled!

Can rising rates or rising inflation kill the stock market? In short no. Not if profits are growing at an even faster pace.


A look on Back on Rates

The next time someone starts’s talking to you about the abnormally low-interest-rate environment, show them this chart. This is my favorite chart of all time, up there with the velocity of MZM.

You can not dispute this chart. The UK Consol Bonds provide more than 300 years for data showing just one thing. The period of 1970, 1980, and 1990’s was the anomaly, not now.

You can count on your hand the number of times before 1960 interest rates went above 5 percent.

In 2009 a very very very smart investor told me the best hedge against inflation are stocks.

I have never forgotten that, and you shouldn’t either.

-Mike

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Recent Articles By Mike:

Technology Stocks Are Primed To Go Higher (paywall member area)

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3 Chip Stocks Posting Big Rebounds

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Why Broadcom’s Stock Is Poised For Bigger Gains

Tech Stocks Seen Rising to New Record Highs

Twitter’s Stock Seen Rising 14%

Tectonic Shifts In The Stock Market (paywall member area)

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Join our 611 Daily Subscribers And Get This FREE Commentary In Your E-Mail! 

 

-Mike

Photo credit via Flickr

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. 

#stockmarket #inflation #rates #housing #prices #income #sp500

 

 

Amazon's Stock Nears Big Break Out, While Micron's Stock Gets Crushed

Amazon’s Stock Nears Big Break Out, While Micron’s Stock Gets Crushed



Amazon’s Stock Nears Big Break Out, While Micron’s Stock Gets Crushed

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

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michael kramer and the clients of mott capital own shares of googl

Stocks continue to churn, with the S&P 500 down about 70 bps today, giving up some the gains from yesterday. But as we noted yesterday, there is a clear rotation going on in the marketplace, because today’s best sectors were Technology and Biotech, while Industrials and Financials struggled. Staples were lower today, and I think this more of a reflection of the imposed tariffs put in place, the likelihood of retaliation from other countries, and the potential impacts on sales and expenses.

Mott Capital Management, Michael Kramer

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Tectonic Shifts In The Stock Market

Biotech

Biotechs continue to advance with the biotech ETF XBI increased to roughly $95.60,  about $2 beneath its all-time. Amazing. It wasn’t so long ago that the ETF was sitting at $85

biotech chart

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Technology

The technology group is also moving higher, and I decided to redraw the pattern in the chart of the ETF XLK.  It is still a bullish pattern, and I still think the sector continues to rally higher.

technology stocks


Alphabet

Alphabet was one the stocks that jumped today, with shares up almost 3 percent. I think the stock still has further to rise, maybe towards $1,125. A rise above $1,125 would be a significant development and substantial positive for the stock going forward.

alpahebt

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Amazon

Amazon is breaking out, and I do think it likely has substantial room to rise ahead on towards $1850.

amazon


Gilead

Gilead shares also look as though they are consolidating nicely, and it appears to have a flag pattern. It could help share rise towards $72.

gilead


Micron

Micron shares got crushed today after Morgan Stanley downgraded the shares, to equal weight. I didn’t have access to the actual note, but the write-up I read makes the call sound wishy-washy and feels like a downgrade because the stock got to the analyst price target, and the analyst doesn’t feel comfortable raising the price target. That is my take away.

Regardless, shares got hammered because that is what high beta stocks do. But the stock did stop falling around $57.50, which is a positive. The chart doesn’t look too damaged, but that doesn’t mean the selling is done either. The chart is not easy to read at this point, with gaps galore.  It would seem there is explicit support at $54, and unfortunately, $61.50 will now act as resistance.

The thing that can happen, two weeks of sideways trading to consolidate.

micron

That is it! Tomorrow we move into June. Time goes so fast, doesn’t it?


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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.

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags: #sp500 #biotech #technology #micron #amazon #gilead #alphabet #staples

Sector Rotation Is Churning Beneath The Stock Market's Surface

Sector Rotation Is Churning Beneath The Stock Market’s Surface



Sector Rotation Is Churning Beneath The Stock Market’s Surface

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Michael kramer and the clients of mott capital own nflx

First, thank you to Market Watch for picking my Italeave commentary for their call of the day! Thank you!

It was as if Italy never happened for the stock market! Today was another perfect example of nothing materially changing in the marketplace, but equities rallied like wild, with the S&P 500 jumping by 1.27 percent, back to 2,724. But there are warning signs out there for different parts of the equity market, and the charts tell a clear story of that.

The rebound in the S&P 500 was inspiring, but the hurdle still sits at 2,742, so we shall wait, to see if get there tomorrow.

spx

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Banks

The good news is that financials did bounce today, the bad news is that they did not recover their losses. The charts still look damaged. The XLF, for example, rose today only to its opening price from yesterday morning and then faded.

banks

JP Morgan didn’t even get back to its opening price from yesterday.

Jp morgan

Nor did Citigroup or Bank of America. I’m not going to show you every chart. But it surely must mean something right? In fact, today’s volume in Citigroup was about half of what it was yesterday, with 18 million shares trading today to yesterday 37.6 million yesterday. Bank of America was the same, with roughly 79 million shares trading to yesterday’s 135 million, so was today’s price action because of an absence of sellers in bank stocks? Potentially.


