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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May 22, 2019 – Stock Mentions: Banks, Qualcomm, Alibaba, Broadcom, Apple
Michael Kramer and the clients of Mott Capital own Apple
Fed Minutes Seem Bullish For Equities
The Fed minutes today seems very dovish to me and should be viewed as a positive for the equity markets. My take away, the Fed is on hold even if the economy should strengthen from here. The only thing at this point that is going to get interest rates moving higher will be inflation. The outlook for inflation is not looking good at the moment when you look around the commodity complex. I explain this in greater detail in a video today. Why The Fed Minute Are Bullish For Stocks. The S&P 500 started to rise following the minutes, but by days end it backed-off, with the S&P 500 finishing down about 30 basis point.
S&P 500 – Crunch Time
The chart below shows how it is crunch time for the S&P 500. The downtrend and the uptrend converge tomorrow, and that means tomorrow is likely to be a turning point for the S&P 500. An increase above the downtrend sends the S&P 500 towards 2,900. A decline below the uptrend since the S&P 500 to 2,800. It is that simple.
The RSI is trending higher, and that makes me believe the index breaks out and heads towards 2,900.
Yield Curve – Not Good For Banks
The spreads on the yield curve continue to contract, and today the 10-year minus 2-year fell to 15bps. Not a good sign for the bank stocks. I talked about this yesterday in the subscriber area Why Banks May Be Heading Lower. The Bank Index BKX Index was down around 75 bps.
Qualcomm managed to hold support “around $70”, but this FTC decision was one of the big worries about the stock for some time. Depending on the next steps, it could be a massive blow to the company’s licensing revenue, which is a big chunk of the total revenue. For now, there is a risk for the stock to fall to around $65.
Alibaba is still falling, and it may continue to look like its heading towards $151.
Broadcom is weakening too, and now it fell below critical support at $273, with the potential to fall to $259. In some cases, one has to wonder though if the market is overdoing the sell-off in these semiconductor stocks. (See: Have Chip Stocks Fallen Too Far?)
Apple is having a tough time, and the downtrend seems to be too strong for the stock to overtake right now. We will see what happens. For now, $182 is holding.
Remember to bring your shoulder pads tomorrow.
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