ORACLE: The TikTok Battle

National security

Such is the case of TikTok. To young performers, it is known as an app where you share your creative ads dancing or doing anything else that may keep the attention of a multimillion audience for several minutes.

To the US security and intelligence, it is known as a Chinese data and social networking company that threatens to tap into the sovereign territory of the US social data. Roughly, that is the concern that made the administration of the US President impose the September-15 deadline for selling the US operations of TikTok to an American company.

Two contenders

Previously, Microsoft used to the main company in focus to continue TikTok’s US operations. However, the negotiations with this potential buyer went aside as Oracle took over the stage, and the people around the issue are pointing to the fact that the deal is very possible. But this is not the only thing people are pointing out: Oracle has been financially supporting Donald Trump’s campaigns and has been more than just cooperative with the US President until now.

So we have an international business, the US-China relations, and the US elections all in one knot around Oracle now. With all this in view, stocks of Oracle may soar in case the deal is successfully sealed: not because there are a lot of truly positive business outcomes from it, but because of the heightened degree of discussions around the matter.

Technical view

On the daily chart, the recent spike that still ended up below the previous high corresponds to the announcement that Oracle is likely to take over the race over TikTok from Microsoft. The bearish ending is logical for that bar because there is no deal signed yet, and in the end, what we have is just talks and negotiations. In the meantime, the deadline of September 15 is nearing – that means, even if we don’t see another bullish spike, there will be increased volatility in any case. In the end, it falls well into the equilateral upward channel Oracle’s stock has been in since March. Expect $56 to provide firm support while $62 may be the objective for bulls in the most aggressively bullish scenario. Otherwise, the area of $58-59 seems a fair target range for Oracle stock in the short term.

This post is written and submitted by FBS Markets for informational purposes only. In no way shall it be interpreted or construed to create any warranties of any kind, including an offer to buy or sell any currencies or other instruments. 

The views and ideas shared in this article are deemed reliable and based on the most up-to-date and trustworthy sources. However, the company does not take any responsibility for accuracy and completeness of the information, and the views expressed in the article may be subject to change without prior notice. 

Microsoft Rallies To New High Ahead Of TikTok News

Dow component Microsoft Corp. (MSFT) broke out to an all-time high this week, completing a 7-week basing pattern just above 200. The rally follows media reports that a deal for TikTok US is getting close, just one month after the tech giant disclosed it wanted to buy the controversial but wildly-popular Chinese social media application. However, there are no guarantees that Mr. Softee will emerge as the winner because other suitors have stepped up in recent weeks.

Microsoft Sell-The-News Reaction After Earnings

The stock sold off more than 9% in July despite beating fiscal Q4 2020 profit and revenue estimates. The company earned $1.46 per-share during the quarter while revenue rose 12.8% year-over-year to $38.03 billion. The highly-successful Intelligent Cloud segment underpinned revenue growth, rising 17% to $13.4 billion, super-charged by 47% year-over-year growth of the Azure public cloud computing system.

A Microsoft blog commented on TikTok negotiations earlier this month, noting the “two companies have provided notice of their intent to explore a preliminary proposal that would involve a purchase of the TikTok service in the United States, Canada, Australia, and New Zealand and would result in Microsoft owning and operating TikTok in these markets. Microsoft may invite other American investors to participate on a minority basis in this purchase”.

Wall Street And Technical Outlook

Wall Street has been wildly bullish on the tech giant for many years, with good reason, while current consensus translates into a ‘Strong Buy’ rating, based upon 26 ‘Buy and just 3 ‘Hold’ recommendations. No analysts are recommending that shareholders sell positions at this time. Price targets currently range from a low of $195 to a street-high $260 while the stock is now trading right on top of the median $228 target.

Microsoft broke out above February 2020 resistance in June and added about 30 points into the July peak near 216. It then eased onto a narrow consolidation above the 200 level, finally lifting to an all-time high earlier this week. A rising highs trendline going back to April suggests initial upside into the 240s where the blue chip could enter another trading range. The stock pays a modest 0.92% forward dividend that might add a few bucks to potential upside.

Markets’ Weather Weekly: Сloud-Computing and Office Software Business Missed Quarterly Estimates.

Overview and trends

U.S. weekly jobless claims hit 1.4 million, the first increase since March, as spiking virus cases halt reopening plans.

Microsoft shares tumbled as much as 2.8% on Thursday after its cloud-computing and office software business missed quarterly estimates. The share price slump caused nearly $46 billion dollars erased from the company’s market capitalization. Intel Corporation (INTC) shares were trading lower yesterday despite the company reported better-than-expected second-quarter EPS and earnings results.

As a result, the tech-heavy Nasdaq Composite finished down 2.3%. The S&P 500 closed down 1.2%. It was their worst performance since June 26. The Dow (INDU) fell 1.3%, or 354 points, its worst day in two weeks.

Stocks weren’t the only assets in the red. The US dollar, as measured by the ICE US Dollar Index, fell 0.2%. The index hit its lowest level since September 2018.

So far quarterly earnings come very mixed. On positive side there are good reports and good responses to the earnings reports from IBM (IBM), Texas Instruments (TXN), Biogen (BIIB), KeyCorp (KEY), as well as yesterday’s miracle from Tesla (TSLA) and upbeat sales commentary from Best Buy (BBY).

Then again, a close candidate for why things are “bad” would be the negative responses to earnings reports from Bank of America (BAC), Netflix (NFLX), Snap (SNAP), Capital One (COF), United Airlines (UAL), and Interactive Brokers (IBKR). Microsoft (MSFT) stock sank over 2% after reporting earnings that beat Wall Street expectations in most ways except in a key business. All these stories prompt us to be extremely vigilant, resourceful and contemplative – correct instrument selection and trade direction is key to trading success through this period!

The week was full of important news. US stocks climbed on Wednesday on positive earnings numbers from Microsoft and Tesla and as traders weighed raging tensions between the U.S. and China, a potential legislative extension to unemployment benefits, and coronavirus vaccine news. Donald Trump’s administration ordered the abrupt closure of China’s consulate in Houston, and official Beijing promptly responded with its intention to close the U.S. consulate in Wuhan in a tit-for-tat game condemned by Beijing as outrageous and unprecedented.

The U.S. government has struck an agreement with Pfizer (PFE) and BioNTech (BNTX) for up to 600 million doses of their COVID vaccine candidate should it be approved. This optimistic expectation and early preparation effort have created positive sentiment in terms of thinking about light at the end of the tunnel down the road.

Trading ideas

The Gold/Silver complex has caught renewed bids this week, which was tipped off by the major gold ETF – SPDR Gold Trust – showing up on the “Doji Week” scan back on Monday. The Doji Week scan is designed to find stocks that are in narrow ranges compared to prior week’s activity that is geared up for a stronger directional move.

There are a number of Gold/Silver – related ETFs and stocks appearing on the Wide Range Breakouts, Power Up, and Overbought results today as the market gets behind their momentum against a sliding US Dollar. As investors’ classics – Barrick Gold (GLD) and Newmont Corp. (NEM) – look increasingly overvalued by both investment multiples and technically, new kids on the block, such as Agnico Eagle Mines (AEM) and Kinross Gold (KGC) look increasingly promising. The two latter stocks unveil single digit price-to-sales ratios as opposed to double-digit ones for Barrick and Newmont.

AT&T (T)

The largest American telecom AT&T (T) beat estimates by 4 cents a share, with quarterly earnings of 83 cents per share. Revenue was in line with forecasts. The company said the COVID-19 pandemic impacted results across all its businesses. Thus, WarnerMedia revenue fell 23% to $6.8 billion as the pandemic shut down film production and movie theaters. Group revenue was down 9% YoY to $41 billion, roughly in line with the $41.1 billion consensus. In contrast, AT&T’s HBO Max boasted by around 36 million active customers (including legacy HBO subscribers), picking up 3 million in the quarter. Cash from operations was $12.1 billion with free cash flow of healthy $7.6 billion.

Total dividend payout ratio remains slightly below 50%. Nevertheless, we must not forget about this telecom’s two extremely important properties: number one, it is the value high dividend stocks. And number two, it is classic defensive countercyclical stock. Given increasing odds of exacerbating recession and noting almost ridiculously cheap valuations at P/E of less than 15, dividend yield of 7% and price-to-cash-flow of just 8 (yes, this is a single-digit number, eight), at the current price level AT&T is perhaps one of very few smart medium term buys.

Vladimir Rojankovski, Grand Capital Chief Analyst

Middle-Week Screening. Seesaw on the Market. Silver and Alibaba are for long; Boeing is for short

Overview and trends

Across the pond, according to Reuters, European Union leaders did not reach solidarity on a coronavirus stimulus plan on Sunday, German Chancellor Angela Merkel said as marathon negotiations ran into a third day and acrimony mounted over the demands of rich but thrifty countries.

On Monday U.S. officials including Senate Majority Leader Mitch McConnell and Treasury Secretary Steven Mnuchin met in the White House to discuss another coronavirus stimulus package. Mnuchin reiterated he wanted to put a cap on spending to about 1 trillion dollars, well below House Speaker Nancy Pelosi’s $3.5 trillion relief plan. He also said the bill will focus on “kids and jobs and vaccines.” Meantime U.S. stocks were higher Monday as Wall Street came off its third straight week of gains and investors turned were busy analyzing more earnings reports including those from Halliburton and IBM (the latter beat estimates by a wide margin and added over 3% in post-market).