Technology

Now we can look at the XLK ETF and notice the difference with the group recovering all its losses from yesterday.

technology

Nvidia jumped to a higher price, and on better volume.

nvidia

Consumer discretionary stocks also recovered all their losses, with Netflix and Amazon being two such examples.

netflix


Materials

The materials XLB look similar to the XLF.

materials

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Staples

Meanwhile, those staples, look at them moving higher!

staples

Both the XBI and the IBB surged today, and much higher than yesterday’s highs. I’m not going even to show the charts.

Go back to the basics, which sectors that are likely to do well in a falling interest rate, rising dollar environment? Well, staples, tech, and biotech for example. Which areas are bound to do poorly financials and materials, yes. Multinationals? Think McDonald’s.

It would seem to me there is a big rotation going on in the marketplace right now. Well, see where it tomorrow goes.


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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.

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags: #sp500 #banks #materials #tech #staples #discretionary #netflix #nvidia #jpmorgnan #bofa #citigroup

 

Italeave Is Back as Banks and Yields Are Crushed, Sector Rotation Is On!

Italeave Is Back as Banks and Yields Are Crushed, Sector Rotation Is On!



Italeave Is Back as Banks and Yields Are Crushed, Sector Rotation Is On!

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I have no idea how the Italians are going to vote when they hold their snap elections, nor do I intend to learn too much about it, it is not even clear when they will be, except that it may be months away. But what I do care about is the impact the vote may have on the eurozone. An Italeave is a very different situation than that of Brexit, because, despite Britain’s vote to leave the eurozone, it had no impact on the actual euro currency. Britain never adopted the currency, instead of sticking with the pound. But for Italy that is a different story because if they were ever to vote to leave the eurozone and be successful, it also means the exit from the currency, and the printing of the lira once again. Italy would no longer feel the benefits of a robust German economy giving the Italians the benefits of a strong currency.

I find it hard to believe that any country would leave the euro, the Greeks were the prime candidate on many occasions and instead, they opted to stay within the single currency. The ramifications of leaving the euro is too high and too steep to risk such a thing. Additionally, the EU would make the negotiations between them and the UK look mild by comparison. That is not even speaking of the inflation ramifications, and how the market might reprice Italian debt, making it hard for the country to issue new debt. Additionally, there would be no ECB to backstop them; it would not be a wise move.

But the notion that the Fed was going to tighten three times in 2018, just went out the window, with 10-year yields falling to 2.79 percent, dropping nearly 15 bps on the day. Italy tensions may also cause the ECB to change their game plan as well, regarding putting an end to QE. It serves as a reminder to all those who forgot the risk of buying 10-year Italian bonds, or German bunds for that matter. It is by no means over, regarding Italeave. I suspect we will soon be monitoring polls, while the uncertainty acts as a drag on the euro currency, and likely pushes US yields lower. To think the vote is not even likely to take place for some time.

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Dollar

The movement was not only felt in the bond market but the dollar as well, with the dollar index surging right up to the next area of resistance we had been watching at 95. It is a significant level, and I suspect we go through it. It will be a big-time negative for the multi-nationals, such as McDonald’s, Nike and the likes. But the falling interest rates should also allow some of the higher yielding stocks to perform better.


Banks Crushed

We saw a big rotation out of the bank stocks today, with spreads contracting on the yield curve, which will hurt net interest income. Additionally, Morgan Stanley said their wealth management business slowed, adding fuel to the fire.

$26.80 on the XLF is a massive level, and should it be broken it is a horrible sign for the banks, which could result in the sector falling to nearly $23.75, a drop of about 11.3 percent.  If there is any hope, the group will bounce tomorrow.

banks

It was just a few days ago that I thought JPM was breaking out and on its way to $120.  Instead, the bank has moved lower, a quick reversal, and now is clinging to support at around $106.

jpm

Bank of America looks identical to the others.

bank of america


Equity Prices

The S&P 500 finished the day down about 1.1 percent, not the end of the world for sure, but it was the banks that brought the index down, and it was technology that kept it from being worse. In fact, the XLK was down only 55 bps, and the staples were down only 22 bps.

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The Rotation

Well so much for the breakout in the S&P 500 I noted last week, but all is not doom and gloom. I think the Italy thing may be a one or two-day event, and will likely have a more significant impact on yields and the dollar than equity prices. But it will mark a rotation out of the higher interest rate trade into the sectors that would benefit from lower rates.

Off the top of my head, it is bad for the banks, materials, energy, and multi-nationals, while good for staples, utilities, and risk-on sectors, tech, and biotech.

Enjoy!

-Mike


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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.

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags: #sp500 #italeave #euro #dollar #brexit #banks #rotation #rates 

10 Indicators To Watch In The Stock Market For The Week of May 28 stock to watch

10 Indicators To Watch In The Stock Market For The Week of May 28



10 Indicators To Watch In The Stock Market For The Week of May 28

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF NFLX & AAPL
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The coming week will be a big week when it comes to data, with inflation and jobs data starting on Wednesday. First, we get ADP private jobs data, with consensus looking for 186,000 jobs created in May, and then 1Q GDP comes later that morning with consensus calling for growth of 2.3 percent. Thursday is personal income and outlays, PCE y/y is expected at 2 percent, while PCE Core ex-food and energy is projected at 1.8 percent. Friday is the employment report, with estimates calling for 185,000 jobs created, and average hourly earnings up 2.7 percent y/y.  You can find more at the Bloomberg calendar, a handy tool.

