Stocks Retreat As Democrats Lead In Georgia Senate Runoff Elections

Traders Sell Tech Stocks

S&P 500 futures are losing ground in premarket trading as Democrats look ready to win both seats in Georgia runoff elections and take control of the Senate.

Nasdaq stocks are hit hard as traders fear that Democrats will introduce strict regulations for Big Tech. Currently, Apple shares are losing about 1.5% in premarket trading, Facebook shares are down by 2.3% while Amazon stock is down by 1.5%.

Meanwhile, the U.S. dollar continues to lose ground against a broad basket of currencies as traders bet that Democrats will soon introduce another stimulus package.

The fear of additional money-printing put significant pressure on U.S. government bond prices and pushed the yield of the 10-year government bonds above the psychologically important 1.00% level.

The bond market is typically considered as “smart money” so the sell-off in U.S. government bonds indicates that institutional investors are seriously worried about the potential impact of additional stimulus.

OPEC+ Reached A Compromise Deal

OPEC+ has finally managed to reach consensus on production cuts thanks to Saudi Arabia which offered voluntary production cuts of 1 million barrels per day (bpd).

Other producers will keep production at current levels in February and March while Russia and Kazakhstan will be allowed to raise production by 75,000 bpd in February and 75,000 bpd in March.

Not surprisingly, oil is trying to settle above the $50 level while oil-related stocks look ready to continue their upside move. That said, it should be noted that once the initial euphoria is over, the market may start to question the reasons for a major 1 million bpd voluntary cut from Saudi Arabia which signals that demand for oil remains much weaker than expected.

ADP Employment Change Report Disappoints

The U.S. has just provided ADP Employment Change report for December which indicated that private businesses fired 123,000 workers while analysts expected that they would add 88,000 jobs.

This is the first negative ADP Employment Change report since April when it indicated a loss of 19.4 million jobs.

On Friday, the U.S. will provide Non Farm Payrolls report for December which is currently expected to show that economy added 100,000 jobs. However, analysts have some time to change their forecasts as the pressure from the second wave of the virus appears to be stronger than expected.

For a look at all of today’s economic events, check out our economic calendar.

Stimulus Hopes Fail to Rally Markets

The S&P 500 closed down for the third consecutive day (Dec. 22), despite Congress’s long-overdue approval of an economic stimulus package.

News Recap

  • The Dow Jones declined 200.94 points, or 0.7%, to 30,015.51. The S&P 500 closed down for a third consecutive day and fell 0.2%. Reflecting a return to the “stay-at-home” tech trade, the Nasdaq gained 0.5% on the day (Dec. 22). The small-cap Russell 2000 index managed to outperform yet again, rising 1.01%.
  • Congress finally voted on and approved a $900 billion stimulus package to aid struggling Americans. Attached to this bill was also a $1.4 trillion measure to fund the government through Sept. 30. President Trump is expected to sign the bill into law within the next few days.
  • A mutant strain of COVID-19 discovered in the UK weighed on markets for a second consecutive day. While the vaccine(s) could still be effective on this strain, the strain appears to be more contagious than others. The discovery of this virus strain has caused stricter lockdown measures and travel restrictions worldwide.
  • Travel stocks were the laggards of the day due to fears of the new strain of COVID-19. American Airlines (AAL) fell 3.9% and United (UAL) dropped 2.5%. Cruise lines all fell as well. Carnival (CCL) fell nearly 6%, Royal Caribbean (RCL) dropped nearly 3%, and Norwegian (NCL) plummeted 6.9%
  • Apple (AAPL) led the Nasdaq higher as it jumped 2.9% due to investor excitement about their EV plans to challenge Tesla (TSLA) by 2024
  • Mixed economic data came in on Tuesday (Dec. 22). The final reading on Q3’s GDP growth found that the US GDP grew 33.4% on an annualized basis, compared to the estimated 33.1%. On the other hand, US consumer confidence fell for the second month in a row and missed expectations – despite vaccine optimism.
  • COVID-19 has now killed over 318,000 Americans (and counting). The CDC announced that this is now the deadliest year in American history as total deaths are expected to top 3 million for the first time. Deaths are also expected to jump 15% from the previous year. This would mark the largest single-year percentage leap since 1918, when WWI and fatalities from the Spanish Flu Pandemic caused deaths to rise an estimated 46%.

Markets have officially stumbled before Christmas and experienced a predictable tug-of-war between good news and bad news. While the general focus of both investors and analysts has appeared to be the long-term potential of 2021, there are some very concerning short-term headwinds.

Although there was some anticipation that a stimulus deal could send stocks higher in the near-term, investors may be simply taking profits before the year’s end and rebalancing for 2021. On the other hand, it is very possible that the stimulus package was “too little too late,” and is being overshadowed by a more contagious strain of COVID-19 discovered over the past weekend in the U.K.

While nobody predicted a renegade mutant virus weighing on market sentiment, short-term battles between optimism and pessimism were quite predictable.

According to a note released on Monday (Dec. 21) from Vital Knowledge’s Adam Crisafulli

“The market has been in a tug-of-war between the very grim near-term COVID backdrop and the increasingly hopeful medium/long-term outlook (driven by vaccines) – the latter set of forces are more powerful in aggregate, but on occasion, the market decides to focus on the former, and stocks suffer as a result.”

Meanwhile, the overwhelming majority of market strategists, including myself, are bullish on equities for 2021. It might just be a bit of a bumpy road getting there. I believe that a correction and some consolidation could be very likely in the short-term, on the way towards another strong rally in the second half of 2021. While it is hard to say with conviction WHEN we could see a correction, I believe that the market’s behavior as of late could be a potential preview of what’s to come between now and the end of Q1 2020. There is optimistic potential, but I believe a potential 5% pullback before the year’s end is possible, as well as a minimum 10% correction before the end of Q1 2020.

According to Jonathan Golub , Credit Suisse’s chief U.S. equity strategist, choppiness in the economy and markets in the coming months could be expected before a surge in consumer spending by mid-2021. Golub said, “I don’t think that there’s a smooth, easy straight-line story on this…I think for the next three or four months, the reopening process is going to be sloppy.”

I believe that the S&P’s three-day losing streak could be an ominous sign of what’s to come in the near-term. I do believe though that this is healthy and could be a good thing.

Before Monday’s (Dec. 21) session, I had warned that the market was flashing signs of over-optimism and euphoria. In its most recent survey, for example, the American Association of Individual Investors (AAII) found that 48.1% of investors identified as being bullish – well above the historical average of 38%.

A correction could be just what this market needs. Corrections also happen way more often than people realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017). I believe we are overdue for one because there has not been a correction since the lows of March. This is healthy market behavior and could be a very good buying opportunity for what I believe will be a great second half of the year.

The mid-term and long-term optimism are very real, despite the near-term risks. The passage of the stimulus package only solidifies the robust vaccine-induced tailwinds entering 2021, specifically for small-cap value stocks.

In the short-term, there will be some optimistic and pessimistic days. On some days, such as Tuesday (Dec. 22), the “pandemic” market trend will happen – cyclical and COVID-19 recovery stocks lagging, and tech and “stay-at-home” stocks leading. On other days, a broad sell-off based on virus fears may occur as well. Additionally, there will also be days where there will be a broad market rally due to optimism and 2021 related euphoria. And finally, there will be days (and in my opinion, this will be most trading days), that will see markets trading largely mixed, sideways, and reflecting uncertainty.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is very possible. But I do not believe, with conviction, that a correction above ~20% leading to a bear market will happen.