Yesterday stocks closed mostly higher on Wall Street Tuesday despite a final hour hiccup that nearly wiped out the market’s gains for the day. The S&P 500 added less than prominent 0.2%, after culminating as much as plus 0.8%. Banks, telecoms and energy stocks led the gains, offsetting mounting losses in technology stocks – something every smart investor must take seriously in the wake of more big techs’ like Apple, Amazon and Microsoft earnings underway – which pulled the Nasdaq index lower.

Oil prices joined precious metals’ extravaganza and rose, reaching the highest levels since March. West Texas Intermediate crude gained more than 3%, to 41 dollar 88 cents per barrel. Brent crude, in its turn, rose almost 3%, to 44 dollars 30 cents per barrel, at the U.S. market close.

Most investors wait as a savior for more financial stimuli from big governments and central banks to prop up stocks and bonds that are slowly losing steam.

Seemingly in response to that urge, many governments have already announced large amounts of additional fiscal support to keep tackling the pandemic. But S&P Global Ratings suggests that some countries, including the U.S., have shown “a degree of fiscal fatigue”. The problem is that additional spending will worsen the governments’ balance sheets, but they are still necessary to “prevent things from getting even worse.”

S&P Global Ratings earlier this month downgraded its forecast for the global economy. The agency now expects global GDP to shrink by 3.8% this year — worse than the 2.4% contraction it previously projected. So the central banks and governments really have little choice but to move on.

The end of the coronavirus pandemic could bring a large number of new asset managers. Recently published data from a research firm called eVestment showed that the number of new investment firm launches substituting some less lucky rivals tends to spike following economic crises.

Here’s why, according to data firm: As markets contract, asset management employees may be laid off. Instead of seeking out a new job, they start their own firms. Additionally, some of these employees leave their jobs voluntarily, with the goal of taking a new investment approach presented by market turmoil.

Conclusion: in order to survive hard times, one needs to be open to new trends and must possess the skill of distinguishing between winning and losing assets.

Trading ideas

Silver futures logged the highest finish in nearly 4 years at the beginning of the week, buoyed by expectations for further central bank stimulation that destroy the value of world major currencies and as the rise in global COVID-19 cases continues to threaten the economic recovery. September silver added almost a dollar, or 4.9% since July 17, to settle at $20.21 an ounce, the highest front-month contract finish since August 2016. Silver is known to be more choppy and volatile precious metal as compared to gold. But this year its uncharacteristic trade smoothness since mid-March leaves its older sister gold’s parameters derailed.

Alibaba’s affiliate company Ant Group, operating the mobile payment service Alipay, reportedly started the process of its initial public offering on the Hong Kong Stock Exchange and Shanghai’s Nasdaq-style STAR market simultaneously. In China Alipay is much more prominent than the namesake portal (alibaba.com) of Alibaba Group. Ant was previously valued at $150 billion after its last funding round in 2018, making it the world’s most valuable start-up.

Reportedly, Ant generated about 120 billion yuan or $17.1 billion dollars in revenue and nearly 17 billion yuan or $2.4 billion dollars in net profit last year. This is very good news for Alibaba stock which rose over 50% since April. Its earnings reporting day is scheduled for August 13, so there is plenty of time to judge this event keeping the stock in the portfolio.

Boeing’s reputation remains under siege even after the much-advertised test flight of Boeing 737 MAX couple of weeks ago. The company was forced to release a catastrophically damning set of documents to congressional investigators last week that included “conversations among Boeing pilots and other employees about software issues and other problems with flight simulators” for the 737 Max, the plane involved in two fatal crashes. The messages further complicate Boeing’s tense relationship with the Federal Aviation Administration, which can’t be satisfied to read the disdain with which Boeing treated the civil aviation regulators.

After the undisclosed outcome test flight, the Boeing share edged up almost 6.5% to $176, but its quarterly earnings date of July 29 will be Boeing’s judgement day, because there is nothing to cheer up its shareholders with. The company reported net loss of $5.72 a share in the previous quarter, which is expected to further deepen this time around, so Boeing is a definite short, which will be easy to cover at a profit thereafter.

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

By Vladimir Rojankovski, Grand Capital Chief Analyst

Microsoft Trading At All-Time High After V-Shaped Recovery

Microsoft Corp. (MSFT) performed admirably during the first quarter’s pandemic swoon, beating fiscal Q3 2020 consensus estimates with $1.40 earnings-per-share (EPS) on $35.02 billion in revenue. Outstanding performance in the Productivity, Business Processes, and Intelligent Cloud divisions underpinned an impressive 14.6% year-over-year revenue growth while the company boasted that COVID-19 had a minimal impact on the bottom line.

‘Mr. Softee’ could lose commercial product sales in coming quarters, despite the first quarter’s remarkable results, because U.S and European corporations are primed to slash information technology budgets to cope with historic revenue contraction, triggered by the pandemic. I.T. spending tends to follow natural economic cycles, increasing during periods of economic growth and shrinking when recessions and downturns depress free cash flow across a vast customer base. These headwinds could eventually undermine the company’s long-term bullish outlook.

Protest Impact And Initiatives

Microsoft is headquartered in Seattle, on the front line of protests after the murder of George Floyd. The company has fostered a strong social identity in the last two decades so it isn’t surprising that CEO Satya Nadella outlined racial diversity initiatives, including a responsibility to “use our platform and resources intentionally to address systemic inequalities in our communities.” However, he offered few specifics, except for banning police from using their facial-recognition systems.

Microsoft Outlook

Wall Street analysts are nearly unanimous in their bullish outlook, issuing 22 ‘Buy’ and just one ‘Hold’ recommendation. Not one of the 23 analysts polled recommends that investors sell the stock at this time, despite the cyclical properties of company divisions.  Price targets currently range from a low of $190.00 to a street high $250.00, while the stock is now trading well below the median target of $207.26. This distribution strongly favors higher prices in coming weeks.

Microsoft has been an outstanding performer since 2017 when it finally cleared 17-year old resistance in the upper 50s. It nearly quadrupled into February 2020 and plunged with world markets into March, losing more than 30% of its value. The second quarter rally recouped those losses, lifting the stock to an all-time high last week. It’s also recovered 100% of the shareholder base lost during the downdraft, setting the stage for bullish price action into the third quarter.

The Test of the S&P 500 Bulls

Already at yesterday’s open, stocks have erased Tuesday’s downswing – and as the day progressed, more gains came in. S&P 500 finished at our initial upside target, at the 61.8% Fibonacci retracement. As the Fed press conference got underway, stocks attempted to break above this key resistance, but sold off in the final 15 minutes of the trading session. What comes most likely next?

Let’s check yesterday’s developments on the daily chart (charts courtesy of http://stockcharts.com ).

S&P 500 in the Short-Run

Yesterday’s candle shows the battle between the bulls and bears. The candle’s shape is bullish by itself, because the upper knot isn’t exactly dwarfing the white body. Therefore, the higher volume of yesterday’s upswing can be chalked down to meeting a serious technical obstacle rather than experiencing heavy selling into strength.

Please note that earlier in April, we’ve seen higher volume too, and stocks still made it above the key resistance (the 50% Fibonacci retracement) back then. The daily chart examination right now leans in favor of upcoming consolidation that will be followed by renewed upswing taking on the upper border of the early March bearish gap.

Let’s explore the clues that favor exactly this outcome.

The Credit Markets’ Point of View

We’ll open this section with the high yield corporate bonds (HYG ETF) analysis.

It’s not just yesterday’s strong showing of corporate junk bonds, their ratio to short-term Treasuries (SHY ETF) performed similarly well. Primed for more gains, they are not alone in this position.

The investment grade corporate bonds to longer-dated Treasuries ratio (LQD:IEI) also moved to the upside yesterday, and appears ready to break higher out of its bullish flag. This is true despite both LQD ETF lagging behind the HYG ETF yesterday, and the weaker showing of municipals (HYD ETF).

Key S&P 500 Sectors in Focus

Technology continues to lead higher, erasing Tuesday’s setback in one go. Whether you look at Alphabet stocks class A or C (GOOGL, resp. GOOG), it’s predictably been a star performer of yesterday’s session. Microsoft (MSFT) and Facebook (FB) results also show that Big Tech can make it through the storm. How strong will Amazon (AMZN) earnings be when it reports today after the market close? In our opinion, the stock will push higher, confirming our bullish bias for the tech sector.

Healthcare recovered part of the lost ground, and appears to be in need of more time to consolidate before continuing higher. The volume of last two sessions is definitely more consistent with consolidation in the sector than with distribution.

But where would the engine of upcoming S&P 500 gains be? Energy (XLE ETF), materials (XLB ETF) and industrials (XLI ETF) have led the charge yesterday too. Consumer discretionaries (XLY ETF) have also smartly dealt with Tuesday’s setback, similarly to financials (XLF ETF).

Given the strong performance in the credit markets, financials a bit surprisingly paused yesterday. It appears likely that similarly to healthcare, this sector needs to digest recent gains before the next move. And chances are, that the move would be higher when it arrives.

The Fundamental S&P 500 Outlook

Yesterday’s Fed meeting is over, and the not so subtle Fed hints that we won’t run out of money are there. So far, so good – the implicit Powell put is in. Despite today’s premarket downswing (futures trade at around 2910 currently) stocks don’t appear ready to test the resolve in what might very well turn out to be a bear trap.

Yes, weekly unemployment claims are just in, at almost 3850K – disappointing expectations. The economy reopening is a long process (state-by-state different) and isn’t likely to bring a V-shaped consumer rebound on a lasting basis. But stocks are forward-looking, ready to bridge the view of more than one quarter ahead.

We’ll monitor the anatomy of both the up and down days for signs that this upleg is over. Right now, that still doesn’t appear to be the case.