So, we should expect the week to have a little more volatility following the numbers, each day, but this week will most certainly be all about inflation. When you look at core PCE over the course of the last 10-years, we can see that it has been consistently low.

PCE like the other gauges of inflation, like PPI and CPI, tracks extremely closely to the price of Oil. 

By the way in case you are curious you can see the similarity with oil and PCE ex-food and energy, are not as close.

When it comes to the future of inflation and interest rates, we will need to watch the price of oil. Wages should continue to remain contained as well below 3 percent.

So is it possible that we see some huge spike in inflation worries this week, well anything is possible. Is it likely? I have a decade worth of data saying no. Additionally, one must remember that the data is backward looking, and oil is a real-time barometer of inflation, and so if oil continues to fall come Tuesday, then I suspect rates fall with it, regardless of the reports.


Stocks To Watch

The most important stocks to watch this week, Netflix, Amazon, Apple, Micron, Biogen, Microsoft, P&G, and Coke. Yes P&G and Coke! Really. Remember if rates are falling then the staples, which have been crushed, should see a rotation back into the names. The other stocks are leads in the most important risk-on sectors around, Technology, Chips, and Biotech.

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P&G

The chart of P&G is bullish and suggests shares could rise back to $78.20 in the short-term. The relative strength index (RSI) is trending higher and has bottomed out at oversold levels now on two occasions.

PG

Coke

The setup in Coke is quite positive too and looks to be heading back towards to $44.50

coke


Microsoft

Microsoft broke out, and we want to continue to see the stock rise. The relative strength index continues to trend higher as well.

microsoft

Biogen

Biogen has broken out as well, and it could be looking to rise back towards $300.

biogen

Apple

Apple has been consolidating since its post-earnings rally, and a breakout higher from the markets most valuable company, would add to positive sentiment.

apple


Micron

Micron is facing a potentially big breakout. Micron has been one of the hottest stocks around, so we want to see this one continue to stay hot, as it acts as a barometer for the risk appetite of the market.

micron

Amazon

Amazon is knocking on the door of a big breakout too.

amazon

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Netflix

There is no doubting that Netflix is the undisputed champion in the market this year, and there is no stock that is more important. If Netflix continues to rise, then I suspect the rest of the market will soon follow.

netflix

Enjoy the long weekend.

-Mike


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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.

© 2018 Mott Capital Management, LLC.  Use, publication or reproduction in any media prohibited without the permission of the copyright holder.

Tags: #sp500 #inflation #oil #yield #microsoft #apple #netflix #amazon #biogen #micron

Oil and Yields Crushed and There Is Still More Pain To Come

Oil and Yields Crushed and There Is Still More Pain To Come



Oil and Yields Crushed and There Is Still More Pain To Come

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF mO
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Looks can sometimes be deceiving, the S&P 500 was down about 25 bps on the day, but make no mistake, it was energy and oil-driven. Oil fell by about 4.5 percent, closing at $67.50, from a high of about $73 on May 22.  So, what happens now? Oil probably heads towards $65, and perhaps $61. That is good news though! You know why, because falling oil prices are deflationary, and like I have been writing and trying so hard to tell everyone is that when oil prices stop rising, so too does the Fed’s inflation problem.


The amazing thing,  when I predicted oil would rise to about $75 it was December 18 and oil wasn’t even $60; it was only $57.20! Wow. Good job on my part. Anyway, in that same piece, I predicted 3 percent yields too, when the 10-year was only 2.39%. Some of the other predictions didn’t work out quite so well, but hey I never thought I’d get them all right.


Dollar

The dollar is breaking out in a big way, and should the index rise over 95; I think it is off to the races. Suddenly the dollar is rising for reasons other than rates, but because Europe’s economy seems to be slowing a bit, and Italy is trying to form a government which may or may not threaten the Euro.  The PMI in the eurozone is rolling over some too, perhaps a sign the economy is now slowing.  Draghi may not be able to roll back QE after all, is Europe the new Japan?

Eurozone PMI

(Trading Economics)

So, we will continue to wait, and see which way the dollar goes, the next few days, will be very telling.

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Spreads

Another thing to consider is the spread between US 10-year yields and German 10-year yields are at levels not seen since the 1980’s!

So, it tells us a couple of things, one that a reversion to the mean, seems reasonably likely at some point, and unless the spread is going to blow out to levels not seen since the high inflation days of the 1970’s, it seems unlikely that this current pace can continue.

German yields have fallen sharply since May 18, from 65 bps to 40 bps in just a week, 25 bps! We talk about our 10-year yields moving five bps, like it some big deal. At some point, all the European bond buyers are going to come and buy more of our treasuries, and that will drive the dollar up, and our yields down. Remember, an international bond buyer must purchase dollars and sell euros to buy US bonds. It is just that simple. The global market will force the Fed’s hand into not being as aggressive as they want. They can keep jacking up the front end of the curve, but they risk inversion.

german bonds


Global Market

We live in a global market, we cannot avoid that, the US is not an island unto itself. A stronger dollar shall kill off what inflation we have, driving rates lower, and that will be a positive for equity prices.


Impact on Stocks

Falling yields are good for the utility and consumer staples. The staples have been crushed, with the XLP ETF down 15 percent from its highs. Massive losses in stocks like Altria, Coke, Pepsi, Clorox, P&G. All Crushed.