The premium analysis this morning will showcase a “Drivers and Divers” section that will break down some sectors that are in and out of favor. As a token of my appreciation for your patronage, I decided to give you a free sample of a “driver” and “diver” sector. Please do me a favor and let me know what you think of this segment! I’m always happy to hear from you.


Small-Caps (IWM)

The Russell 2000 small-cap index once again beat the larger-cap indices and gained 1.01% on Tuesday (Dec. 22). Despite the profit-taking and negative sentiment during Tuesday’s (Dec. 22) session, small-caps didn’t get the memo.

I do love small-cap stocks in the long-term and this small-cap rally is more encouraging than the “stay-at-home” stock rallies from April/May. This is a bullish sign for long-term economic recovery and shows that investors are optimistic that a vaccine will return life to relative normalcy by mid-2021.

I do have some concerns about overheating in the short-term though. As I mentioned before, I believe that the S&P’s losing streak is only a preview of what could come in the next 1-3 months.

According to the chart above for the Russell 2000 ETF (IWM) , it becomes pretty evident that small-cap stocks have overheated in the short-term. Stocks won’t always go up, but the IWM’s trajectory since November has been essentially vertical. The ETF keeps hitting record highs while the RSI keeps overinflating way past overbought levels as the volume shows instability.

Since November, the Russell index has been on a run nothing short of astounding. Just look how the iShares Russell 2000 ETF (IWM) compares to the ETFs tracking the Dow, S&P, and Nasdaq in that time frame. Since November, the IWM has risen nearly 28% and has at least doubled the returns of the ETFs tracking the other major indices.

Although the Russell index is composed mostly of small-cap cyclical stocks dependent on the recovery of the broader economy and may be more adversely affected on “sell-the-news” kind of days, its hot streak since November has seemingly not cooled off as much as other indices and sectors.

But I believe this will eventually happen in the short-term, and I hope it does for a long-term buying opportunity.

In the short-term, small-cap stocks may have overheated and could experience the greatest volatility. SELL and take short-term profits if you can, but do not fully exit positions .

If there is a pullback, BUY for the long-term recovery.


US Dollar ($USD)

If the dollar rallies at all again soon, do not be fooled.

Ever since I called the dollar’s rally past the 91 level two Wednesdays ago (Dec. 9) a mirage, the dollar has declined by 1.25%.

I believed it to be “fool’s gold” then and I believe any subsequent rally that could come will be “fool’s gold” too.

I still am calling out the dollar’s weakness after several weeks, despite its low levels. I expect the decline to continue as well thanks to a dovish Fed.

The world’s reserve currency is still trading below 90 and has not traded this low since April 2018.

Joe Manimbo , a senior analyst at Western Union Business Solutions, seemingly agrees with me as well and said that “the latest blow to the dollar came from the Fed, which vowed not to touch policy even if the outlook for the U.S. economy brightens as it now expects.”

Since hitting a nearly 3-year high on March 20th, the dollar has plunged nearly 13% while emerging markets and other currencies continue to strengthen.

On days when COVID-19 fears outweigh any other positive sentiments, dollar exposure might be good to have since it is a safe haven. But in my view, you can do a whole lot better than the US dollar for safety.

I have too many doubts on the effect of interest rates this low for this long, government stimulus, strengthening of emerging markets, and inflation to be remotely bullish on the dollar’s prospects over the next 1-3 years. Meanwhile, the US has $27 trillion of debt, and it’s not going down anytime soon.

Additionally, according to The Sevens Report , if the dollar falls below 89.13, this could potentially raise the prospect of a further 10.5% decline to the next support level of 79.78 reached in April 2014

After briefly rising above an oversold RSI of 30 last week, the dollar’s RSI is now at an alarmingly low 27.87. The dollar is also significantly trading below both its 50-day and 200-day moving averages.

While the dollar may have more room to fall, this MAY be a good opportunity to buy the world’s reserve currency at a discount as the RSI is oversold. But I just feel you can do a whole lot better than the USD right now.

I’m not a crypto guy either myself, but Bitcoin’s run compared to the dollar’s disastrous 2020 has to really make you think sometimes….

For now, where possible, HEDGE OR SELL USD exposure.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

For a look at all of today’s economic events, check out our economic calendar.

Thank you.

Matthew Levy, CFA
Stock Trading Strategist
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Matthew Levy, CFA, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Levy is not a Registered Securities Advisor. By reading Matthew Levy, CFA’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading, and speculation in any financial markets may involve high risk of loss. Matthew Levy, CFA, Sunshine Profits’ employees, and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


The Pandemic Year 2020: Investors Navigating the New Normal with COVID

As we head into the holiday season, investors remain focused on COVID-19 pandemic which has forcefully plunged the world into a “New Normal”. The alarming speed of the spread of the virus across the world has transformed and reshaped the world in a short amount of time but with longer-lasting impact. As everyday life has been impacted, investors have also reassessed and realigned their investment strategies to face the new world.

Stock Market

Quarter 1 – A Trio of Crises & the Great Lockdown

The markets tumbled like dominoes hit by various headwinds at once ranging from geopolitical tensions between the US and China, Hong Kong and Iran, extreme weather conditions, an oil price war, and the novel coronavirus which forced various forms of lockdowns and social distancing across the globe. Faced by an unprecedented health crisis, and an oil crisis, the world was bracing for an unexpected economic crisis.

Volatility soared in the markets to decades high from an average of 20 to a high above 80 around mid-March causing several circuit breakers and trading halts on some stock exchanges. The stock market bottomed down, and major equity indices dropped in bear market territory ending an 11-year bull-run in the stock market. Global stocks experienced the worst week since the global financial markets.

Central banks and governments rushed in to intervene and cushion the freefall in the financial markets and support their economies which brought some degree of calm in the stock market.

Quarter 2 – The Grand Reopening & Roadmap to Recovery in a Pandemic

Investors witnessed the grand reopening in the second quarter after the great lockdown in the first quarter. Massive fiscal stimulus, ultra-low levels of interest rates, central banks interventions and optimism on the reopenings helped the stock market to rebound as fiercely and aggressively as it initially fell.

The government and central banks have absorbed nearly all the shocks of the virus on the financial markets by injecting massive liquidity in the economy, keeping credit flowing and supporting their economy with huge fiscal stimulus plan among many others unconventional plans. On the reassurance that the intervention measures are not going to fizzle out anytime soon, investors have pushed global stocks higher:

  • Major US equity indices rallied and record new highs.
  • European stocks were flaring better. Even though the Eurozone was not economically strong pre-COVID-19 crisis, the better containment of the virus compared to the US and the historic unity European countries have shown during the coronavirus crisis has boosted confidence for European stocks
  • Australian shares also rebounded significantly and reclaimed the 6,000 level to mark the best quarter in over a decade.

Quarter 3 – Vaccine Optimism, Presidential Election, and Tech Rally

While the vaccine updates and the US Presidential elections campaigns were at the forefront of the markets in the third quarter, global stimulus improving economic data, a better-than-expected earnings season and the resilience of the technology sector have lifted risk sentiment. Global equities have been on a staggering rally at the beginning of the quarter allowing the major equity indices to recover the losses made in the first quarter.

However, geopolitical risks – US/China tech war and the ending of the US pact on Hong Kong extradition and reciprocal tax treatment, the US stimulus gridlock, the rising number of coronavirus cases and the uncertainty around the pace of recovery created an environment of caution.