From the Readers’ Mailbag

Q: In your latest alert, you mentioned a profit target for the S&P 500, what’s the exit strategy? To complicate matters a little more, we use your service to trade 3x ETFs, what would the stop-loss percentage be and of course, the exit profit target?

A: We didn’t exit the profitable long positions at the first rendezvous with the 61.8% Fibonacci retracement, because too many signs (credit markets, sectoral strength) point to the upswing consolidation. Sure, we’re experiencing a pullback today, but does it change the bullish short-term outlook? We’ll examine the sectors with their ratios and see whether our ducks remain as much lined up in a row as they were going into this session. And naturally, we’ll react and issue an intraday Stock Trading Alert if situation warrants that.

Thanks in no small part to the early March bearish gap, the 61.8% Fibonacci retracement offers a stronger resistance than the 50% Fibonacci resistance. And it took quite a few attempts to overcome this weaker resistance, which is why we expect that overcoming the 61.8% one wouldn’t be piece of cake either. We’ll monitor the tape and money trail thanks to the sizable upside potential in this trade – the next strong resistance zone is at the July and September highs (at around 3050).

Coming to the leveraged ETFs part of your question, please note that it really depends on their underlying assets (i.e. the ETF’s construction). Generally speaking, they are designed to magnify the intraday moves. If I were in your place, I would look at how the instrument performed during the recent upswings and downswings in the S&P 500 – did it roughly match the index move? That will serve as a useful guideline on where it’s sensible to place any kind of limit or market orders. If it hasn’t exactly matched that index move, a recalculation of what to reasonably expect from the instrument should the S&P 500 move to this or that level, is a sensible approach.

Finally, you’re asking about the stop-loss percentage. In the overview of Trade Results at the Performance page of my home site, you’ll see the percentage of account risked on each past trade. That’s a key building block in the money management, because it allows you to risk only as much as you are comfortable with in any trade. At the same time, we manage our open trades according to the prevailing outlook, which means that not every take-profit or stop-loss order has to be hit to take us out of the open position. Capital preservation is the rule number one. The offense wins matches, while the defense wins championships.

Summary

Summing up, S&P 500 challenged the 61.8% Fibonacci retracement yesterday, and today’s premarket trading shows that it won’t be that easily overcome. But the index still remains primed for further gains, and the credit markets keep on providing tailwinds. Powered by positive earnings reports, the tech sector looks far from having topped. While healthcare and financials are likely to consolidate, the stealth bull market trio (energy, materials and industrials) continues to perform. And so do consumer discretionaries. As the bulls’ resolve get tested and stocks digest recent gains, the balance of risks still remains skewed to the upside and our long position justified.

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Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, 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, Przemyslaw Radomski, 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. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA 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. Przemyslaw Radomski, 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 Lockdown, The Fallout and the RoadMap to Recovery

Global Lockdown

In an abrupt and unprecedented manner, the world witnessed a mass halt to global activities due to the pandemic. Governments and central banks rushed in to intervene and support the global economy with unconventional measures to cushion the impact of the coronavirus on their economies and ease market strains.

As the virus spread quickly across the globe, the world forcing employers and employees to work remotely and rethink how to operate in a new ‘virtual reality’. Similarly, investors are faced with a new normal and are at an inflection point where there is a pressing need to reshape their investing strategies.

Oil Crash

The oil price war is over for now and the OPEC+ group has also agreed to a historic production cut in early April; though . Aa little too late considering how the situation unfolded during the month. Oil demand took the biggest hit seen in years at a time where production was reaching new highs.

The world is running out of spare room to store the fast-expanding glut that the pandemic has created. The damage initially caused by the price war was irreversible during such pandemic. The lack of storage capacity triggered a big plunge in crude oil prices.

Crude oil futures markets were in chaos, triggered by the inability of investors or traders to take on physical deliveries of oil barrels. The storage problem is so dire that investors or traders holding oil contracts are willing to sell their contracts at a loss, causing crude oil futures to turn negative for the first time in history.

A situation of more sellers than buyers.

On April 2020, WTI futures for May delivery traded at around negative 37 for the first time ever, reflecting the urgency of sellers to offload their contracts to avoid taking physical deliveries given the pandemic-induced circumstances.

Source: Bloomberg

What to expect in the coming months?

There is no quick fix for rebalancing the oil market. In such volatile markets, it is hard to predict what will happen with the June contract as the storage capacity will remain a primary source of concern.

Oil future prices took another blow when one of the largest oil funds, the United States Oil (USO), filed an SEC filing and revised its investment in oil future contracts to concentrate on contracts that are further out in the future.

Crude oil prices have remained under heavy selling pressure throughout the month. The near-term outlook for the oil market remains grim but investors are hopeful some recovery will take place when:

  • Production cuts will slow down the speed at which storage tanks are being filled; and
  • Major economies will ease lockdowns and activities will gradually pick up.

In the last few days, WTI for June delivery lost more than 15% and is trading at $14.26 a barrel while Brent recovered from earlier losses for June settlement and is trading at $21.42 a barrel.

GDP Contraction

The International Monetary Fund (IMF) has predicted in its 2020 World Economic Outlook that the economic impact of the COVID-19 pandemic might result in the “worst recession since the Great Depression”. The IMF expects the world economy to contract by 3% in 2020 due to the magnitude and speed of the collapse in activity following the various forms of lockdown seen across the globe.

Attention was on the GDP figures of the world’s two largest economies!

Earlier this month, China reported a deep contraction of 6.8% in GDP in the first quarter. It was not surprising given that China exercised strict lockdown measures and put a halt to activities throughout most of the quarter.

China has slowly resumed activities since the beginning of the month as the worst of the pandemic appears to be over. Manufacturing and trade data has been more upbeat which has risen expectations of a gradual return to normal if China avoids another wave of the virus.

Investors will be ending the month with the US GDP report that will show the first wave of the impact of the pandemic. After more than a decade of expansion, the US economy was expected to contract by 4% with a steeper contraction in the second quarter.

As of writing, the preliminary figures show a worse-than-expected contraction of 4.8%, which is the first sharpest decline since the Great Recession.

The figures echoed the IMF warnings!

Earnings Season

Earnings results were widely expected to highlight the pain inflicted by the coronavirus-induced crisis. Even though investors were expecting a tough earnings season with withdrawn forecasts, confusion and uncertainties about the 2020 outlook, the quarterly results are also meant to reveal how certain industries are affected by the virus and how those insulated from the virus are managing the pandemic.

Everything about the pandemic is unpredictable and therefore, companies in every sector are facing the challenges to communicate their guidance. Companies within certain sectors will perform worse than others.

Financials

The earnings season kickstarted with major US banks. As widely expected, banks like JP Morgan, Wells Fargo, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley all reported a significant drop in profits. Overall, the banks made significant provisions for credit losses and saw major declines in asset management revenues.

Banks like Goldman Sachs and Morgan Stanley have flared better and their share price is currently up by 15% or more.

Communication Services

Our attention move to the big tech giants like Alphabet, Facebook and Netflix which have been reclassified to the communications sector in the last few years.

Netflix was among the first few to report its quarterly results. The company reported a $5.8B in revenue with a year-on-year growth of 27.6%. The number of subscribers came above estimates and more than double its target with 15.77 million paid subscribers. The substantial growth came in March when the lockdown and social distancing measures forced many more households to join the TV and movie-streaming service.

However, the company warned that revenue and growth might decline mostly due to probable lift of the confinement measures, a stronger US dollar that is impacting international revenue growth and the lack of high-quality content following the pause in production. Its share price reached a high of around $440, but as of writing, it is currently trading at $411.

Alphabet, Google’s parent company, issued its quarterly results after the bell on Tuesday. The company reported an increase of 13% in revenue for Q1 2020, compared to a 17% increase for the same quarter a year ago and earnings of $9.87 per share. Based on expectations, it was a miss on earnings. However, the company has performed well given the challenges and is cautiously optimistic tones for the second quarter. Alphabet’s share price rose by almost 9% on Wednesday.

Facebook – The social networking giant reported earnings of $4.9B or $17.10 per share for Q1 2020 compared to earnings of $2.43B or $0.85 per share in Q1 2019. The company doubled its earnings. Similarly to its peers, Facebook warned of the unprecedented uncertainty and withdrew its revenue guidance for the rest of the year. Its share price jumped by 6% to trade at $194.20.

Both Google and Facebook have seen a significant reduction in demand for advertising, but the companies still managed to stay massively profitable and adapt in a coronavirus-fueled environment.

Tech Sector

Microsoft released strong results in the third quarter of its fiscal year 2020. Overall, COVID-19 has had a minimal net impact on total revenue. As people around the world shifted to work and learn from home, there was a significant increased in demand for Microsft’s Cloud business to support remote works and learning scenarios. Compared to the corresponding period of last fiscal year:

  • Revenue was $35.0 billion and increased 15%
  • Operating income was $13.0 billion and increased 25%
  • Net income was $10.8 billion and increased 22%
  • Diluted earnings per share were $1.40 and increased 23%

Microsoft did not only top revised COVID-19 estimates but also the earnings that were expected back in January before the coronavirus crisis.

All eyes will be on Apple Inc. which will report earnings on Thursday, April 30, 2020 after market close. Apple’s conference call to discuss second-quarter results will be held on the same say at 2:00 p.m. PT / 5:00 p.m. ET.

Consumer Discretionary

Unlike the consumer staples sector which includes companies that produce or sell essential products, consumer discretionary stocks are mostly companies that do not manufacture or sell essentials. The various forms of lockdowns have left many people without employment. For example, the US economy lost around 20 million jobs over the last few months. It took the US like a decade to add those jobs in the economy.