XLP Chart

XLP data by YCharts

I know I’m living on the edge and going against all the masters of the universe. But ask yourself, where were all the rocket scientists who are now calling for $80 oil, higher rates, and higher inflation back in December? That’s right, nowhere to be found.

-Mike


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Tags: #sp500 #oil #dollar #yields #inflation

 

Stocks Show Their Might Led by Chips and Biotech

Stocks Show Their Might Led by Chips and Biotech – The Daily Rundown



Stocks Show Their Might Led by Chips and Biotech – The Daily Rundown

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We surely didn’t get the breakout I was looking for today, but we sure did get an exciting trading session, that told us about the market’s current state of mind. If this had been February, I think word of tensions with North Korea, or President Trump pulling out of a meeting with the leader of North Korea would have sent the market reeling lower by 1.5 to 2 percent on the S&P 500. But this is May and spirits seem much brighter.


Equities indeed sold-off following the news President Trump was calling off the summit with Kim Jung-Un of North Korea in June. The S&P 500 had an initial knee-jerk reaction taking it down about 1 percent by 11 AM. But the rest of the day was about price recovery, and by the close, the S&P 500 finished down about 20 bps, while the NASDAQ recovered all its losses to finish essentially flat. That is impressive, and I think it tells us a lot about the state of mind for the market. What had been a weak market just a few short weeks ago, seems to have become more confident.

^SPX Chart

^SPX data by YCharts


Risk-on Leadership

Like I wrote yesterday, we saw leadership prevail from the key players, with chips and biotech’s up on the day by nearly 40 bps, the risk-on sectors of the markets. Yes, Utilities rose by 80 bps on the day, but that has more to do with yields falling, with 10-year yields down to 2.98 percent, from 3.10 a week ago.

Chips mounted a rally, from down 80 bps at 11 am, to up 34 bps by the close, a significant recovery. What stocks led, well the usual suspects, Micron up 2.6 percent and now at $61.50, followed by AMD up 2.0 percent, On Semi up 3.6 percent, and Broadcom up 1.3 percent.


Micron

The advance in Micron continues to be impressive, shares are nearing a very big breakout, sitting right at resistance at $61.50. If it can manage to advance tomorrow, then it might still have some further to go, and $61.50 should offer support in the future should it climb and retrace.

Should Micron break out tomorrow and rise above its 52-week high of $63.42, then it may be on a trip towards $73, a price not seen in nearly two decades, back to the year 2000! Yes, a break out for Micron is a huge deal.

The bears will argue the DRAM pricing cannot stay strong, and Micron’s recent revenue and earnings surge cannot last, while the Bulls say the opposite.

Based on estimates to the year 2020, analysts are forecasting flat revenues and declining earnings, the street seems to believe the good times can’t last, which means Micron’s stock can continue to climb should it keep putting up strong results because a positive outcome is not baked into the stock.


Netflix

As noted yesterday, Netflix broke out, and it continued today with shares reaching an intraday high of $353. Some in the media were talking about Netflix now having a market cap just barely higher than Disney’s and Comcast, at $152.14 billion to Disney’s $152.03 billion, and Comcast at $145.78 billion. Most of that has to do with the fact that Comcast is nearly down 20 percent on the year.

DIS Market Cap Chart

DIS Market Cap data by YCharts

Plus, my knee-jerk reaction, why shouldn’t Netflix be worth more, aren’t Comcast and Disney trying to become like Netflix? Isn’t that why Disney is launching a direct to the consumer product. Isn’t that why Comcast is trying to steal Fox’s assets away from Disney? Of course, it is. Comcast and its cable line will be worthless in another few years when Verizon and the other wireless players launch 5G, and cord cutting start to accelerate at an even faster pace.

Imagine a world, where one day like your phone and your tablet, your TV will be able to access data, but not through wifi, but your wireless provider. It sounds crazy, but how hard could it be?

Why else would Comcast be so hot to get Fox? They want to keep building up their content library and become a content business.

-Mike


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Tags: #netflix #micron #comcast #disney #amd #broadcom #biotech #chips #stocks #sp500

The Bull Is Back, Stocks Are About To Break Out! - Daily Rundown

The Bull Is Back, Stocks Are About To Break Out! – Daily Rundown



The Bull Is Back, Stocks Are About To Break Out! – Daily Rundown

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF nFLX
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I know that some people thought earnings wouldn’t save the market, that inflation was going to run rampant, or that yields were going straight to 4 percent on the 10-year. That all these factors were surely going to tank the market, but at the end of the day, the underlying fundamentals do matter and understanding the fundamentals matter even more. Right now, the underlying fundamentals support higher equity prices and lower yields.

In fact, the Fed tipped its hand today, when it said: “a temporary period of inflation modestly above 2 percent would be consistent with the Committee’s symmetric inflation objective.”

That was the big take away from the Fed minutes, and what does that mean? Well, it means that the Fed likely realizes what I have been telling you for months now, once the benefits of rising oil fade, the Fed’s inflation problem will fade too. The Fed is merely buying itself time, to see that indeed is what happens.  What was the market reaction?