Investors were monitoring closely the interventions by central banks and governments to push stocks higher at the risk of the global economic backdrop and the stimulus-fueled economy. The month of September again lived up to its reputation of being the typical scary month for investors which saw major corrections in the stock market as investors were navigating in a highly uncertain environment.

Once the volatility around the US elections faded, investors were focused on the prospects of another round of national lockdowns and the lack of timely US stimulus support. The tech sector was at the centre of attention as the big tech leaders outshined when the world went into virtual reality mode. The industry biggest players: Amazon, Apple, Facebook, Alphabet, and Microsoft were somewhat well-equipped to rise to the challenges. The resilience and performance of the tech sector year-to-date stood out this year – mega-caps tech companies have tackled the pandemic relatively unscathed by its impact compared to the economic malaise other industries are facing.

  • The Reshuffling of the Dow Jones Industrial Average

Another notable event was the reshuffling of the Dow – Amgen (AMGN), (CRM) and Honeywell International (HON) were added to the index while Pfizer (PFE), Raytheon Technologies (RTX) and Exxon Mobil (XOM) were removed. The moves were spurred by Apple’s decision to split its stock which will reduce the Information Technology index weight.

Apple made history in August and retakes the market-cap lead from Microsoft to become the first US company to be valued at US$2 trillion.

If immediate attention generally was on the FAANG group, Sea Ltd, the leading internet platform in Southeast Asia and Taiwan drew attention as well. The company outshines Tesla and the FAANG group of companies and emerged as the world’s best performing large-cap stock.

The Last Quarter – First Vaccinations

Amid the election mayhem and a probable contested election, the gridlock in Congress, another wave of hard lockdowns, and Brexit chaos, investors had a breather with promising vaccine updates. The back and forth on the US stimulus coronavirus relief package and Brexit negotiations took the markets on a wild ride in the last quarter. Throughout the last few months, Pfizer and BioNTech, Moderna and AstraZeneca issued convincing statements of the progress of the vaccine trials.

The emergency vaccine approvals and the first vaccinations across major countries like the US and the UK brought some relief following the ongoing surge in coronavirus cases in certain economies. Overall, there was enough optimism in the last few weeks for global equities to recover from October’s plunge.

Source: Bloomberg

US Share Market

Despite a contested election, the lack of timely fiscal support and the raging spread on the virus in the US, the share market was supported by the vaccine updates and first immunizations which took place earlier this month.

Source: Bloomberg

Similarly, the encouraging vaccine news was the bullish trigger for the European markets despite the further lockdowns in major European countries, tough Brexit negotiations and a slower economic recovery compared to its peers. As of writing, a new variant of the virus in the UK triggered a sell-off in the European markets. The CBOE Volatility Index jumped to the highest in a month above the 30 mark.

The new COVID mutation was mainly detected in the UK but the WHO confirmed its presence so far in Denmark, the Netherlands and Australia as well. Investors are closely monitoring statements on whether the new variant is more easily transmissible than the original strain of the disease.

The Australian Share Market – Back in Black

After the release of the Federal Budget, Australian shares started to decouple from US and European stocks as investors endorsed the government blitz which boosted confidence. During the month of November, the Australian share market has rallied significantly on the back of:

  • The easing of lockdown restrictions in the second most populated state and the second’s largest city in the country.
  • The positive vaccine updates coming from Pfizer and BioNTech, Moderna and AstraZeneca.
  • The confidence in the Australian economy as compared to other major countries. Consumer confidence reached a 10-year high.
  • Historically low-interest rates. Even though the RBA slashed interest rates to a historic low, there is a level of reassurance that the lower level of interest rates will stay for a longer period which means that the central bank is not expecting a deterioration in the Australian economy fuelling investors’ confidence.
  • The Asia-Pacific Free Trade Agreement has provided another level of confidence at a time of global trade uncertainty. It has also elevated expectations that both countries might initiate some sort of dialogue after the Chinese Communist Party has frozen all communications with Australian ministers.

In November, the ASX recorded their best month in decades and briefly erased its 2020 losses before retreating lower. As of writing, the index is currently trading at around 6,601.

Forex Market: The King Dollar?

The US dollar went on a roller coaster ride throughout the year. In a classic reaction to an unpredictable and uncertain event like the pandemic, the demand for haven assets triggered a rally in the US dollar. As panic gripped markets, dollar funding pressures drove the US dollar index to a 3-year high above the 102 level. Even though policymakers stepped in to enhance flows, the greenback remained in elevated levels.

Source: Bloomberg

A significantly bigger stimulus package compared to its peers at the beginning fuelled hopes that the US economy would probably recover faster than other major economies. The US dollar was unable to maintain the bullish momentum over the following quarters as risk sentiment improved and the US was still battling hard the spread of the virus with no signs of slowing down and stimulus packages were not flowing in as required.

Major currencies remained stronger than the US dollar in the following quarters. Major central banks like the RBA had to tap into QE for the first time this year and many even contemplate or left the door open for negative interest rates if warranted.

Source: Bloomberg

The Euro gathered strength on the historic unity, some economic recovery, the ECB stimulus program and EU budget. The renewed lockdowns and Brexit woes remain the factors that may drove further volatility in the EUR pairs. The EURUSD pair is trading at a high above the 1.22 level.

The Antipodean currencies were among the top gainers lifted by the additional funding from the central banks, governments, renewed confidence, economic data and the better containment of the virus as compared to other major economies. The AUDUSD pair is trading nearly three-year high around the 0.750 level.

Source: Bloomberg

As the Brexit deadline looms, the Pound swung between gains and losses driven by contradictory headlines and statements from both the EU and the UK. Traders grew more hopeful in the last few days when both parties appear committed to seeing a deal through despite significant differences on three critical issues: level playing fieldgovernance and fisheries. Investors were taken on a roller-coaster ride following intensifying deal negotiations and on-and-off positive and negative announcements.

Brexit hopes drove the GBPUSD pair to an intraday high of 1.3624 last week. The Pound plummeted on the news of a new variant of the virus and as of writing, the pair retreating lower to the 1.33 level.

Gold Rally

At the start of the year, the US dollar and Gold were moving in tandem due to the prevailing uncertainties – QE, low-interest rates, trade frictions, geopolitical tensions, global debt and growth uncertainties, gold hoarding by central banks have driven the gold price higher just below the $1,700 mark.

However, Gold was initially liquidated due to the wider and rapid spread of the coronavirus across the globe. The precious metal is viewed as a highly liquid asset and investors were in a need of cash due to margin calls and other liquidity requirements. COVID-19-induced liquidity issues caused the yellow metal to plunge to a low of $1,451.55.

The yellow metal rallied at the start of the third quarter to a high of $2,075 in the month of July but traded within a narrow range as investors digested some positive vaccines updates, improving economic data and easing lockdown restrictions. The XAUUSD pair plunged below a key psychological level below the $1,900 mark but held on to elevated levels.

From the health crisis point of view, the vaccine updates are fuelling the hopes of a quicker recovery and providing reassurance to investors. However, the amount of stimulus injected into the global economy over the last couple of months is evidence that the economic and financial recovery might take some time. Gold is still trading at a decade-high around the $1,880 mark.

Oil Market

An oil price war and the ongoing pandemic struck the crude oil market at a time where the industry was already faced with a simultaneous demand and supply shock. As the world grapples with the ongoing pandemic, different forms of lockdowns across the globe have severely impacted key industries of consumers of oil. Global activities have slowed down on a massive scale with empty roads, grounded aircraft, plunging car sales and disrupted supply chains abruptly sapping oil demand.