Amazon.com Inc has always stood out from the lot because of its status as a leading e-commerce retailer. Investors will closely watch its earnings reports for guidance. The company Amazon.com, Inc. will hold a conference call to discuss its first quarter 2020 financial results on April 30, 2020 at 2:30 p.m. PT/5:30 p.m. ET.

Stock Market

Worldwide sharp contractions in the manufacturing sectors, warnings of economic contraction and fears of a recession in the month of April have created panic and volatility in the financial markets.

A look at the All-Country World Index shows that global equities are poised for their biggest monthly gain since the Great Recession. The biggest driver is the unprecedented and unconventional actions by central banks combined with massive fiscal stimulus.

Global equities are surging even though economic data is painting a different picture.

Towards the end of the month, some positive developments on the novel coronavirus cases and the possibilities of earlier opening plans of certain major economies has driven markets higher. Mega-cap stocks like Microsoft, Amazon, Facebook and Google have also contributed to lifting sentiment and drove the rally while smaller-cap companies are bearing the brunt of the pandemic.

The Reopening Plans

There is still hope for the economy despite the tough circumstances. V-shaped or U-Shaped Recovery? New infections have slowed down but there is still no vaccine and economies are at risk of a new wave of infection.

A vaccine could have increased expectations of a swift recovery like a V-shaped immediate recovery in the third quarter or a U-shaped recovery with stability more towards the second half of the year.

However, at the moment, governments are easing lockdown restrictions and investors will be back to a New Normal to replace the current “normal”. The economy is trapped in an unusual type of recession created by the novel coronavirus.

The roadmap to recovery will be progressive and dependent on the governments approaches towards easing lockdowns. It will be different across the globe depending on how governments feel about the situation and the risk of a second wave of the virus.

The path to recovery will be a learning process given the unknown territory!

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

Deepta Bolaky, Market Analyst at GO Markets.

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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.


Disclaimer: Articles and videos from GO Markets analysts are based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.  Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice

Was That an S&P 500 Reversal? Most Probably Not

Despite opening with another bullish gap, the buyers just could push stocks higher yesterday. But the futures have rebounded in the overnight trading, so can the S&P 500 upswing continue now?

Let’s check yesterday’s developments on the daily chart (charts courtesy of http://stockcharts.com ).

S&P 500 in the Short-Run

Yesterday’s red candle shows the reversal of fortunes. The key question is whether it’s a short-term, one-day phenomenon, or whether it marks a local top.

Volume would slightly lean in favor of the bears, but the daily indicators haven’t suffered much with yesterday’s downswing. Preceding price action supports upswing continuation – after all, we have made neither a lower high, nor a lower low.

As a result, the benefit of short-term doubt still goes to the bulls. With prices back above the 50% Fibonacci retracement, it’s up to them to show us they can make it to the 61.8% Fibonacci retracement next, and close the early March bearish gap in the process.

Let’s dive into the reasons why we think the upswing has a pretty good chance of continuing.

The Credit Markets’ Point of View

Credit markets are a key ingredient in stock analysis. Does the riskier corner (well, considering the breadth of the Fed intervention, what is actually the riskiest one now?) of the debt instruments support stocks going higher?

Just as high yield corporate bonds (HYG ETF) themselves, their ratio to short-term Treasuries (SHY ETF) kept more than steady yesterday. That’s an encouraging sign pointing to the stock market recovery being not too far behind. In other words, yesterday’s setback is likely a short-term phenomenon only.

How did yesterday’s S&P 500 decline reflect upon its key sectors?

Key S&P 500 Sectors in Focus

There’s no denying that technology reversed yesterday, led by the heavyweights. As Alphabet (GOOG) was about to release its earnings after the market close, the uncertainties-driven downswing is understandable. But the disappointment wasn’t really there to the degree feared. Yes, ad sales slowed down but revenue climbed 13% as the net income has scored merely a 1.5% gain. This illustrates that the ad market downturn is starting to cut into profitability.

The upcoming quarter will be hard on advertising. Being as diversified as Alphabet is though, the company will weather the storm. Its shares liked the earnings conference call message, and reacted with an upswing in aftermarket trading.

This bodes well for the other tech behemoths such as Amazon (AMZN), Microsoft (MSFT), Apple (AAPL) or even Intel (INTC) as they report. And as a result, for the tech sector as such.

Healthcare was the other sector leading yesterday’s S&P 500 downswing. It also happened on sizable volume, and the extended daily indicators have taken a hit. Considering the sharpness and momentum of the recovery from the Mar 23 lows, it wouldn’t be unimaginable to see the sector taking a breather and consolidate over the coming sessions.

Which sectors would then help drive the index upswing? Despite the lackluster oil performance, energy (XLE ETF) and materials (XLB ETF) with industrials (XLI ETF) not lagging behind, are the places to look at. And among the S&P 500 sectoral heavy-weights, financials (XLF ETF) are doing quite well too.

Let’s quote our yesterday’s observations:

(…) Our Friday’s takeaway was that financials don’t appear to be willing to decline much further these days and that the odds favor their next move to be up. And in line with anticipation and the signals from the credit markets, they’ve indeed turned steeply higher yesterday. This development bodes well for the risk-on assets and further index gains.

Even accounting for yesterday’s downswing, they still closed the day higher than on Monday. Coupled with the discussed resilience in credit markets, this bodes well for the upcoming strong showing of the sector.

Please note the low volume of yesterday’s session – it doesn’t point in the direction of us having seen a reversal yesterday. The daily indicators haven’t suffered much either, and looking at the premarket S&P 500 upswing (futures are trading back around 2885 currently), it’s more than likely that financials will finish up today.

The Fundamental S&P 500 Outlook

Later today, the Fed will announce its new monetary policy decisions, and of course hold a press conference. These were our yesterday’s thoughts:

(…) Do the markets expect a new move out of this meeting? Yesterday, Bank of Japan took some more action, whetting the appetite around the world. But will the Fed deliver in a meaningful way? Probably not, as we look rather to the wait-and-see attitude to win overall at this meeting with perhaps a few bones thrown here and there.

Should the Fed meeting outcome be largely along these lines, stocks may waver thereafter. But the tape tells us that the expectations are for the Fed to have the bulls’ back.

These points remain valid. We’ll monitor the unfolding news and market reactions in real-time, and issue an intraday Stock Trading Alert to discuss the breaking developments and our moves.

Summary

Summing up, even accounting for yesterday’s downswing, S&P 500 trades solidly above the 50% Fibonacci retracement, and remains primed for further gains. Among the key sectors, technology and healthcare were hardest hit, while financials held up fine and the stealth bull market trio (energy, materials and industrials) continued to perform. The key ratios (financials to utilities, and especially discretionaries to staples) haven’t really suffered a profound setback yesterday either. More than a cursory examination of yesterday’s Alphabet earnings report also supports the case for the tech sector moving higher later today. The balance of risks remains skewed to the upside and our profitable long position remains justified.

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Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, 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, Przemyslaw Radomski, 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. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA 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. Przemyslaw Radomski, 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.

 

Yes, the S&P 500 Is Climbing a Wall of Worry Right Now

Stocks entered last week on a weak note, but smartly dusted themselves off after Tuesday’s slide. As the week ended close to unchanged in the S&P 500 futures, what clues does the detailed assessment of their performance and the fundamental situation offer?

Let’s start with the index itself, and check the weekly and daily perspectives (charts courtesy of http://stockcharts.com ).

S&P 500 in the Medium- and Short-Run

The week started with a bearish gap and onslaught of the bears. Since Wednesday though, stocks have erased the sizable decline and closed little changed from where they opened.

While the weekly indicators are on their buy signals, the volume isn’t really sending strong signals either way. Viewed from the weekly perspective, the rally could be either consolidating prior gains before another upleg, or stalling before turning lower.

Let’s check the daily chart to see whether the weekly lower knot is a sign of strength of the bulls or their last gasp attempt to stem the coming decline.

The daily perspective helps refine the broad picture and to choose between the two options above. After Thursday’s hesitation at the 50% Fibonacci retracement, stocks retested it, jumped higher and haven’t looked back since. It’s encouraging for the bulls to see a strong finish to Friday’s session that also took prices above the 50-day moving average.

Volume is leaning slightly in support of the bullish case, and the daily indicators are trying hard to shake off their prior bearish overtones. Still in a precarious position though, such posture can support both the upswing continuation or its consolidation.

Only a decisive downswing below the 50% Fibonacci retracement on high volume coupled with prospects of further declines, would change the bullish-to-neutral takeaway. Currently, we see none of that – instead, there’s still potential for the rally to go on.

As the S&P 500 struggled at the 50% Fibonacci retracement, we asked on Friday whether stocks have rolled over and:

(…) kept moving down when faced with grim incoming economic and coronavirus news? No, it rather appears to be shaking them off. Stocks are actually quite resilient, just as they were in early April with all the 12-month plus lockdown speculations making the rounds and no economy reopening hopes in sight.

Perhaps this means that the market now actually wants to go higher. Does that mean we have a bull market? While it’s encouraging that the market doesn’t really sell off on bad news, the present upswing (stabilization at higher levels) may still turn out to be a bullish leg up within a trading range that spans over weeks and potentially months.

The Credit Markets’ Point of View

Let’s check now the high yield corporate bonds to short-term Treasuries ratio.

The stock upswing isn’t confirmed as the ratio is lagging behind. But is the non-confirmation as dire as it might appear at this chart?

Let’s overlay the above ratio with the S&P 500 and take a look at the recent past.

In early April, the ratio had also been on a downswing, and on Apr 3 (also Friday, by the way), it hit a new low while stocks didn’t. Should the recent history repeat itself, we could be looking at credit markets again leading stocks higher.