Dollar

The dollar reversed right at resistance around 94 on the dollar index.

dollar

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Yields

10-year yields fell below 3 percent.

yields


S&P 500

The S&P rose higher, recovering all the day’s losses, plus yesterdays.  We likely get a retest of resistance around 2,742, and a breakout tomorrow in my opinion.

sp500


Netflix

If Netflix is any indication of the future, then tomorrow the S&P 500 rises above resistance. Because Netflix broke out in a big way today. It is a breakout of epic proportions. Just look at the straight line following the breakout!

netflix

Not only that the breakout comes on better than average volume, with the RSI confirming the breakout, with a breakout of its own.

nflx

Make no mistake I think this is a very big breakout, not just for Netflix but the market. Netflix has been the leader all year long, and the soldiers will follow the generals, and there is no doubting Netflix’s leadership this year.

Technology

It wasn’t just Netflix that broke out today; the technology sector broke out too.

technology

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Amazon

No, Amazon still has not broken out, but when it does, it will be just further confirmation, of the bullishness gripping stocks.

amazon

You know where I stand and what I think.

-Mike


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Tags: #netflix #amazon #sp500 #fed #yields #dollar 

 

 

Could Netflix Move Into Music? The Daily Rundown - MCM Market Recap

Could Netflix Move Into Music? The Daily Rundown – MCM Market Recap



Could Netflix Move Into Music? The Daily Rundown

MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF nFLX AND TSLA
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Netflix

I thought Netflix may have broken out early in the day but was unable to hold the gains.  It has a solid uptrend in place, and the RSI certainly looks like it too is ready to breakout.

Into Music

I have been thinking a little bit about Netflix and wondering if it makes sense for them to get into a music service. They have 125 million subscribers, and maybe for an extra $5 a month they can bundle in a streaming music service. The Netflix app is already on my phone, making it easy to likely get conversions.

Yes, the streaming music space is getting crowded, but how many people would gladly pay $20 a month for music and content.  I’m sure a lot.

Doing some back of the envelope math, even if you consider the 55 million US subscribers, and a conversion rate of 30 percent, it could easily add about $250 million in extra revenue a quarter, and just further solidify the company’s dominance, in streaming media.

netflix


Broader Market

It was a pretty quiet day all around, stocks couldn’t build any positive momentum all day long, and the sellers just came in at the end of the day.  When it comes down to it, the S&P 500 was only down about 30 bps, certainly nothing to fret over, and refilling some of the gap created yesterday.

sp500

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Industrials

Industrials had a great day yesterday, and today we gave back a portion of that significant gain.  Again, some investors blame trade tension; I blame the Algo’s playing a game of fill the gap.

xli


Boeing

The same thing happened with Boeing.

boeing

Chips

The setup in the chip stocks still looks strong.

chips

Micron

Micron has a lot to do with the chips being strong; the stock jumped by about 6.5 percent today.  But, be mindful of that gap, just like the other charts above show us.  A fall back to $56 or even $54 is entirely possible.

micron

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Tesla

Tesla certainly has an unusual setup, with the stock sitting at support around $272, while the RSI continues to trend lower.  It is the stock that everyone loves to hate. It needs to find a bounce off this support level. Otherwise, things might get difficult for the longs. The short interest as of April 30 was at the highest level ever in the stock’s history at 39 million.

tesla


Now on to some boring, but very important stuff

Dollar Index

The dollar index has stopped rising for now, and where the dollar goes can have ramification on other parts of the market. For now, it struggles around $94, and should it break above $94, then is going to be a significant problem for commodities and multinational stocks. Should it managed to reverse and head lower, that is going to help fuel Oil rise even higher.


Eurodollar Rates

The Eurodollar deposit rate is perhaps telling us that demand for dollars abroad may be easing, and that may be a sign that the recent rise in the dollar is nearing an end. Back on March 20, I speculated that the rising Eurodollar rates were a sign the US dollar would begin to surge, and indeed since that time, the dollar index has climbed from 90.50 to a high of 94 yesterday, a climb of about 3.8 percent. So indeed, we should pay attention to the cost to borrow dollars aboard.eurodollar

Libor

Additionally, 3-month libor rates are stalling out, and perhaps that is a sign that expectations for future Fed rate hikes are cooling. It would surely be nice if that were the case.

 

For the most to think we are in a low inflation environment with strong earnings growth and a robust economy. Hard for me to bearish in this type of situation, I continue to see more and more signs of sectors breaking out, and individual stocks as well.  Outside of some unforeseen geopolitical event, I think the most significant risk to the economy and the markets is an over aggressive Fed. Nothing would make me happier than the Fed to leave things alone at this point.

That is it for today.

-Mike


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Tags: #netflix #music #tesla #sp500 #industrials #boeing #dollar #eurodollar #libor

The Stock Market Is Moving Back To A Risk-On Mentality



The Stock Market Is Moving Back To A Risk-On Mentality

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The risk-on asset classes had good days, with Biotechs (XBI) up 1.4 percent, Chips (SOXX) up 1.3 percent, and materials (XLB) up about 1.2 percent. Risk-on is what one wants to see start to happen more because it tells us that investors are looking to move into more aggressive parts of the market, and that bodes well for a rise higher.

S&P 500

The S&P pieced together a decent day, rising about 40 bps, recovering about 2/3 of yesterday’s decline. It seems the past three days have been a game of back and forth filling the gaps from the previous day. The good news is that today, there was no gap up or down, and that should hopefully mean tomorrow we continue higher.

S&P 500


Sectors

The XBI continues higher and appears to be heading back to the previous highs.

xbi

The setup in Chips also continues to be very strong.

ch

What is ironic is just how much alike the two charts look. I guess the chips and biotechs are part of the same risk-on algo running.