The extent of the disruptions in the energy market caused by the pandemic will probably leave a lasting impact on the oil market which may take years to overcome. Traders are analysing whether the impact of the pandemic will either accelerate the pace in using renewables or delay that process.

Crude oil prices have mostly remained stuck within a range below the $50 after the big plunge earlier this year. With a dire demand outlook from as per the October reports, there are increasing pressure from OPEC members and its allies to balance the supply side and avoid flooding the oil market with extra supply.

In a pandemic-induced environment, investors are navigating a new normal with COVID-19. Despite the painful year on the health front, the stock market had a great year driven by the prompt interventions in the financial markets by central banks and governments around the globe.

While a vaccine provided a sense of relief, we are ending the year with much uncertainty on the geopolitical, economical and health front.

By Deepta Bolaky

Disclaimer: The articles are from GO Markets analysts, based on their independent analysis or personal experiences. Views or opinions or trading styles expressed are of their own; should not be taken as either representative of or shared by GO Markets. Advice (if any), are of a ‘general’ nature and not based on your personal objectives, financial situation or needs. You should therefore consider how appropriate the advice (if any) is to your objectives, financial situation and needs, before acting on the advice. If the advice relates to acquiring a particular financial product, you should obtain and consider the Product Disclosure Statement (PDS) and Financial Services Guide (FSG) for that product before making any decisions.

About GO Markets

GO Markets was established in Australia in 2006 as a provider of online CFD trading services. For over a decade we have positioned ourselves as a firmly trusted and leading global regulated CFD provider. Traders can access more than 250 tradeable CFD instruments including Forex, Shares, Indices and Commodities.

Follow us and keep up to date with the latest market news and analysis.

Technology Giant Apple Targeting Car Production by 2024, Shares Gain About 4%

California-based technology giant Apple Inc is planning a production of passenger vehicles by 2024 with its own radically new battery design, according to a Reuters report which cited undisclosed sources, sending its shares up about 4% in pre-market trading on Tuesday.

Two people familiar with this plan told Reuters that the iPhone maker has planned to tap outside partners for elements of the system, including lidar sensors, which support self-driving cars get a three-dimensional view of the road.

“It has long been the auto and tech hardware teams’ collective working assumption that Apple will, one day, design and engineer a car. Apple possesses the key ingredients that we believe are critical to be successful in the future auto industry. From a Tesla perspective, we have long felt that tech players like Apple (working with manufacturing partners such as FoxConn) represent far more formidable competition than the established/legacy OEMs,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Large tech firms want access to the auto industry due to its large TAM size, as well as the enormous amount of time spent in cars. From our Apple team… they see Project Titan (Apple Car) as a long-term project where, similar to other markets like mobile and wearables, Apple can disrupt through vertical integration. The EV arms race is still in the early stages and the battery technology is not mature,” Jonas added.

At the time of writing, Apple shares traded about 4% higher at $133.19; the stock is up about 80% so far this year.

Apple Stock Price Forecast

Thirty analysts who offered stock ratings for Apple in the last three months forecast the average price in 12 months at $131.88 with a high forecast of $160.00 and a low forecast of $75.00. The average price target represents a 2.85% increase from the last price of $128.23. From those 30 equity analysts, 23 rated “Buy”, six rated “Hold” and one rated “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $144 with a high of $201 under a bull scenario and $77 under the worst-case scenario. The firm currently has an “Overweight” rating on the technology company’s stock.

Several other analysts have also recently commented on the stock. Apple had its price objective raised by analysts at Citigroup to $150 from $125. Oppenheimer reiterated an “outperform” rating and set a $125 price target. Royal Bank of Canada raised their target price to $132 from $111 and gave the stock an “outperform” rating. Loop Capital upgraded shares to a “buy” rating from a “hold” and raised their target price to $131 from $110.

Analyst Comments

“Apple has the world’s most valuable technology platform with over 1.5 billion active devices, and is entering FY21 with its strongest portfolio of Products and Services in years, 80% of which have been refreshed in the last 12 months,” said Katy Huberty, equity analyst at Morgan Stanley.

“We see multiple tailwinds to drive a re-rating over the next 12 months including 1) accelerating adoption of 5G smartphones, 2) work, learn and play from home demand, 3) increasing penetration of high margin services, and 4) strong cash returns. Longer-term investments in augmented reality, payments health, autos and home can help sustain growth as Apple captures more of its users time and wallet share,” Morgan Stanley’s Huberty added.

Stocks Move Higher As Stimulus Talks Make Progress

Stimulus Hopes Push Stocks Higher

S&P 500 futures are moving higher in premarket trading as traders are optimistic on the current stimulus talks.

It looks like negotiations between Republicans and Democrats are progressing well, and there’s a chance that a new coronavirus aid package will be approved before Christmas.

Tomorrow, the U.S. Fed will announce its Interest Rate Decision. The rate is expected to stay unchanged so traders will focus on Fed’s commentary.

The Fed may decide to increase purchases of long-dated bonds in order to put pressure on their yields which will be bullish for stocks.

Big Tech May Face Fines Of Up To 10% In EU

EU is expected to unveil new rules which will limit the power of tech giants like Facebook, Apple, Amazon and Alphabet.

Big Tech companies may face fines of up to 10% of annual turnover if they fail to comply with new rules which deal with antitrust concerns, disinformation, hate speech and other important areas.

It should be noted that EU members will still have to negotiate the final set of the rules which may take months or even years. However, it is already clear that Big Tech will face increased regulation in this decade.

At this point, investors remain confident that tech companies will be able to solve their regulatory problems, but it should be noted that most Big Tech stocks are trading below highs that were reached in early September.

Oil Ignores Grim Forecasts

Yesterday, OPEC cut its oil demand forecast for 2021 from 96.26 million barrels per day (bpd) to 95.89 bpd. Today, IEA also decided to cut its oil demand forecasts.

Both OPEC and IEA noted that current virus containment measures in Europe put material pressure on oil demand.

Interestingly, oil traders were able to shrug off near-term demand concerns, and WTI oil is trying to get to the test of the recent highs near $47.70.

Energy-related stocks suffered a serious sell-off during yesterday’s trading session, and they will have a good chance to rebound today.

For a look at all of today’s economic events, check out our economic calendar.

Tech Stocks Drag Market Lower

Tech Stocks Are Under Pressure On Antitrust Concerns

Yesterday, S&P 500 found itself under pressure after Federal Trade Commission and 46 states announced lawsuits against Facebook, alleging that the company used its monopoly power to crush competition.

Worries about increased regulation of Big Tech companies have increased in recent months so the news caused a sell-off in the tech space.

It looks like this sell-off is set to continue today as shares of Facebook, Microsoft, Alphabet, Apple are losing ground in premarket trading. A potential sell-off in tech stocks may present a serious problem for S&P 500 due to their weight in the index.

European Central Bank Boosts Its Pandemic Emergency Purchase Programme

European Central Bank has recently announced its Interest Rate Decision and left the rate unchanged, in line with analyst consensus.

ECB decided to increase its pandemic emergency puchse programme (PEPP) by 500 billion euro to a total of 1.85 billion euro. While this increase was mostly expected by traders and analysts, it may provide some support to global markets.

Meanwhile, EU and UK negotiators have time until the end of the week to craft a Brexit deal. While previous deadlines have been ignored, it looks like this deadline is a serious one. A no-deal Brexit will likely put pressure on global markets.

It looks like markets are getting more nervous about the outcome of negotiations, and GBP/USD is under significant pressure today.