Next, let’s take a look at the individual performance of high yield corporate bonds (HYG ETF) and short-dated Treasuries (SHY ETF).

Junk corporate bonds closed almost unchanged – they’re not leading down. It rather appears they’re taking a breather before the next move. There’s a very good chance it’ll be up.

The fact that short-term Treasuries are overall moving lower in recent days (and not rising sharply as investors seek shelter), tips the scales in favor of an upswing in riskier assets such as corporate bonds or stocks.

The ratio of investment grade corporate bonds to longer-dated Treasuries also speaks in favor of the upswing to continue. Unlike the ratio of junk corporate bonds to short-term Treasuries, it has made a higher low on Friday, and appears ready to break out higher from its bullish flag formation. Seeing it lead in the upswing, is another point in support of higher stock prices.

The ratio of stocks to Treasuries went higher, supporting the notion that risk-on is far from down and out. Should the ratio overcome the April highs, it would bode well for higher stock prices ahead.

Let’s dive into the S&P 500 sectors to assess the health of the most recent turnaround.

Key S&P 500 Sectors and Ratios in Focus

Technology is the sector that leads the index both up and down. While the lower volume warrants caution, technology is leading higher, and it can be seen also within its heavy-weight stocks such as Amazon (AMZN), Microsoft (MSFT), Alphabet (GOOG), Apple (AAPL) or even Intel (INTC). On Tuesday, Alphabet‘s earnings report is scheduled, Microsfoft is slated for Wednesday, and both Apple and Amazon on Thursday.

As technology goes, the S&P 500 goes. And the balance of risks within the sector points higher.

Healthcare is the other engine of the S&P 500 upswing. Again, the bullish price action is marked by the very low volume of Friday’s upswing and the extended daily indicators. Just as with technology, continuation of the move higher or consolidation of recent gains, are the most likely scenarios.

Financials don’t appear to be willing to decline much further these days. On low volume, they have even turned slighly higher in their tight trading range. In our opinion, they’re basing here just as high yield corporate bonds are. Odds are that their next move will be higher.

Given the turmoil in black gold, energy is a bright spot, and an example of a sector that leads the index higher as it closed the week in the black.

Materials also finished the week with a positive result. And just as with energy, the volume differential between their Friday upswing and the average daily volume in the week, wasn’t as stark as with the three heavy-weight sectors. Therefore, chances are that technology, healthcare and financials will play catch up over the coming days.

These were our Friday’s observations regarding the financials to utilities ratio:

(…) Despite yesterday’s S&P 500 decline, financials (XLF ETF) outperformed utilities (XLU ETF). This sends a subtly bullish message as it appears that the ratio isn’t really ready to move much lower.

Indeed, financials outperformed, and rejected the intraday move lower. As the financials are farthest away from what we could call an uptrend, this ratio is understandably still weak overall. Seeing it break above the declining resistance line formed by the March and April tops, will be a bullish development. If it breaks below the April lows, it would be a bearish omen. Until it break out in either direction, its implications are rather neutral, and paying attention to financials provides more clues.

The dicretionaries to staples ratio provides more colorful insights. As well, it refused to roll over to the downside, and is slowly but surely marching higher in a gentle nod to the S&P 500 upswing.

The Fundamental S&P 500 Outlook

If we have seen a V-shaped recovery somewhere, it was in the stock market. The hopes and expectations of the economy reopening fuel the run, but will the real economy rebound as the V letter implies? We’re of the opinion that just as different states and major cities reopen to varying degrees at different points in time, so will the whole economy move. Currently, a U-shaped recovery is the most probable scenario in our opinion. We don’t exclude a W-shaped recovery either, though in that case, the right bottom would likely form above the left bottom of the letter W.

However, this means that stocks are trading at stretched valuations currently, and their reaction to the upcoming key technology companies’ earnings, is of key importance. Judging by how the S&P 500 took to this week’s reports batch, the takeaway is encouraging. Sure, the unemployment data are dismal, Great Depression-like – and we see it cascading well beyond the usual corona-impacted suspects such as airlines, tourism and the like. The brick-and-mortal retail was on the ropes even before the pandemic played into the Amazon hands. Yes, big business is downsizing and many small businesses won’t reopen.

As the economic destruction is unprecedented, central banks don’t stand idle. And they won’t in the future either. Joined by fiscal policy moves, how long will it take for another stimulus package to hit the waves? It must be in the works already.

Let’s keep in mind that we’re trading the stock market, and not the real economy. We have to watch the S&P 500 price action and money flows. Once the sharp sell-off ended in late March, it’s not out of the unexpected to see a reflexive rally up to the 50% Fibonacci retracement. Even dead cats bounce.

But we’ve seen quite a few rejections of prices returning back lower. The upswing certainly hasn’t been reversed to the downside, and while the breakout above this retracement hasn’t been confirmed by three consecutive closes yet, there are encouraging signs that it would continue upwards.

Will people take profits as prices approach the nearest strong resistances such as the 61.8% Fibonacci retracement or the early March bearish gap? The best we can do is to look at the money trail not merely on a day-to-day basis – should it deteriorate (coupled with warning signs from the S&P 500 sectoral analysis), it would be the best signal available to get out of our increasingly profitable long positions.

No one has a crystal ball and can say with 100% certainty that this or that, major or minor, resistance will hold. It’s in the context and overall interpretation of all the above-discussed signals that the market sends. Plus the fundamental developments and headlines. The rally can both go higher, and still roll over to the downside in the coming weeks or months in a challenge of the 2200 lows. By the same token, the lows might be already in. The point is we have to trade the situation in the now, because there are so many moving parts to discount in the price. That’s for the present – and don’t forget about the unknown unknowns that will strike down the road either.

The current outlook is bullish but we have to stay nimble and continually ask ourselves whether our long position keeps making sense. Right now, it does.

From the Readers’ Mailbag

Q1: Do you see this bull run breaking down at 2880 or the 2930 .618 Fib? Last couple of days felt very weak especially on volume.
Q2: Do you still hold a downside target of 2200? I’m concerned with how far VIX fell today. Do you foresee it breaking above 2840 and 2880?

A: Please see the above three paragraphs for your answers.

Q: What do u think about S&P 500 pe ratio topping February’s peak?

A: Sure, as earnings go down, the valuations are getting stretched. Yet the market looks over the valley and discounts the upcoming quarterly earnings, which means that the P/E ratio can still get ridiculously high if you consider real economy developments. But we’ve seen this in the Great Recession as well. Paying too much attention to the P/E ratio is best left to long-term investors. In the current environment, one has be flexible and ready to act on the many above-described technical indicators. We’re not in a buy-and-hold environment.

Summary

Summing up, S&P 500 closed the week back above the 50% Fibonacci retracement. While Friday’s upswing happened on lower volume (making it less credible), the key sectors and their ratios (financials to utilities, and especially discretionaries to staples) favor the upswing attempt to continue. Credit markets seem to be making a local bottom, and financials may be already acting on that. The ease with which bad news (economic or corona-related) are ignored, gives the bulls the benefit of (perhaps even more than) a short-term doubt. Stocks appear to be ready to move higher and our Thursday-initiated long position remains justified. Today’s premarket upswing points to a bullish gap at the open, lending further support to the bulls.

We encourage you to sign up for our daily newsletter – it’s 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 our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

Monica Kingsley

Stock Trading Strategist

Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, 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, Przemyslaw Radomski, 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. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA 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. Przemyslaw Radomski, 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 Great Markets Debates

This is likely reflecting the fact that S&P500 and Nasdaq 100 futures are up 0.8% and 1.1% respectively. Asian markets are responding in kind.

Spot gold is down smalls, although gold futures are modestly higher, but the daily chart of spot gold looks bullish and we are watching for the upside closing break of 1738 for a future move into 1800.

Two important market debates

The two big debates that have been most prevalent through the weekend, or at least that I found most interesting, remain the disconnect between the real economy and asset values. And, where to for the USD. There has also been increased focus on the moral hazard argument, where at a simplistic level the Fed incentivised business to over-lever their balance sheet, and now the Fed is bailing them out or supporting them indirectly. We can also look at the number of countries that are opening their economies, gradually, and the market is eyeing the risk of a second wave, which is another factor that makes it hard to chase risk.

Italy has announced they will start to ease lockdown restrictions on 4 May, joining Spain who will ease movement restrictions on 2 May. France will detail a plan to the world tomorrow to end lockdown next month, while Belgium is due to open shops on 1 May. In the US, a number of states are easing restrictions, and we hope this is the start of more normal times ahead, although the post-virus world throws up many challenges and one focal-point that immediately springs to mind is the blame game and the US (and the world’s) ongoing relationship with China.

The disconnect between economics and asset values will be the focal point this week though.

The data and event risk rolls in and I know investors have written off 2020 as a shocker and are looking more intently into the landscape in 2021, but this argument will be seen case in point this week. On the micro-side of considerations, this week we get to hear from some big-name corporations – Amazon, Tesla, Microsoft, Apple, Boeing, FB, Alphabet, McDonald’s, and Exxon, to name but a few. Earnings expectations have come down and FY20 and FY21 consensus stand at $131 and $165, respectively, but it still means we are going into this week with investors paying 21.6x for 2020 earnings – the highest since December 2001. But they are also paying 17.1x 2021 which is still lofty given the challenges ahead.