Materials are also breaking out, and that, of course, is a positive as well.

materials


Russell

Not only that, but the Russell 2000 is breaking out as we talked about the other day.

russell 2000


Stocks

Nektar broke out today, after bouncing off our support level around $70.

nektar

Intercept looks close to breakout too.

icpt

Micron broke out and appears to be heading back to $61 now.

micron

Lam Research also appears to be breaking out and could be heading back to around $224.

lrcx

Texas Instruments back to $120.

txn

The suspense in Amazon is just killing me! BREAKOUT ALREADY!

amazon

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Dollar

It looks like the dollar finally broke out, and it seems clear which way it is going.

dollar

Night!

Mike

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Tags: #sp500 #biotech #materials #chips #nektar #amazon #micron #lam #texas 

 

Inflation Runs Rampant Only In The Imagination of Investors

Inflation Runs Rampant Only In The Imagination of Investors



Inflation Runs Rampant Only In The Imagination of Investors

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The S&P 500 finished the day lower by about 70 bps, off the lows, when it was down about 1%. Nothing earth shaking but enough to get everyone talking about how rising rates are going to kill the market, and inflation once again is rearing its ugly head. So just how much inflation is there? I can think of one commodity that is going up, and that is apparent Oil. Which, I have shown you time and time again,  how it tight the correlation with the CPI and PPI is.

Yes, No, Maybe So?


Copper

Some critical industrial metals like copper, have gone nowhere over the past year. To, to be honest, the chart doesn’t look so hot and looks like it may be heading lower. Not so good for Freeport (FCX)

copper

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Iron Ore

Iron ore is a critical ingreident in steel.  Again, not so inflationary, either. But that setup looks nice, for a rise at some point, if the dollar doesn’t get too strong. Maybe a positive for Vale, Rio, and BHP.

iron ore


Gold

Then off course there is gold.

gold

Coffee

Must be coffee? That has to be a good sign for SBUX, right?

coffee


Sugar

What about Sugar? Definetly not.

sugar


OJ

Orange Juice? Oh there is a little bit, is Orange Juice to blame for the rapid inflation? Does Coca-Cola (KO) still own Tropicana?

oj

Lumber

Lumber now that is going up.  Not good for the homebuilders like PHM.

lumber


Cotton

Cotton has a little bit of inflation. Yeah not so good for Haines, (HBI)

cotton

PCE

Of course, there is the PCE which is at 2.6 percent! Strange thing here, is that it hasn’t change since the first quarter of 2016.

Wages

Hourly wages haven’t accerlated since 2016!

 

Even housing costs have remained relatively stable.

I mean do any of these charts speak of rampant inflationary forces taking place in the economy? No, and in some cases, things are getting cheaper! Maybe, I need to do that thing; you know where you remove the scale, and then zoom all the way in and get real close, to make a ten bps rise look monstrous. But, no. That is no what we aim to do here.

So when you find some inflation someone please let me know!

Night!

Mike

 

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Oil and Yield's Rise May Soon Fade, Sparking The S&P 500 Rise To 3,000

Oil and Yield’s Rise May Soon Fade, Sparking The S&P 500 Rise To 3,000



Oil and Yield’s Rise May Soon Fade, Sparking The S&P 500 Rise To 3,000

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Stocks finished mostly flat, ending the day on the S&P 500 up by roughly ten bps.  The morning rally faded by mid-afternoon wiping out the gap higher that started the day. Not an unusual occurrence since we see this type of price action on a regular basis.  Support continues to rest around 2,716, but I have added a trend line in green, for the sake of adding one, to see what happens to it tomorrow. It is too early in the game to name a new trend line, so we will wait and see.  I still think the S&P 500 has a clear path on to 2800, before hitting choppy waters again.

spx

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The technology sector (XLK) also stalled out today, but like the S&P 500, it appears to be more of gap fill than anything.

technology

The setup in the Russell 2000 also looks very bullish, with that rising triangle, and it seems like a breakout might happen soon.

russell

Consumer stocks managed to break out strangely, basically trading sideways through the pattern. Not exactly a sign of strength, but it sure is better than it going down.

consumer stocks

Amazon still hasn’t broken out; I’m surprised it has taken this long. But volume has been light, and the RSI is still trending lower. Maybe tomorrow.

amazon


Treasury Yields

Treasury yields on the 10-year are still hovering just below 3.03 percent, with no breakout yet. It seems like every analyst or commentator is sure yields are going higher. But, I keep thinking yields are done rising. Right now, I am in the minority camp on this topic. Then again, I was in the minority when I was calling yields to breakout.  I have my reasons for thinking yields will not continue to rise. I believe inflation rates will start coming down, once the price of Oil starts leveling off.

oil


Oil

Oil is another thing people have gotten overly bullish on, and again I find myself in the minority thinking oil prices may be about finished rising. I feel like every day we have someone predicting oil to rise to $80 or higher. Where were all these guys when oil was $50 or even, $60? Nowhere to be found.