Initial Jobless Claims Jump To 853,000

U.S. has just released Initial Jobless Claims and Continuing Jobless Claims reports.

The Initial Jobless Claims report indicated that 853,000 Americans filed for unemployment benefits in a week compared to analyst consensus of 725,000. Meanwhile, Continuing Jobless Claims increased to 5.76 million while analysts expected that they would decline to 5.36 million.

In addition, U.S. provided inflation data for November. Inflation Rate grew by 1.2% year-over-year compared to analyst consensus of 1.1%. Core Inflation Rate was in line with analyst projections at 1.6%.

The big increase in Initial Jobless Claims is a negative surprise for the market which may put additional pressure on stocks.

For a look at all of today’s economic events, check out our economic calendar.

Apple Could Test All-Time High In December

Dow component Apple Inc. (AAPL) posted an all-time high at 137.98 in September and eased into a correction that unfolded through a symmetrical triangle pattern. Buying pressure is now picking up, raising odds the tech superstar will test, and possibly break, range resistance prior to year’s end.  A trio of benign forces should underpin this uptick, with positive seasonality, vaccine distribution, and the surging Nasdaq-100 index encouraging investors to come off the sidelines.

December ‘Window Dressing’

The Nasdaq-100 has now reached within 100 points of the September high, stoking buying pressure throughout the tech universe. This is great news because 2020’s top performers, including the famed FAANG quintet, have underperformed so far in the fourth quarter, with capital rotating into 2021 recovery plays. However, market leaders often end the year at their highs because funds buy shares in December to ‘dress up’ annual reports to investors.

Apple news flow has been quiet in the last month or so, characterized by a Loop Capital upgrade, App store developments, and a few product and partnership announcements. Everyone is waiting on iPhone 12 sales statistics but CEO Tim Cook is unlikely to provide metrics until the end of the 2020 holiday season. This news vacuum can be good news for investors because it fosters speculation on sales strength without the threat of a sudden reality check.

Wall Street And Technical Outlook

Wall Street consensus has grown more cautious in recent months due to Apple’s 68% year-to-date return, with a ‘Moderate Buy’ rating based upon 23 ‘Buy’, 6 ‘Hold’, and 1 ‘Sell’ recommendation.  Price targets currently range from a low of $75 to a Street-high $150 while the stock is now trading about $7 below the median $129 target. Share gains should be relatively easy to achieve into year’s end, given this humble placement.

The stock broke out above the February 2020 high at a split-adjusted 81.22 in June, entering a powerful trend advance that added more than 50 points into the September high. It sold off to 103 a few weeks later, setting the boundaries of a symmetrical triangle that should resolve to the upside. Price action posted the first higher high in this pattern in the first hour of Tuesday’s session, raising odds for a triangle breakout and test of the rally high.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.




Few US Stocks That Could Brighten Up Your Portfolio

Markets are really quiet recently and that is why we will shift our focus towards the American Stocks, coming in right on time as Axiory have increased their product offering by introducing CFD stocks on MT4. This can significantly help you diversify your portfolio and take advantage of more trading opportunities.

Apple is testing the upper line of the symmetric triangle.

Home Depot locked in the sideways trend, waiting for a breakout.

McDonald’s defending the neckline of the H&S formation.

Netflix aiming for the lower line of the rectangle.

Pfizer with a false bullish breakout.

Prudential enjoying the buy signal after the breakout of the upper line of the triangle.

Tesla testing the lower line of the triangle.

Western Digital with a fresh buy signal coming from the breakout of a major resistance.

Micron Technology enjoying a proper buy signal after making new long-term highs.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Retreat As Amazon Faces EU Antitrust Charges

Stocks Are Set For A Pullback After Touching All-Time Highs On Monday

S&P 500 futures are losing ground in premarket trading in continuation of the market action seen in the last hours of yesterday’s trading session.

Market is worries about the fate of the new coronavirus aid package, the speed of vaccination and the continued uncertainty around the U.S. presidential election as Donald Trump prepares for legal battles.

Notably, Nasdaq futures are down by about 1.5% in premarket trading as leading tech stocks like Apple and Facebook remain under pressure. Yesterday’s laggards like Zoom and Netflix are also set to open lower, while Peloton investors can hope for some bounce at the start of the trading session.

The tech sector was leading the rebound of S&P 500 after the pandemic-related sell-off in March, and its recent weakness is worrisome for the bulls as it may take the broader market to lower levels.

Amazon Is Under Fire From The European Commission

Shares of Amazon are down by almost 2% in premarket trading as EU regulators accused the company of distorting competition in the online retail space.

While the EU decision on the case is expected in 2021, investors fear that the growing regulator attention to tech giants will ultimately hurt their profits or lead to break-ups of the leading tech companies.

The Big Tech is already facing increased scrutiny in the U.S., and EU has just indicated that it also plans to increase pressure on the companies whose might exceeds the power of many sovereign countries.

A potential sell-off in Big Tech stocks is one of the biggest threats for the market so investors will continue to monitor this story closely.

Oil Continues To Move Higher On Vaccine Hopes

Oil has managed to stay above the psychologically important $40 level and made an attempt to settle above the $41 levels as traders hope that an effective coronavirus vaccine will be a game-changer for the oil market.

The energy sector was a big winner yesterday, and energy-related stocks are also set to open higher today.

Shares of BP are set for an especially active trading session as they are already up by more than 7% in premarket trading.

For a look at all of today’s economic events, check out our economic calendar.

U.S. Stocks Set To Open Lower As Tech Stocks Slide After Earnings Reports

Big Tech Stocks Are Losing Ground In Premarket Trading

S&P 500 futures are losing ground in premarket trading as leading tech stocks are under pressure after the release of third-quarter earnings reports.

Shares of Apple, Microsoft, Facebook and Amazon are losing ground in premarket trading, while shares of Alphabet are gaining more than 6% due to healthy growth of Google’s ad sales.

Elevated expectations are the biggest problem for tech stocks right now. For example, Apple shares are up by 57% year-to-date while Amazon stock gained almost 74% since the beginning of the year.

In this situation, it is not enough to simply beat analyst estimates on both earnings and revenue – the market wants to see a path for robust growth in the future. That said, it remains to be see whether the current premarket sell-off will  turn into a serious multi-day pressure on tech stocks as many traders are waiting for a pullback to initiate their positions in market leaders.

Oil Fails To Rebound As Coronavirus Continues To Surge

Oil remains under pressure after yesterday’s sell-off as traders evaluate risks of additional lockdowns. Yesterday, U.S. recorded more than 91,000 new cases of the disease, so coronavirus will likely get back to the headlines right after the U.S. presidential election.

Meanwhile, Exxon Mobil reported its third-quarter results, missing analyst estimates on revenue and beating them on earnings. Chevron also beat earnings estimates but failed to live up to revenue expectations.

This trading session is set to be chalelnging for oil majors as their revenues were hit hard by the pandemic while oil is trading near the $36 level amid virus fears.

Personal Spending Increased By 1.4% In September

U.S. has just provided Personal Income and Personal Spending reports. Personal Income increased by 0.9% month-over-month in September compared to analyst estimates which called for growth of 0.4%. Personal Spending grew by 1.4% compared to analyst consensus of 1%.

Both reports were better than expected and can provide some support to stocks during today’s trading session. The strength of Personal Spending is especially welcome as it shows that consumers remained confident in September.

For a look at all of today’s economic events, check out our economic calendar.