At this juncture though, in the battle of liquidity vs earnings, liquidity is winning but these are some big names dropping this week, representing a catalyst for index traders. The NAS100 is the strongest market if looking for a vehicle to express a risk-on bias this week (in index land). However, I think the set-up on the US500 needs attention. On the upside we have downtrend resistance, the 6 March gap and 61.8% fibo to clear and a break here needs to be respected, especially when we’re hearing that the systematic funds will be ramping up outright longs on a break of 3007.

However, on the downside we see price has broken the wedge and the head and shoulder neckline kicks in around 2726. A break here will see buying in the USD, JPY and US Treasuries. I am watching inflation expectations (breakevens) extremely closely, as where they go will underpin where equities and gold go.

On the data docket this week we get:

BoJ meeting – we saw the BoJ meeting and as expected they removed the cap and reverted to unlimited JGB buying. There has been limited reaction in the JPY. I continue to like the JPN225 on a break of 19,886 and will wait for price to compel and the structure to suggest the index is ready to trend.

USDJPY is interesting because it is just so dull – there is literally no range and it feels like it will break hard soon. At this juncture, the market feels this is fair value, but I am watching for a change here.

US – Q1 GDP (consensus at -3.9%), jobless claims (3.5m), FOMC meeting, ISM manufacturing (36.1). I would expect no reaction to Q1 GDP, as Q1 is but a relic in time and we are looking at Q2 and beyond. The FOMC meeting is the main game in town this week and after two emergency meetings, we look at the first scheduled meeting that could move markets.

We should see the Fed tweak the interest it pays banks on excess reserves by 5bp, although, the market is going some way to discounting that and it shouldn’t cause much of a move in the USD. We should also hear more about the targeted level of US Treasury and mortgage buying, with the monthly run-rate closer to $150b, but they will retain an element of flexibility towards this.

As mentioned, the debate as to where the USD is headed is key, and I will put out a note tomorrow on this as it is important. For now, the DXY (or USDX) tracks the regression channel and is not going lower despite USD funding costs (blue – 3m FRA-OIS, yellow – EUR cross-currency basis swaps) falling heavily as a result of the Fed’s swap lines, massive balance sheet expansion and excess liquidity.

Next week we get NFPs and consensus currently sits at 20m jobs lost, with the unemployment rate at 15.1%.

Eurozone – The ECB meeting is the highlight, especially given the recent widening of interbank credit metrics, notably the Euribor-OIS spread (see below), which has pushed into 30bp. The ECB will need to do more and granted the PEPP program (Pandemic Emergency Purchase Program) has been seen as a solid step forward from the bank, this program is going to need to be increased from its current E750B size – although, whether it plays out at this meeting is unlikely. We should see some tweaks to what can be offered as collateral to access PEPP funds, and similar to the Fed the ECB may accept bonds that were downgraded to junk since the start of COVID-19 the so-called ‘fallen angels’.

Whether this Thursday’s ECB meeting (21:45aest) proves to be a vol event is yet to be seen, and we see EURUSD 1-week implied volatility at 9.17%, which implies a move (higher or lower) on the week of 116p.

\

I am looking at the EURAUD short idea and watching price action very closely. I do not see the ECB meeting being a huge vol event, but I am loath to hold EUR exposures over this meeting.

China – Manufacturing PMI (30 April- 11am) – consensus at 51.0 (from 52.0). I am sceptical this will be a vol event but may get some headlines.

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Stock Market: The Earnings of Microsoft, Amazon And More

Ford Motor

EPS forecast: $0.26

Revenue forecast: $36.73B

Ford has been going through a hard time during the past few years as the demand for its cars, particularly sedans, fell. Now one of America’s largest automakers is undertaking an $11 billion restructuring plan which implies layoffs, closing factories overseas, and building capacity to manufacture electric and driverless cars. As a result, investors will want to see what progress the company made in these areas.

The stock has been within the general downtrend since 2014. In the first half of 2019, the price tried to recover but met resistance around $10.50, formed a double top and turned lower. In October, Ford managed to show a bullish correction recovering from $8.45 to the 200-day MA at $9.30. Last week the stock closed above the 50-week MA ($9.214). All in all, if the financial results are decent enough, there’s technical potential for an extension to $9.64 (September high) and $10.00 (resistance line, 200-week MA). This area, in turn, will be a great obstacle for buyers. Support lies at $8.70 and $8.45.

Ford.png

Microsoft

EPS forecast: $1.24

Revenue forecast: $32.14B

According to analysts’ forecasts, Microsoft’s earnings will rise by 9%, while revenue will increase by 10.5% y/y. Noticed that during previous quarters, the company tended to beat expectations. Microsoft has a variety of products that generate solid income. Pay special attention to the dynamics of Azure, its cloud computing service – the figures should once again be pretty impressive as the tech giant added new capabilities to its product.

The stock has been trading sideways between $142 and $131 since the end of June. The price consolidated after a long-term uptrend. Currently, it’s in the $137 area, near the middle of the horizontal range. Its edges, mentioned earlier, are the initial targets.

Microsoft.png

Tesla

EPS forecast: $-0.45

Revenue forecast: $6.47B

Tesla is expected to show the third unprofitable quarter in a row despite selling a record number of cars. At this point, bad figures will be a surprise to no one, so investors, on the contrary, will look for glimpses of light: a forecast for future profit, a positive free cash flow, evidence that demand remains solid. If the electric vehicle maker doesn’t provide these sources of hope, the negative pressure on the stock will mount.

After the selloff in the first half of the year, Tesla bottomed in June and then managed to stabilize. Most recently, the price met the resistance of the July high ($266). On the upside, there are also obstacles at $268 and $273.6 (50- and 200-period MAs) ahead of $278 (50% Fibo retracement of the 2018-2019 decline). Support lies at $235 and $231 (daily MAs) as well as $225 (support line).

Tesla.png

eBay

EPS forecast: $0.64

Revenue forecast: $2.65B

Analysts have positive expectations about eBay’s financial results. The company’s putting a lot of effort into the technological enhancement of its core e-commerce business. On the downside, the increased investment may hurt earnings. In addition, notice that the competition with Amazon and Wal-Mart is a big challenge for eBay. Investors will also look for the news regarding the potential sale of StubHub or eBay Classifieds, a contentious issue for the company that provoked the departure of its CEO last month.

The stock has been on the rise since the end of 2018. However, at the end of September, the price slipped below $39 – this level tends to be an important border for eBay during the whole year. A return above $39.50 (100- and 50-day MAs) is needed to open the way up to $41 and 42.50 (78.6% Fibo retracement of the 2018 decline). Support is at 37.65 (200-day MA), $36.50 and $35.50.

ebay.png

Thursday, October 24

Amazon.com

EPS forecast: $4.59

Revenue forecast: $68.82B

According to Wall Street, Amazon’s adjusted earnings will decline by about 20% y/y showing the first decline in nine quarters. The company’s revenue, however, is seen increasing by 22%. During the last few months, Amazon was pressured by lower-than-expected earnings, volatile equity markets, political criticism, and antitrust allegations. In this report, investors will look at the numbers for Amazon Web Services (the company’s cloud segment), the signs that the Prime delivery speed increase is boosting sales growth in North America as well as Amazon’s guidance for the next quarter.

Although Amazon remains one of the best long-term performers among both tech and consumer goods stocks, it is behind other the other so-called FAANG stocks during the past year. In August, the stock violated the uptrend from the end of 2018. The price then started trading below $1,835/50, limited by the 100- and the 50-day MAs. The most recent attempt of the price to get higher ran into an obstacle just below $1,800, near the 200-day MA. All the mentioned levels will act as resistance. Below $1,740 support is at $1,700 and $1,670 (June low).

Amazon daily.png

Intel

EPS forecast: $1.23

Revenue forecast: $18.02B

During the previous quarter, Intel benefited from rising demand for personal computers and sales of higher-priced server chips. Investors will want to see whether the positive trend continues and what the semiconductor producer projects for the rest of the year. So far, the stock has been resilient enough despite the trade war between the United States and China, an important market for the chipmaker, although the threat of higher tariffs has obviously limited its upside.

The stock of Intel is trading within an ascending triangle. The resistance that has been keeping the price from getting higher lies at $53.20 (61.8% Fibo retracement of the April-May decline). The break above this obstacle will open the way up to $55 and $56 (78.6% Fibo). Support lies at $50 (200-day MA, support line) and $49.20/00. The loss of 48.50 will make the price vulnerable for a decline to $46.75.

Intel.png

Visa

EPS forecast: $1.43

Revenue forecast: $6.08B

For years, Visa’s stock has been slowly but surely appreciating – a reflection of the fact that digital payment is replacing cash. This tendency has all the chances to continue pushing the price higher, although there may be corrections on the way. This time, Wall Street sees Visa earnings rising by 18% y/y and revenue grows at 12%. Notice that Visa has a tendency to beat forecasts during the earnings releases.

Visa’s long-term uptrend ran in September into the resistance at $187.00. Since then, the price has consolidated around $175.00. The further resistance is at $190 and $200. On the downside, support lies at $169.00 and $163.80 (200-day MA). The fall below $160 will question the uptrend.

Visa.png

S&P 500 at Cliff’s Edge Again

The U.S. stock market indexes lost 2.4-3.0% on Friday, as investors reacted to the negative U.S. – China trade war news. The S&P 500 index retraced almost all of its recent advance and it got back to its short-term local lows. The broad stock market’s gauge is now 6.0% below July the 26th record high of 3,027.98. The Dow Jones Industrial Average lost 2.4% and the Nasdaq Composite lost 3.0% on Friday.

The nearest important resistance level of the S&P 500 index is now at 2,850-2,870, marked by the recent support level. On the other hand, the support level is at 2,820-2,825, marked by the previous lows.

