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Tomorrow Became A Very Big Day For The Stock Market – The Daily Recap for July 10

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHARES OF NETFLIX AND TESLA

 

The S&P 500 continued its hot streak rising again by about 30 bps, falling just short of 2,800. But the real level that might matter more is 2,794, and that is the level that’s been problematic since February. We closed right at that level today, 2794. So the index is right at the cusp of the breakthrough or significant retracement, making tomorrow a possibly dramatic day. We will need a strong follow-through higher tomorrow taking the index above 2,800. If that does not happen, I think many investors will begin to question why the market can’t rise in the face of what should be strong second-quarter results.

That makes tomorrow a potentially big day for stocks.

Staples

The consumer staples have been the big winners recently, and the XLP rose by 1.2 percent on the day. With a break out now in place, the group likely has room to continue climbing with the next level of resistance in the ETF around $53.60.

Pepsi

The big winner within the group was Pepsi, with that stock breaking out on strong earnings. I was glad to see that even in the face of a stronger dollar, the company was able to post a solid beat. The stock could be heading back to its highs around $122

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Banks

The banks where one group that didn’t have a great day with the big banks giving back some of their gains from yesterday. Not much has materially changed over the past few days and with earnings this Friday for a few of them.  I don’t expect these stock to do much over the next couple of days until we start seeing the results.

I know that some people will argue about how cheap some of these banks are based on the earnings multiple and the significant buybacks. But one must also remember that the growth rates for many of these stocks are coming way down in 2019, and the market is now looking forward. The significant events lifting results in 2018 are now behind us. JP Morgan’s growth is expected to slow to 8 percent in 2019 from 31 percent in 2018, while BofA is forecast to decelerate to 14.5 percent from 38 percent, those are material differences, and it may be part of the reason why the banks have struggled so badly, on top of the contracting spreads in the yield curve.  We’ll see come Friday, and then adjust our stance if need be.

Amazon

I know Amazon was up again today, and remember I said it could still rally, to $1760 over the coming days. At this point, the chart still looks bearish to me, and until it breaks out above $1760, the trend is lower, that is just how it goes.

Tesla

Tesla announced it would be building a  new Gigafactory in China, and that will be a big deal at some point, but not for a few years. But it will give the bears something else to bellyache about now. The cost, the cash raise, blah blah blah,  insert some other excuse. Yes, it will give both bull and bear something else we can waste an incredible amount of time and energy arguing over. Anyway. The chart looks fine to me. The stock got a solid bounce where it was supposed too in the $290’s, and now the focus can turn to 2Q results and of course, whatever sort of guidance the company gives, and who could forget more updates on Model 3 production rates, because there just hasn’t been enough media focus that.

Netflix

Netflix was initiated at Credit Suisse tonight after the close with a $500 price target. The stock looks strong here, and earnings come on Monday. I expected more favorable commentary from the sell-side going into Monday. The average price target on the stock is still only at $358, versus the stocks closing price of roughly $415, which means analysts still have further to raise their price targets so they can look smart when the earnings come out, which likely means shares have room to climb over the next  couple of days.

NFLX Price Target data by YCharts

 

Twitter

Twitter’s stock has been decimated the past few days, and now I’m not sure what happens. The unfavorable report about the accounts over the weekend killed the stock, and it reminds us that fundamental news always,  always trumps technicals. It happens.  My one take away from the chart, is that stock found itself firmly entrenched in the previous trend, and that may not be a bad thing. We have to wait things out and see how it develops now.

Fundamentally, I’m sure that anything thing actually changed for the company, but the market obviously did not like the news, so what do I know.

Alibaba

I use to be so good with Alibaba. But the last couple of times opined, I have been hit and miss. My biggest concern for this company are those declining margins, and I don’t see that issue going away. It is the one significant advantage Amazon has on Alibaba right now, because Amazon’s margins have been rising, and Alibaba has been getting worse.

BABA Gross Profit Margin (Quarterly) data by YCharts

The technical chart of Alibaba looks beyond confusing, I think this one is dead money for a while longer, with more risk to the downside than upside.

That’s it.

Mike

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#banks #sp500 #stocks #equities #amazon #tesla #pepsi #staples #consumer #alibaba