Mixed Bag of Quarterly Reports from Tech-Heavyweights Could Pressure US Stock Indexes on Friday

U.S. stock indexes posted a volatile reaction to a mixed bag of quarterly reports from top-tier technology companies after the closing bell on Thursday. Yesterday’s late reports came amid turbulence on Wall Street, with soaring coronavirus cases and uncertainty about a fiscal relief bill in Washington dimming the outlook for an economic recovery and knocking over 3% off the S&P 500 so far this week.

After the cash market close on Thursday, Alphabet (Google) rallied, Apple sank, Twitter tumbled and Facebook dropped. Share swings in these companies following their earnings reports after the bell sent exchange-traded funds tracking the S&P 500 and NASDAQ Composite down about 1% each, suggesting downside pressure on Wall Street on Friday.

Alphabet Sales Growth Revived as Advertisers Flock Back to Google

Google parent Alphabet Inc on Thursday powered back to sales growth, beating analysts’ estimates for the third quarter as businesses initially hobbled by the coronavirus pandemic resumed advertising with the internet’s biggest supplier of ads.

Alphabet shares, up 13% on the year, rose 8.5% after hours to $1,689.89.

Apple’s Late iPhone Launch Temporarily Wiped $100 Billion Off Its Stock Value

The late launch of new 5G phones caused Apple Inc’s customers to put off buying new devices, leading the company on Thursday to report the steepest quarterly drop in iPhone sales in two years.

Apple fell over 5% at one point in after-hours trade, wiping $100 billion from its stock market value.

Since 2013, Apple has delivered new iPhones each September like clockwork. But pandemic-induced delays pushed the announcement back a month, with some devices still yet to ship.

Even as booming sales of Macs and AirPods boosted overall revenue and profit above what analysts had expected, iPhone sales dropped 20.7% to $26.4 billion.

Twitter Warns US Election Could Affect Ad Sales, Shares Drop 16%

Twitter Inc on Thursday added fewer users than Wall Street had expected and said a rise in expenses would accelerate in the fourth quarter, sending its shares tumbling 16%.

The San Francisco-based social media company said it expected expenses to increase by close to 20% in the fourth quarter compared with a year ago due to an increase in investments.

The company also cautioned that it was hard to predict how advertisers would react as the U.S. presidential election nears on November 3.

Shares of Twitter fell to $44.00 in after-market trading.

Facebook Anticipates Tougher 2021 Even as Pandemic Boosts Ad Revenue

Facebook Inc on Thursday warned of a tougher 2021 despite beating analysts’ estimates for quarterly revenue as businesses adjusting to the global coronavirus pandemic continued to rely on the company’s digital ad tools.

The world’s biggest social media company said in its outlook that it faced “a significant amount of uncertainty,” citing pending privacy changes by Apple and a possible reversal in the pandemic-prompted shift to online commerce.

“Considering that online commerce in our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth,” it said.

Shares of the company were lower in extended trading.

Amazon Sees Pandemic Boosting Holiday Sales and Investment in Delivery Inc on Thursday forecast a jump in holiday sales – and costs related to COVID-19 – as consumers continued to shop more online during the pandemic.

A company executive added that heightened spending on delivery infrastructure would likely continue over years, and shares fell 2% in after-hours trading.

For the fourth quarter, Amazon said it expects net sales of $112 billion to $121 billion. That would mark the company’s first over $100 billion and follows a third-quarter revenue beat that analysts such as eMarketer’s Andrew Lipsman did not expect.

“While it was clear that the pandemic-driven shift to e-commerce would keep Amazon’s topline elevated, it surprised by easily surpassing an already high bar,” Lipsman said.

Revealing Summary

Without Facebook, Apple, Amazon, Netflix and Alphabet – the so-called FAANG stocks – the S&P 500 would be down about 4% in 2020, compared with the index’s 2% year-to-date rise, according to a research note from Bespoke Investment Group on Thursday.

“Due to both the huge weight of these stocks and their outperformance, the market has become more reliant on them than ever before for its gains,” according to Bespoke.

For a look at all of today’s economic events, check out our economic calendar.

Big Week for Big Tech

On October 28, the CEOs of Facebook (Mark Zuckerberg), Google (Sundar Pichai), and Twitter (Jack Dorsey) are set to testify before a Senate hearing about how these tech giants manage hate speech, misinformation, and privacy on their respective platforms. This will be a closely-followed hearing, considering that it comes mere days before the hotly contested US presidential elections on November 3.

Then, a day after the Senate hearing, Amazon, Apple, Alphabet (Google’s parent company), Facebook, and Twitter are all scheduled to release their respective Q3 results after US markets close on October 29.

Given that these tech titans are set to feature prominently in market headlines this week, such prospects may make for volatile trading, and the price swings may be captured within the FXTM Social Media index.

FXTM Social Media Index beats major US benchmarks

This index, which comprises four, evenly-weighted constituents, namely Google, Facebook, Twitter, and Snapchat, has far outperformed the gains seen in the major US benchmark indices so far in October. Since US markets closed on September 30th, the FXTM Social Media index has risen by 8.3 percent, even after Monday’s selloff. Compare that to the Nasdaq Composite index, which managed 1.71 percent during the same period, while the S&P 500 index has a month-to-date climb of 1.13 percent.

The FXTM Social Media index’s gains of late have been amplified by Snapchat’s inclusion. Shares of the loss-making social media platform have soared by an astonishing 58 percent on a month-to-date basis, setting multiple record highs after reporting a blowout Q3 quarterly earnings last week.

At home and bored: Social media’s dream

Advertisers ramped up their spending on Snapchat, knowing that users are using the platform a lot more amid the pandemic, given the disruptions to their daily routines and physical interactions. Snapchat has already added 31 million new daily active users in the first nine months of 2020, all while managing to steer clear of the negative headlines that have engulfed other platforms such as TikTok and Facebook.

Should Alphabet, Facebook, and Twitter also announce a Snapchat-esque Q3 earnings bonanza, one that’s fueled by ad spending, that could spell even more upside for the FXTM Social Media index before the week is up, provided that the Senate’s grilling of Zuckerberg, Pichai, and Dorsey on Wednesday do not heighten concerns surrounding these companies.

A bumpy upwards climb?

From a technical perspective, the FXTM Social Media index is now trading at relatively healthier levels after yesterday’s pullback, given that its 14-day relative strength index has pulled away from the 70 mark, which typically denotes overbought conditions. Still, this index is not immune to broader sentiment, which could see more market angst as investors’ concerns over looming US political risks are laid bare.

And the fundamentals of these social media giants could be clouded by the bipartisan campaign against Big Tech. Note that Zuckerberg and Dorsey are set to attend a separate Senate hearing on November 17th, which is two weeks after the US elections polling day, while Google is contending with a massive antitrust lawsuit by the US Justice Department.

While the legislative scrutiny could weigh on the performance of social media stocks, these downside risks may not be fully manifested for years more. As long as the tailwinds in this pandemic era remain intact, there could potentially be more gains to be had once we get to the other side of the US elections.

Written on 27/10/20 02:00 GMT by Han Tan, Market Analyst at FXTM

For more information, please visit: FXTM

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Did Alphabet Make Shady Deal With Apple?

Google parent Alphabet Inc. (GOOGL) reports Q3 2020 earnings after Thursday’s U.S. closing bell, with analysts expecting a profit of $11.14 per-share on $42.81 billion in revenue. That would mark a modest 10% earnings-per-share (EPS) increase compared to the same quarter in 2019. The stock fell after a mixed Q2 report in July but bottomed out quickly, ahead of a strong advance that posted an all-time high at 1726.10 in September.