The broad stock market broke below its two-month-long upward trend line in early August, and then it quickly retraced most of the June-July advance. The S&P 500 index is close to the local lows right now. It still looks like a consolidation following the January-February advance. However, it could also play out as a long-term topping pattern ahead of a more meaningful downward correction:

Positive Expectations, Just Upward Correction?

The index futures contracts trade 0.5-0.7% higher vs. their Friday’s closing prices. So expectations before the opening of today’s trading session are positive. The European stock market indexes have gained 0.4-0.6% so far. Investors will wait for the Durable Goods Orders number release at 8:30 a.m. There will also be a speech from the FOMC Member Bullard at 10:00 a.m.

The S&P 500 futures contract trades within an intraday consolidation following overnight advance. The market extended its short-term downtrend, before retracing some of its Friday’s sell-off. The nearest important resistance level is at 2,880-2,900. On the other hand, the support level is at 2,840-2,850. The futures contract got back closer to the 2,900 mark this morning, as the 15-minute chart shows:

Nasdaq 100 Also Bouncing

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation after bouncing off a new short-term low. It bounced off a support level of 7,350-7,400 again. And the nearest important resistance level is now at around 7,600-7,650. The Nasdaq futures contract remains below its last week’s short-term consolidation, as we can see on the 15-minute chart:

Tech Stocks’ Sell-off

Let’s take a look at the Apple, Inc. stock (AAPL) daily chart. The stock sharply reversed its recent upward course on Friday, as it fell closer to the $200 price again. The market may extend its volatile fluctuations following the early August breakdown below its two-month-long upward trend line:

Chart courtesy of http://stockcharts.com

Now let’s take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock retraced most of its recent advance on Friday, as it fell to a support level of $130-135 again. It still looks like a consolidation within a medium-term uptrend. However, the price remains below its recently broken trend line:

Dow Jones at 200-day Moving Average Again

The Dow Jones Industrial Average broke below its upward trend line in late July. Then it fell to around 25,500, before bouncing off the 200-day moving average. It kept bouncing off that support level recently. On Friday the Dow fell to its average yet again. If it breaks lower, we could see more selling pressure:

The S&P 500 index broke below the upward trend line in late July, as investors reacted to the Fed’s Rate Decision release, among other factors. We saw technical overbought conditions along with negative technical divergences then. And the market declined following renewed trade war fears. Recently it was rebounding off a support level of around 2,800-2,820. On Friday it reached that support level again. So it is on a brink of either bouncing off a support level again or breaking below it.

Concluding, the S&P 500 index will likely open higher today. The market may retrace some of its Friday’s news-driven sell-off. However, there have been no confirmed short-term positive signals so far.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

 

Are Stocks Turning Lower Again?

The U.S. stock market indexes 0.3-1.0% on Friday, retracing their Thursday’s advance, as investors’ sentiment worsened following economic data releases, trade war fears. The S&P 500 index fell over 200 points from its previous Friday’s record high of 3,027.98 a week ago on Monday. Then it retraced almost 120 points of that sell-off. The Dow Jones Industrial Average lost 0.3% and the Nasdaq Composite lost 1.0% on Friday.

The nearest important resistance level of the S&P 500 index remains at around 2,945-2,950, marked by some previous daily low and daily high. The resistance level is also at 2,980-3,000. On the other hand, the support level is at 2,890-2,900, marked by Thursday’s daily gap up of 2,892.17-2,894.47.

The broad stock market broke below its two-month-long upward trend line recently, and then it quickly retraced most of the June-July advance. The S&P 500 index remains below the previous medium-term local highs. For now, it looks like a consolidation following the January-February advance. However, it could also play out as a long-term topping pattern ahead of a more meaningful downward correction:

Negative Expectations Again

The index futures contracts trade 0.8% below their Friday’s closing prices. So expectations before the opening of today’s trading session are negative. The European stock market indexes have lost 0.2-0.5% so far. There will be no new important economic data releases today.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces its Friday’s intraday advance. The nearest important resistance level remains at 2,925-2,930, marked by the short-term local highs. On the other hand, the support level is at 2,890-2,900. The futures contract trades along the 2,900 mark this morning, as we can see on the 15-minute chart:

Nasdaq 100 Also Lower

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. It is closer to the 7,600 mark again. The nearest important resistance level is now at 7,700. On the other hand, the support level is at 7,550-7,600. The Nasdaq futures contract broke below its week-long upward trend line today, as the 15-minute chart shows:

stockcharts.com

Apple, Microsoft – Short-Term Uncertainty Following Rebound

Let’s take a look at the Apple, Inc. stock (AAPL) daily chart. The stock continued to trade at the resistance level of $210-215 recently. It broke above the early May local high following quarterly earnings release. However, the market reversed downwards off its new medium-term high and then it broke below the upward trend line. On Thursday it got back above $200 price, as it retraced some of the sell-off:

Now let’s take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock reached the new record high of $141.68 in the late July following quarterly earnings release. But recently it retraced most of the advance and it broke below the two-month-long upward trend line. Last Monday it accelerated lower. However, on Thursday and on Friday the price retraced some more of the decline and it got back to the broken trend line:

Dow Jones – New Uptrend or Just Upward Correction?

The Dow Jones Industrial Average broke below its upward trend line recently. So the second half of July consolidation was a topping pattern. Then the market broke below the previous medium-term high and last week it came back below the 26,000 mark. There we saw short-term oversold conditions. And the index bounced off its 200-day moving average:

The S&P 500 index broke below the upward trend line recently, as investors reacted to the Fed’s Rate Decision release, among other factors. We saw technical overbought conditions along with negative technical divergences recently. And the market turned lower. Then it accelerated the downtrend following renewed trade war fears. The market reversed its downtrend on Wednesday and on Thursday it accelerated higher following breaking above the 2,900 mark. However, it still looks like a correction within a downtrend.

Concluding, the S&P 500 index will likely open lower today. The market may continue to fluctuate following its recent sell-off.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care


Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a 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, Paul Rejczak 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. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’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. Paul Rejczak, 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.

Stocks Going Lower After Fed, Were We Right About the Topping Pattern?

Then the index slightly bounced before closing 1.1% lower. So is this a new downtrend or just a quick correction within an uptrend?

The U.S. stock market indexes lost 1.1-1.3% on Wednesday, as investors reacted to the Fed’s interest rate cut decision release. The S&P 500 index broke below the 3,000 mark. It fell almost 70 points of its Friday’s new record high of 3,027.98, before bouncing off the support level and closing more than 20 points above the daily low. The Dow Jones Industrial Average lost 1.2% and the Nasdaq Composite lost 1.3% on Wednesday.

The nearest important resistance level of the S&P 500 index is now at 2,995-3,000, marked by the recent support level. The resistance level is also at 3,020-3,030. On the other hand, the support level is at 2,950-2,960, marked by the early May local high of around 2,954, among others.

The broad stock market broke below its two-month-long upward trend line yesterday, and then it accelerated lower towards the early May local high. Is this a downward reversal or just another correction within an over half-year-long medium-term uptrend? For now, it looks like a downward correction:

New Short-Term Uptrend or Just Retracement?

The index futures contracts trade 0.1-0.4% above their Wednesday’s closing prices, so expectations before the opening of today’s trading session are slightly positive. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements today: Unemployment Claims at 8:30 a.m., ISM Manufacturing PMI, Construction Spending at 10:00 a.m.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its yesterday’s decline. The nearest important resistance level is now at around 3,000, marked by the previous support level. On the other hand, the support level is at 2,970-2,975, among others. The futures contract is within a short-term upward correction this morning, as the 15-minute chart shows:

Nasdaq 100 Slightly Below 7,900

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend this morning. The resistance level is at around 7,900-7,950. On the other hand, the support level is at 7,800-7,850. The Nasdaq futures contract is way below its recent trading range, as we can see on the 15-minute chart:

Apple’s Reversal?

Let’s take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock continued to trade at the resistance level of $210-215 recently. It was the highest since the early May on Monday. But it broke higher following Tuesday’s quarterly earnings release. However, we can see a short-term topping pattern here:

Now let’s take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock reached the new record high of $141.68 on Friday following the recent quarterly earnings release. But yesterday it retraced most of the recent advance and it broke slightly below the two-month-long upward trend line. Is this a new downtrend? For now, it looks like a medium-term consolidation:

Dow Jones Broke Below the Trend Line

The Dow Jones Industrial Average broke below its upward trend line on Wednesday. So the recent consolidation was a topping pattern. However, the market bounced off it’s previous medium-term high yesterday. Is the decline over? There have been no confirmed positive signals so far:

Nikkei Keeps Going Sideways

Let’s take a look at the Japanese Nikkei 225 index. It broke below the over month-long upward trend line recently and then it bounced off the 21,000 mark again. The market extends its half-year-long consolidation:

The S&P 500 index broke below the upward trend line yesterday, as investors reacted to the Fed’s Rate Decision release. We saw technical overbought conditions along with negative technical divergences recently. And the market turned lower. But is this a new downtrend or just another downward correction within a medium-term uptrend? For now, it looks like a downward correction. However, if the index gest back below the early May local high, we could see more selling pressure.

Concluding, the S&P 500 index will likely open slightly higher today. The market may retrace some of its yesterday’s decline. However, it may be hard to reverse the negative effect of the post-Fed decline.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care


Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a 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, Paul Rejczak 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. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’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. Paul Rejczak, 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.

Is Apple About to Fall From Investor’s Grace?

You know what they say, it’s lonely at the top, and once you get there, there is nowhere to go but down.

Of all the Giants of the Internet, Apple is one of the top Giants.