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Dollar

We must remember something when it comes to Oil; it has had the benefit of a weakening dollar over the past year or so to rise. Now, the dollar appears to be going the other way, and I suspect that it will continue to rise. Not for the apparent reasons, but because Draghi had so much success stoking the European economy with a cheap Euro, and let’s face it, the Euro’s advance is what is killing the Euro region, which is why it suddenly has seen moderating growth.  Just like the BOJ doesn’t want a strong Yen, which has also strengthened materially over the last year. So, if the Fed is intent on raising rates, then the ECB and BOJ’s best interest might be to continue their current programs of easy money to weaken those currencies once again, while they can. The chart for the dollar index has not officially broken out, but it is pretty close.

dollar

Deposit rates on Eurodollar’s, dollars held abroad, are still high, and that would suggest to me that dollars are in demand outside of the US.

eurodollar


3,000 Still On Table

With many of my predictions for 2018, such as rising oil, 3 percent on 10-year Treasury yields, rising inflation already being hit this year, I’m beginning to go in another direction, because I’m seeing changes occurring at a faster pace than I expected. I think for the most part this is all a positive for equity prices, keeping intact my prediction for 3,000 on the S&P 500.

That is it.

Mike

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Biotech's Stock May Have Finally Been Unleashed

Biotech Stocks May Have Finally Been Unleashed

Biotech Stocks May Have Finally Been Unleashed

Michael Kramer and the Clients of Mott Capital Own CELG
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Stocks continued to move higher, led by the Biotech’s, which were up by about 3 percent. There’s something we haven’t said in a long time. The highly anticipated speech regarding drug prices by the President didn’t seem to be as bad as many had feared. Increasing competition, deregulation, cutting out the middlemen, is at the core of the proposals, based on my interpretation.

The drug pricing overhang had plagued this sector since September 2015, when Hillary Clinton made it a political point in the race for President. If this is the worst of it, I think the group might have much further to rise. Companies like Celgene, Gilead, Biogen, and Amgen are all trading at some of their lowest earnings multiples in years. Albeit for good reasons in some cases, but some of the valuations seem excessively low.

The details aren’t fully known yet, and what ends up getting put into law may be very different. But just knowing the blueprint for how they plan to tackle drug pricing might unleash the sector from the shackles of the past three years.

I think the group is likely heading higher.
biotech


S&P 500

The S&P 500 continues to rally, and finished near the highs at 2727, up about 2.5 percent. The setup continues to look strong.

sp500

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Amazon

Technology stocks continue to look strong as well and so do consumer stocks, even though Amazon still didn’t break out.  $1620 is proving, for now, to be tough for Amazon. Now that I’m calling for it to rise, it will probably go down! Ugh. We shall see.

amazon

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Nvidia

I’m surprised Nvidia was down today. But I also do not think today’s price actions mean the stock is going lower. Shares held firmly above support around $253. The results were stunning, and this probably keeps working higher.

nvda


Amgen

Amgen shares continue to look strong as well, with a well-defined double bottom, and what looks like a solid path towards $178 to $180 range.

amgen

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Gilead

Gilead also looks as if it could see a rise to about $72.

gilead


Biogen

Biogen also looks like it is on the cusp of a big breakout.

biogen

That is going to be it for today.

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Tags: #biotech #amgen #gilead #biogen #technology #amazon #sp500

The Best Earnings Season In Years Makes Stocks Cheap

With earnings starting to wind down, it is becoming quite clear that this has been one of the best earnings seasons in years! With nearly 81 percent of companies in the S&P 500 reporting results through May 3, almost 77.5 percent have beat earnings estimates, while almost 17 percent have missed, and 5.6 percent have met. I compiled the chart from data from Dow Jones S&P Indices, and it shows that to this point, this has been by far the best quarter when it comes to companies beating expectations since 2012.

Data From S&P Dow Jones Indices

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Cheap To Earnings

According to Dow Jones S&P, 303 of the 405 companies reported so far, have beat on sales estimates as well. Sales in the first quarter are estimated to have risen by nearly 10 percent as well, making this quarter more than just about the bottom line.

Earnings for the full year in 2018 are forecast to rise to $153.06, and $170.48 in 2019. It leaves the S&P 500 trading at 17.4 times 2018 estimates and only 15.6 times 2019 earnings estimates.


Cheap To Rates

Even with the rising interest rate scenario investors have become concerned with, the ratio of the 10-year Treasury yield to the S&P 500 yield, is only at 1.56. Explained,  it means that the 10-year yield at 2.95 on April 30 is 1.56 times more than the S&P 500 yield of 1.89 percent. The average ratio since 1962 is 2.19 with a standard deviation of 0.86, a range of 1.32 to 3.05. So the S&P 500 is still on the cheap side of the historical average, and the historical norm. The chart below shows us just that.

Stocks Are Cheap

It is clear from the chart above that in late 1990’s and early 2000’s, which saw the ratio explode as the stocks soared, in the bubble years, just how overvalued the market was to bonds at the time. So at this point, yields would have to rise a lot further. It would take yields on the ten-year to reach 4 percent to get to the historical average, before stocks would start looking for expensive to bonds.

For, now it continues to be tough to say that stocks are overvalued to earnings or bond yields.


GDP Growth

I have become increasingly more bullish over the past few weeks, and I expected to remain optimistic for some time to come. In fact, I think the recent slow down in the US economy is also going to start picking up rather nicely. In fact, over the past ten years, earnings growth has been a leading indicator to US GDP growth, as the chart below shows. That would suggest over the next two quarter we should see a significant ramp up in GDP growth.

S&P 500 Earnings Per Share TTM Chart

S&P 500 Earnings Per Share TTM data by YCharts

It also continues to support my thesis that we will see an acceleration in job creation.