Department Of Justice Files Anti-Trust Suit

The U.S. Department of Justice filed an anti-trust suit against Alphabet last week, alleging “Google has unlawfully maintained monopolies in search and search advertising by (1) entering into exclusivity agreements that forbid pre-installation of any competing search service and (2) entering into tying and other arrangements that force pre-installation of its search applications in prime locations on mobile devices and make them undeletable”.

DoJ intends to target a questionable deal with an alleged co-conspirator to prosecute their anti-trust case. According to The New York Times, the company pays Apple Inc. (AAPL) an estimated $8 to $12 billion per year to make Google the exclusive search engine for all their devices and services, including the iPhone and Siri. More importantly, this is alleged to be Alphabet’s biggest single payout, accounting for as much as 21% of Apple’s annual profits.

Wall Street And Technical Outlook

Wall Street consensus is utterly euphoric, with a ‘Strong Buy’ rating based upon 31 ’Buy’ and 1 ‘Hold’ recommendation. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $1,600 to a Street-high $2,202 while the stock opened Monday’s U.S. session just $15 above the low target. This suggests Alphabet is undervalued but the lawsuit could weigh on buying pressure in coming months.

The stock reversed in September at a rising highs trendline going back to 2015 and sold off to the 200-day moving average. It bounced off that support level into October and has now recovered about 75% of the downdraft. Accumulation readings are perking up after garden variety profit-taking and a strong quarterly report could close the distance into the prior high. Even so, it will be tough to overcome trendline resistance between now and year’s end.

For a look at all of today’s economic events, check out our economic calendar.

Apple Rangebound Ahead of Thursday Report

Dow component Apple Inc. (AAPL) reports earnings after Thursday’s U.S. closing bell, headlining the busiest week for big tech stocks of the third quarter earnings season. Analysts are pounding the tables ahead of the release, expecting a profit of $0.70 per-share on $62.7 billion in Q3 2020 revenue. While that marks just 23% of Q3 2019 earnings-per-share (EPS), Wall Street’s undivided attention is now focused on last week’s iPhone release.

iPhone 12 Should Drive Higher Sales

The next iPhone generation should book excellent sales and impressive margins, if the euphoric early teardowns and reviews are any guide. The release marks the start of the 5G era for Apple, even though the buildout won’t be done for three to five years. The higher price tag crushes the $1,000 barrier after resistance in the early days of the iPhone 11 while a boost in graphic performance will improve gaming capabilities, underpinning Chinese and Asian sales.

Cowen’s Krish Sankar issued upbeat commentary after the Oct. 13 release event, stating “We maintain our Outperform rating on AAPL as we believe the arrival of 5G wireless and a range of screen form factors could be a catalyst for consumers to replace older devices. The refreshed iPhone product family was largely in line with our expectations, and the modest sell-off in the stock post the event is not surprising given the recent appreciation in shares”.

Wall Street And Technical Outlook

Wall Street has grown more cautious in recent months, due to returns in excess of 50% so far in 2020. Current consensus yields a ‘Moderate Buy’ rating, based upon 25 ‘Buy’, 8 ‘Hold’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of just $67 to a Street-high $150 while the stock closed Friday’s session $10 below the median $125 target. There should be plenty of room for upside after a strong report, given this placement.

The rapid share appreciation set off overbought technical readings during the summer, triggering an intermediate correction just two days after the Aug. 31 four-for-one stock split. Price action has been testing support at the 50-day moving average for more than 7 weeks while long-term relative strength indicators have slipped into sell cycles that could persist until year’s end. Given these headwinds, Apple could remain rangebound until the first quarter of 2021.

For a look at all of today’s economic events, check out our economic calendar.

Apple Accused of Anti-Competitive Behavior

Dow component Apple Inc. (AAPL) was named as an “anti-competitive threat” by the House Sub-Committee on Antitrust on Tuesday, with the Democratically-controlled venue taking the first step toward a big tech break-up. Wall Street analysts and tech aficionados shook off the news, skeptical that Congress will follow through on legislation. However, this is no longer a partisan issue, with both sides noting similarities to the railroad and Ma Bell monopolies.

Biden Administration Could Break Up Big Tech

Democrats could take more forceful action next year than Republicans, who have been primarily focused on alleged anti-conservative bias by Facebook Inc. (FB) and Twitter Inc. (TWTR). The Left’s broader argument is more persuasive, with Apple now boasting a market cap of over $2 trillion. As the House report notes, corporate bullying and crushing competition in the name of innovation have become routine practices at these institutions, all in the quest for higher profits.

Needham analyst Laura Martin chimed-in on the controversy on Wednesday, defending Apple by noting the House committee did not recognize the company’s “value to consumers or life-improving innovations”. She ends on a cynical note, insisting that “because AAPL’s core asset is access to nearly 1 billion of the wealthiest consumers, we do not expect this report to materially impact valuation”, implying that rich folks will use their vast influence to stop Congress.

Wall Street And Technical Outlook

Wall Street’s long-term outlook on Apple has grown more cautious since the second quarter, with a ‘Moderate Buy’ rating based upon   24 ‘Buy’ and 8 ‘Hold’ recommendations. Three analysts now recommend that shareholders sell their positions and move to the sidelines. Price targets currently range from a low of $67 to a street-high $150 while the stock is now trading about $7 below the median $122 target.

The stock posted an all-time high at 137.98 in early September, two sessions after the company issued a 4-for-1 stock split. It then fell to the 50-day moving average and has now been testing that support level for the last 6 weeks. Accumulation readings have flatlined during this period while monthly relative strength indicators have crossed into sell cycles. In turn, this predicts more sideways action or continued downside that fills the July gap between 96 and 100.

For a look at all of today’s economic events, check out our economic calendar.

Asian Shares Mixed in Early Trade; Miners Lift Aussie Stocks

The major Asian stock indexes are trading mixed early in the session on Wednesday as investors awaited the Federal Reserve’s view on the economy at the end of its policy meeting, although upbeat Chinese and U.S. economic data is giving the indexes a tailwind.

Global equities markets rallied on Tuesday, first on data that showed China’s industrial output and retail sales picked up, and later on an increase in U.S. factory production.

At 01:34 GMT, Japan’s Nikkei 225 Index is trading 23425.55, down 29.34 or -0.13%. Hong Kong’s Hang Seng Index is at 24732.76, unchanged and South Korea’s KOSPI Index is trading 2439.21, down 4.37 or -0.18%.

In China, the Shanghai Index is trading 3294.96, down 0.72 or -0.02% and in Australia, the S&P/ASX 200 Index is at 5939.60, up 44.80 or +0.76%.

Nikkei Struggles after Japan Exports Tumble

Japan’s exports slumped 14.8% in August from a year earlier, down for the 21st straight month, Ministry of Finance data showed on Wednesday, underlining the coronavirus pandemic’s heavy hit to global demand. That compared with a 16.1% decline expected by economists in a Reuters poll and followed a 19.2% fall in July.

Imports dropped 20.8% in the year to August, compared with the median estimate of an 18.0% decline.

The trade balance came to a surplus of 248.3 billion Japanese Yen ($2.36 billion), against the median estimate of a 37.5 billion Japanese Yen deficit.

Australia Shares Rise on Miners, Tech Boost

Australian shares gained on Wednesday as miners rallied for a third straight session and tech stocks tracked their Wall Street peers higher, with investors hoping that the U.S. Federal Reserve will stick to its supportive policy stance.

The tech index added as much as 2.5% to be the top percentage gainer after its U.S. counterpart ended more than 1% higher overnight, while export-reliant miners were the biggest boost to the benchmark index.

