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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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL, NFLX
Good Morning Today is December 19
- S&P 500 futures are pointing to a lower opening of 8 points as of 7:30 AM
- The US 10-year rate is at 2.81%
- Dollar Index is at 96.80
- WTI Crude Oil is $46.32
- VIX: 25.09
- Critical events for today: – FOMC Rate Decision, Italy and EU agree on Budget
Recap of International Trading:
- Japan was -0.60%%
- Hong Kong Hang Seng Index +0.20%
- China Shanghai Comp. -1.05%
- UK FTSE +0.86%
- Dax +0.49%
FED Rate Hike Watch:
According to the CME, there is now a 66% chance of a rate hike in December, that is down from 71% on Tuesday
Currently, the market is pricing in a 47% chance there is no rate hike in 2019 and a 26% chance of just one rate hike, and 18.5% of a rate CUT.
The Big News Is At 2 PM
The FOMC rate decision will come today at 2 PM followed by a press conference. Expectations are still for a 25 basis point rate increase, but those odds have fallen sharply over the past few days.
Stocks are pointing to a slightly higher opening, and the key again is if the gains can hold, and more critical build some positive momentum. It would be nice to see the indexes string together a day or two of positive gains.
Overall, there is a bullish technical pattern forming in the chart, a descending wedge, and that is a reversal pattern. But it would seem to still be in the middle stages, and it suggests, there is still more work that needs to be done. But perhaps a light at the end of the tunnel.
When we look at the NASDAQ, we can see a similar pattern has formed. Both charts would suggest that a bottoming process may be in the works.
Russell 2000 (RUT)
The Russell 2000 continues to be the problem index, and a drop to 1,344 is the level to watch for, from its current level of 1,377.
FedEx lowered its guidance for the year, and that is sending the stock lower today, and it could fall as far $166. Some key takeaways, which I do not think will shock anybody: robust US growth and slowing economic growth in Europe and Asia. Here is the crucial paragraph from the call:
Internationally, economic strength seen earlier this year has given way to a slowdown. The peak for global economic growth now appears to be behind us. Eurozone growth has slowed from 2.5% last year to under 2% in the second half of 2018, and economic growth in the UK has slowed sharply since July. The secular slowdown in Chinese economy has been exacerbated by trade tensions. Spillover effects from these tensions and the fading tech cycle have negatively impacted growth throughout Asia. Emerging Asia growth slowed from 6% in 2017 to 5.6% in Q3. World trade slowed in Q3 to just 3.5% compared to 5.3% in Q3 2017. Leading indicators point to positive but even slower trade growth near term.
Micron reported results mostly inline, but as noted in last nights commentary, the guidance was terrible. Again, I don’t think this was a surprise as we have seen many negative articles in the past weeks about falling prices DRAM and NAND. Regarding the issue of tariffs, for the most part, it would seem the company has successfully navigated through those issues. I would think other companies are likely to follow.
During the last few months, we successfully leveraged our global supply chain to mitigate the impact of the China trade tariffs to less than 50 basis points to our consolidated fiscal first quarter gross margin.
We expect to be able to mitigate approximately 90% of the impact from tariffs starting in January 2019. We believe that Micron will not be directly impacted by any expansion of trade tariffs to additional product categories.
Micron’s stock fell below key support around $32.50, and now that puts the stock at risk for an even further decline to perhaps $29.
More negative headlines for Facebook. It should be interesting to see how the stock reacts. If the stock rises, it would suggest to me that all the bad news is priced into the stock. If it falls, well, that would not be good.
The stock needs to stay above $140 to maintain support. A drop below $140, likely sends the stock back into the downtrend of death, which has been in place since July and would indicate lower prices are on the way. First stop $133. Lets hope that is not the case.
Netflix is attempting a breakout, and should it rise above $275; it would have risen above its long-term downtrend. With the next level of resistance coming at $285.
Apple continues to hold support around $164. The stock needs to get over $170 before a more positive view can be formed.
Amazon has caught my attention because it has this interesting pattern forming. It has the making of a reverse head and shoulders, a technical reversal pattern, suggesting the can rise. Additionally, the RSI continues to trend higher. But the stock first needs to get over 1760 to confirm the reversal.
That’s it for today. Enjoy The Ride!
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 results.
sp500, nasdaq, micron, fedex, amazon, netflix, apple