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Low Inflation

But I still believe inflation levels will remain low, and that will keep a lid on Treasury rates from rising too much. Counter-intuitive, yes, but we need to remember also we are living in a very different time, where automation and companies like Amazon are continuing to make things cheaper for the consumer.


The Fed

Additionally, the Fed will not want to be responsible for killing the party and inverting the yield curve. With two year yields at 2.5 percent and the ten-year at just under 3 percent, the spread is now only 50 bps. One more rate hike gets the two-year to probably around 2.75, and that is all the Fed will be able to in terms of rate hikes in 2018. I still we get only one more.

-Mike

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Tags: #sp500 #stocks #yields #rates #earnings 

 

 

Stocks Are Getting Ready For A Big Breakout, Plus A Look At Apple

Stocks Are Getting Ready For A Big Breakout, Plus A Look At Apple

Stocks Are Getting Ready For A Big Breakout, Plus A Look At Apple

Michael Kramer and the Clients of Mott Capital own shares of AAPL, NFLX

Another positive day on Wall Street with the S&P 500 climbing by nearly 1.3 percent closing at 2,663. I still happen to think the setup in the S&P 500 is positive, and rise to 2,800 is at work. I spoke about it the other day, and I continue to think that is very much case. The more I look through companies earnings and trends; the more positives keep emerging, over the negatives.   

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Technology

When looking at sectors the same positives trends keep showing up for the most part. In fact, it would appear the technology sector broke out today, and that is a very positive sign. In fact, a rise back towards $69 is maybe on the way.  The relative strength index broke out today as well.

xlk

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Getting Long Apple

A Rise Back To 2,800 On The S&P 500

Biotech

Biotech stocks have been stubborn and have been able to hold support at $100 nice. I think it sets the group for a rise of about 10 percent back to $110.

biotech

Consumer

We can see a similar pattern forming in the consumer discretionary stocks as well.

xly

The same with the chip sector.

soxx


Microsoft

Microsoft has a rising-triangle formation in, and that suggest may about to rise.

microsoft


Netflix

Netflix appears headed towards $340.

netflix


Not All Equal

But that doesn’t mean all stock is about to rise because Facebook, Amazon, and Broadcom have struggled to move higher, and I think it may continue to stay that way. Well, see though. I just find it interesting that Amazon and Facebook reported monster results, and the market hasn’t rewarded them in a big way.

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Apple

I teased this idea on the blog the other night about Apple and a Netflix like valuation. No, I do think Apple will trade at a 60 earnings multiple, but I think in time as investor begin to realize services are becoming a more significant part of the revenue, the market will give the company a higher earnings multiple, as the stock moves away from being primarily an iPhone business.

More and more of our lives are moving to mobile devices, and I think Apple will now start to provide even more services on top of the hardware to make substantial growth the future. Well see, but I like the idea enough, that I bought it today.

That is it for a Friday.

Mike

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Why The S&P 500 Will Rise To 3,000, and The Fed Has Only One More Hike

Why The S&P 500 Will Rise To 3,000, and The Fed Has Only One More Hike

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The S&P 500 may be nearing a pretty big breakout soon. The chart of the S&P 500 looks like a giant ascending triangle, and the breakout would likely occur sometime before the end of May. Basically, at this point, rise above 2,730 would signal the breakout along the downtrend, which has been in place since late January.


Strong Earnings

Again, strong earnings will continue to stoke the stock market’s rise, and I still think the S&P 500 will rise to 3,000 in 2018. Yeah, crazy! I know. But listen to these stats, from Dow Jones S&P Indices:

Almost 53 percent of the companies in S&P 500 have reported results so far, and about 78 percent have beat earnings estimates, with only 16 percent missing. In the first quarter of 2017, with the companies reporting results, only 74 percent beat estimates, with 19 percent missing.  Meanwhile, revenues are up nearly 9.4 percent vs. the same period a year ago.

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A Rise To 3,000

Estimates are calling for FY 2018 earnings of $154.23 per share, and with the S&P 500 currently at 2,648, we are trading at 17 times 2018 earnings, and 15.6 times 2019 earnings estimates of $169.54. And so what multiple would the S&P 500 be at should it rise to 3,000? Just 17.7 times 2019 estimates, far from nosebleed levels.


Inflation

Additionally, the inflation and increasing rate narrative I think it is starting to lose steam, trimmed mean PCE today came in at 1.77 percent in March vs. a year ago. I continue to believe this is the best measure of inflation on the traditional measures,  as it throws out the top and bottom outliers. Meanwhile, the velocity of MZM is my all-time favorite predictor of future inflation and yields, and it continues to flatten out at 1.3. Does the MZM chart look familiar?

It should remind you of a chart of 10-year interest rates.


Falling Rates

Based on the data above, and these technical charts below, I continue to believe that the 10-year will revert to the uptrend, around 2.6 percent. tnx

Then there are this charts for the 30-year yield.

30 year

and this one for the 10-year.


One More Rate Hike

The moment of truth? I don’t know about that, because I’d be shocked if rates continue to rise. In fact, I think the Fed may only raise rates one more time this year.

There I finally said it, I have been thinking about this a lot lately, I have been on the fence about saying it, but there you go.

One more rate hike in 2018, making a total of only 2.

-Mike

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Tags: #earnings #sp500 #yields #inflations #rates