Miners began their jump this week after upbeat Chinese data on Tuesday, with global giants BHP Group and Rio Tinto gaining 1.6% and 2%, respectively.

Apple Supplier Shares Mixed

Apple supplier stocks in the region were mixed in the Wednesday morning trade. Apple Inc retraced earlier gains after its product event, which included the roll-out of a new virtual fitness service and a bundle of its subscriptions into Apple One. The stock, which often dips after a run-up prior to the event, closed up 0.2%. This was well off its intra-day high.

In Japan, shares of Apple supplier Murata Manufacturing rose 0.26% while Sharp gained 0.3%. South Korea’s LG Display, on the other hand, slipped 0.62%.

For a look at all of today’s economic events, check out our economic calendar.

US Stocks Mostly Higher, but Apple Gives Back Gains after Event

The major U.S. stock indexes finished higher on Tuesday on the hope the Federal Reserve would stick with its accommodative policy as the central bank’s two-day meeting got underway. The rally was impressive and a nice start to the week, but gains were limited as Apple Inc’s shares lost early gains following its rollout of a new virtual fitness service and a bundle of all its subscriptions, Apple One.

In the cash market on Tuesday, the benchmark S&P 500 Index settled at 3401.20, up 17.66 or +0.52%. The blue chip Dow Jones Industrial Average finished at 27995.60, up 2.27 or +0.01% and the technology-based NASDAQ Composite closed at 11190.32, up 133.67 or +1.21%.

Fed Begins Two Day Meeting

In its first policy meeting since Fed Chair Jerome Powell announced a more accommodative stance on inflation.  Investors are also wondering if the U.S. central bank will add to its already considerable stimulus measures after talks in Congress stalled for another round of virus relief aid.

The central bank could switch its Treasury purchases toward long-dated debt to keep long-term yields low, some strategist said.

US Economic Data Better Than Expected

The Federal Reserve reported on Tuesday that U.S. industrial production rose 0.4 percent in August – its fourth consecutive monthly increase, but gains have plateaued since June. The Empire State Manufacturing Index, a monthly survey of manufacturers in New York State conducted by New York’s Federal Reserve Bank, confirmed that business activity expanded at a solid clip in September.

Separately, U.S. import prices increased more than expected for the same month, supporting the view that inflation pressures were building up.

Apple Falls After New Product Event; Face Criticisms

Shares of Apple gave up earlier gains and were down more than 1% after the company wrapped up an event to showcase new products. The tech giant debuted a new Apple Watch and a bundle for its services, such as Apple Music. The stock was up about 2% before the event began.

Streaming music firm Spotify Technology SA on Tuesday criticized rival Apple Inc, saying that a new subscription bundle offer from the iPhone maker abuses its dominant market position by favoring its own Apple Music service.

“We call on competition authorities to act urgently to restrict Apple’s anti-competitive behavior, which if left unchecked, will cause irreparable harm to the developer community and threaten our collective freedoms to listen, learn, create, and connect,” the music streaming company said.

Sellers Pressure Banks

Citigroup Inc dropped 4.3% following a report that federal regulators were preparing to reprimand the U.S. lender for failing to improve its risk-management systems.

JP Morgan Chase & Co slipped 2.4% as it lowered its full-year net interest income forecast.

The Internals

Advancing issues outnumbered declining one on the NYSE by a 1.92-to-1 ratio; on NASDAQ, a 1.72-to-1 ratio favored advancers, Reuters reported.

The S&P 500 posted 21 new 52-week highs and no new lows; the NASDAQ Composite recorded 63 new highs and 15 new lows.

For a look at all of today’s economic events, check out our economic calendar.

Tesla Stock Crash Targets $75.00

In my article, Will Tesla Stock Price Crash, I laid out the likelihood for a 50%+ decline. Tesla shares peaked just after the stock split, and the initial breakdown is underway. I don’t foresee a bottom until prices drop below $75.00 in 2021.

TSLA DAILY CHART: Tesla peaked just after the stock split, as I suspected. The initial crash is underway, and prices could test the 200-day MA (currently $182.94) before the next multi-week bounce. Longer-term, we expect prices to remain under pressure into 2021 and 2022 before prices carve out a bottom below $75.00.

A close up of a map Description automatically generated

I am very bullish on Tesla longer-term and believe it could become the next Apple. Currently, I do not own the stock.

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.


Has Apple Topped Out?

Dow component Apple Inc. (AAPL) slumped near a 4-week low as trading resumed in the United States on Tuesday, continuing a decline that started just two sessions after the tech giant posted a 4-for-1 split on Aug. 31. The stock hit an all-time high at 137.98 and turned sharply lower on Wednesday, relinquishing nearly 30 points into Friday’s intraday low at 110.89. It’s still testing that level, which has narrowly aligned with the 50-day moving average.

Goldman Sachs Issues Sell Rating

The stock has risen nearly 65% since the last trading day of 2019 and more than 125% since the March low, setting off extremely overbought technical readings that now favor an intermediate correction lasting for weeks and potentially reaching much lower price levels. For now, market watchers are waiting for Apple to confirm the initial production of 5G iPhones after delays caused by pandemic-driven supply disruptions.

Goldman Sachs analyst Rod Hall took aim on Tuesday, justifying a ‘Sell’ rating and $85 target, noting “Apple’s miss/beat track record is mixed, with the company failing to meet consensus expectations in 2016, 2018, and 2019. This compares to Microsoft beating revenue expectations for the last three years running and Amazon beating for three of the last five. To be more positive, we simply would like to see a consistent string of beat-and-raise quarters from Apple that matches the growth narrative.”

Wall Street And Technical Outlook

Wall Street consensus has grown more cautious in recent months, with a ‘Moderate Buy’ rating based upon 25 ‘Buy’ and 8 ‘Hold’ recommendations. Three analysts now recommend that shareholders sell their positions and move to the sidelines. Price targets currently range from a low of $66.60 to a street-high $150 while the stock is trading right on top of the $116 median target. This neutral placement favors neither bulls nor bears.

A multiweek pullback that reaches May breakout support near 80 could ease overbought readings and test the 200-day moving average for the first time since Apple remounted that level in April. While it looks like a perfect position for sidelined capital to get on-board, tight stops may be needed because a failed breakout could expose the March into September rally as the climactic wave in an Elliott 5-wave rally pattern off the December 2018 low.

Telsa Stock Price Crash Update

A week ago, I penned an article titled, Will Tesla Stock Price Crash? I felt prices were in a bubble that could pop any day, probably around the time of the coveted stock-split.

I have often compared Tesla to the chart of Apple during the late 1990s. Studying the final parabolic advance in APPL reveals a potential price target for TSLA, if price crash as I suspect.

AAPL CHART (1984 – 2004)

The late 1990s parabolic run in Apple to new all-time highs unfolded in a power 3-wave (ABC) 10x advance. Prices peaked at C and then crashed below the terminal parabolic starting point of B. I expect something similar in Tesla.

TSLA (2012 – NOW)

Expecting a repeat of Apple’s post-bubble crash – Tesla could collapse below $75.00 before starting the next major advance. In my opinion, that could present the buying opportunity of a lifetime…if you want to own Tesla.

A close up of a map

Description automatically generated

Here is what happened to Apple’s chart once prices bottomed in “D.”

A close up of a map

Description automatically generated

AG Thorson is a registered CMT and expert in technical analysis. He believes we are in the final stages of a global debt super-cycle. For more information, please visit here.