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The Winds Of Stock Market Change May Be Brewing For 2019
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN TESLA & NETFLIX,
S&P 500 (SPX, SP500)
The S&P 500 did a whole lot of nothing today, which is fine with me considering yesterday’s big move higher. But the trend, for now, is still higher and that might be all that matters. As long as the index stays above 2,794, then that trend remains our friend.
The dollar moved nicely higher today. I certainly would not call this a confirmation move higher for interest rates. But if the dollar does break out, that is bad news for oil and the rest of the commodity complex.
Right now, oil is sitting on its 50-day moving, but we can also see that 200-day moving average is quickly rising. On its last move lower, the commodity found support at the 200 DMA. Will it be the same case this time? Depends on if the dollar breaks out and by how much it rises. Watch the dollar here.
Copper is a good indicator for global economic health, and right now it suggests the global economy is may not be that strong.
Platinum is trading like it’s 2008. Platinum is most used in the automotive business to help lower emissions.
Winds of Changes?
Is of some of the commodity-related weakness due to a stronger dollar? Sure. But, we surely can’t contribute it all to the dollar. For the first time since the summer of 2016 when I turned mega bullish, and I will say this very carefully, I am growing bearish on the global and US economy. I do not see a recession, but decelerating growth. I’m still working through this.
GDPNow is tracking the third quarter at 3.9%, a solid showing given the quarter ended three weeks ago. But CPI and PPI last week are now sending a signal of disinflation taking hold in the economy, and you can see it clearly in the prices of many commodities. Have you seen Lumber?
I think that at the very least we consider should this scenario and what it might mean for equity prices should things slow. I will be monitoring earnings very carefully and most important tracking the trends in earnings estimates for 2019. Ang sign of estimates falling is not what we want to see. Think about this carefully. Watch the trends.
Did if you watch the trading action in Netflix today? It was amusing. The stock gapped higher, and then it worked its way lower for most of the day, in an attempt to fill that gap. It was apparent to me very early in the day what would occur.
The stock managed to work all the way down from $390’s to $357. Ask yourself why $357? What is magical about $357? Well, first off its a critical level of technical support going back to June. It was also the price that stock failed at twice on October 9. Once the stock hit support, it rallied nicely into the close.
Amazon looks like it consolidating nicely right below $1,840. That is a positive sign.
Look at the bank index (BKX) it goes right back to resistance and fails miserably. Not good!
I have to tell you Micron has held-up very nicely in a terrible tape, and that has to be a good thing. At least I think so. Look at that RSI starting to change direction. Better days may be in store for Micron.
Look at the RSI on Tesla, it seems like the trend is starting to change. Another positive sign?
Ok, That is 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.
spx, sp500, dollar, oil, copper, platnium, netflix, amazon, tesla, micron, banks