With the ability to earn $1.45K in profits a second, it is earning double per second in profits then it closets rival Amazon, both of which are, or were trillion dollars, $1,000,000,000,000 companies!

That’s a one (1) with 12 zeros after it.

However, as of this writing, Apple’s stock was trading at $168 a share, which is down, anywhere from 20% to a much higher amount, depending on when you compare the previous trading of the stock.

This makes Apple no longer a trillion dollar company.

But ‘don’t cry for me Apple investors’ just yet, the company is worth anywhere from $800 billion to well over $900 billion, depending on the day.

Apple has for quite some time been a good investment for the big picture, so as investors, who know the game, this slight fall from grace may only be just a blip, a glitch in things, and there are a few things we need to keep our eyes if we wish to keep investing, or riding it out with Apple.

Apple has proven itself as a leader in certain technology, beginning with their home PC’s, moving into the land of iPods and Apple Music, and for the past many years, the iconic iPhone.

The iPhone has become the flagship of Apple’s popularity with the general public. The queues waiting for days for the next release and generation, the new styling, changes in technology, smaller, lighter, then larger screen, all these innovative changes not only put the iPhone and Apple over the top but helped keep them there.

Until now. There are a few concerns that investors have regarding Apple and their future.

Competition and Pricing

Apple’s iPhones are not selling as well as they had in the past, period.

Apple’s answer to low sales in the past was to increase the price, sell less, but make the same profit or margin. In the past, a good model to follow, but not if the economy and personal spending drops and goes down.

Raising prices is a business solution that for now is not working, and in part, it is due to the fact iPhones are expensive enough already.  They cost more than other mobile phones, and not many users can afford to replace such an expensive item every year.

Second, Apple may have reached market saturation. They’ve sold billions of these little wonders, maybe the market has had enough.

Stir in a little competition, from Samsung, Microsoft, and even some of the smaller players in the mobile world, and you have a recipe for sluggish sales. And sales of your hottest selling product slowing down, it can make investors a little nervous.

Apple’s Services Business

Apple is not just iPods, iPads, iPhones, and computers, but also a services division, such as Apple Pay, Apple Music, their app store, etc.

Investors want to know, are these service divisions going to pick up the revenue slack that sales of other products may create.

Apple has eluded to other services such as TV, films, banking, and even the health industry. Although the Apple watch may be the start of some of these services, no formal plans have been shared. Apple plays their cards close to their chest, which in the past has created a mystery shrouding them, and created interest and sales.

Investors now want facts and figures to weigh before they click a button sending their money off to brokers and buying shares.

An Analyst at Creative Stategies, a market research firm, Carolina Milanesi stated, “If we know that sales for the iPhones are going to be either flat or down and then there’s nothing else to compensate that, the, of course,e there are reasons for concern but I think it’s too early.”

“In a year’s time, if we don’t see the services business pick up in the way we expect, then I think the concerns could be legitimate.”

So, time will tell.

Trade Tensions

Apple may be one of the largest companies in the world, and even with stock prices down, they can adjust their business models how they see fit. Yet, there is one thing out of their control – trading between countries, trade tensions, tariffs, import and export duties, and politics.

The politics that may affect trades.

While Apple’s Tim Cook may have made light of the proposed trade tariffs, the current President of the US has stated he will impose those tariffs against China. The company now is seeing that these tariffs and trade tensions are affecting their revenues.

And it will affect Apple’s profit. Investors are anxious as 20% of Apple’s revenue comes from the Greater China Region, which includes Hong Kong and Taiwan.

Looking at all these factors, it does put Apple in a grim light.

However, the company is a strong one and is financially viable enough to weather most economic storms.

One area the company may be looking into is their computer products. The Macbooks and MacBook Air have been solid sellers in the computer market. Not much has changed with these over the years, as Apple concentrated on the iPhones and iPads.

A change in the computer division may be a shot in the arm the company needs.

Of course, they could always have something else up their sleeves.

Apple has for quite some time been a good investment for the big picture but the same as any other big company, Apple faces new challenges

Asia Slumps, ECB Stands Pat, US Equities Rebound On Strong Earnings

Asia Falls Hard, Led By Tech

Asian indices fell hard in Thursday trading following a massive rout in the US. The Japanese Nikkei led with a loss of 3.72% and outpaced most other major indices in the region. The Nikkei created a large price gap at the open and fell from there, creating a large red candle and setting a new 9-month low. The is bearish and gaining momentum although price action is now approaching a key support level near 21,000.

The Australian ASX posted the second largest decline during the Asian session with a loss near 2.80%. The ASX was led by tech, but bloodshed was not limited to one sector. The energy, financial, and mining sectors all saw substantial losses with shares of Rio Tinto and BHP falling roughly 3.0%. Chinese indices were not immune to the selloff but fared much better than either the Nikkei or ASX. The Hong Kong Heng Seng led Chinese markets with a loss of -1.0%, the mainland Shang Hai index posted a gain of 0.02%.

The ECB Holds Rates Unchanged

In Europe attention was focused on earnings and the ECB. The ECB held their October policy meeting over the past two days and released their statement this morning. The bank decided to hold rates unchanged which was expected; the bank also maintained its outlook for tightening. The ECB says they are on track, barring unexpected data, to end their bond purchase program in December and to begin policy tightening mid to late 2019.

EU markets were mostly flat and mixed at midday. The UK FTSE was the only index to hug the flatline, trading in a tight range over and under 0.00%, while the DAX and CAC were both able to post gains. The CAC led advancing markets with a gain near 1.0% followed by a distant 0.35% for the DAX. Markets in the region were buoyed by earnings more than anything else. Automakers were strong performers as their results reveal dominance over US car makers like Ford (F) who reported sales decline for the region.

US Futures Point To Rebound, Earnings In Focus

In the US futures trading indicated a strong open. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite were all indicated to post a gain of near 1% led by tech. The NASDAQ was indicated to open with a gain near 1.5% as strong earnings from Microsoft (MSFT), VISA (V), and Tesla (TSLA) all blew past expectations for revenue and earnings growth.

Regarding earnings and earnings season; today is the single busiest day of the season with 66 S&P 500 companies reporting. Reports from Amazon, Google, Intel, Pricesmart, Mattel, and Chipotle Mexican Grill are all due after the bell. Based on reports so far there is a high likelihood this batch will produce better than expected results with a few outlying misses. What will matter to traders is the impact of tariffs and trade war on earnings and how they will affect the outlook for earnings growth over the next five quarters.

Global Equities Struggle For Direction, EUR/USD Slumps To New Low, Boeing Raises Guidance

Asian Markets Mixed Amid Fears Of Slowing Growth

Asian indices closed the Wednesday session mixed following Tuesday’s deep declines. Fear of slowing growth has gripped the market despite word from the PBOC it would work to support economic activity in China. The Korean Kospi led decliners with a loss of 0.40% and was closely followed by the Hong Kong Heng Seng Index. Japan’s Nikkei led advancing indices with a gain of 0.37% followed closely by China’s mainland Shang Hai index. Energy stocks were among the regions biggest losers as oil prices move to a new two-month low.

Oil prices fell hard in Tuesday’s US session leaving the price of WTI sitting on a key support level near $66.00. The move began last week when US crude oil inventories increased 4X the expected amount offsetting fears sanctions against Iran would tighten the market. Yesterday’s mass sell-off was sparked by word from Saudi Arabia it would work to ensure global oil markets remain well supplied. The move trimmed 5.0% from the price of WTI and has the price near the bottom of a short-term trading range where it may find support.

The EUR/USD Falls As Economic Activity Falls Short Of Expectation

European indices moved higher in the first half of the EU session with the CAC leading the charge advancing more than 1.15%. The DAX and FTSE were not far behind, each, posting gains in the range of 1.0%, and all three indices supported by earnings. In France, shares of Kering and Societe BIC advanced more than 8.0% on better than expected earnings. Kering, the owner of iconic brands like Gucci, says sales are strong and gave a favorable outlook.

The EUR/USD fell hard during the EU session on weaker than expected economic data. The EU Purchasing Managers Index shows expansion within the EU is still happening but at a slower rate than in the previous month and much slower than expected. The reported 52.7 for the composite figure, both manufacturing and services, fell 1.4 points from previous and missed expectations by 1.2 points. The data raises concerns that EU growth is slowing faster than expected which is an indication the ECB may need to prolong its QE program past the indicated December end-date. The ECB will release its policy statement on Thursday and will likely produce a market moving event.

US Futures Make Triple Digit Swing

In the US equity futures went on a wild ride in the early pre-opening session. The Dow was indicated to open with a triple-digit loss until the release of earnings by Boeing. Boeing reported better than expected top and bottom line issued, a favorable outlook for its business, and raised full year guidance which resulted in a 5% gain for the shares of the stock. Other notable earnings in the pre-market session include AT&T and UPS. AT&T missed on the top and bottom lines sending shares down by 3.0%, UPS reported figures that were only as expected and sent shares of that stock down more than 2.5%.

Today’s action is going to be dominated by two things; earnings and the FOMC. A host of important earnings are due out after the bell including Barrick Gold (BKX), Ford (F), Microsoft (MSFT), and Visa. Before that look out for the Fed’s Beige Book which is due to be released at 2 PM EDT.

SP500 Index Changing Drastically

The beginning of October brings with it the biggest changes to the SP500 index since 1999. Some sectors and industries will most likely emerge, and some may disappear, with their respective weight in the index changing as well. Additionally, some stocks may move to other sectors. These changes may mostly affect the IT, telecommunications and consumer goods sectors.

Consequently, the weight of the information technology sector may fall from the current 25 percent to 20 percent. A new sector is likely to be created, specifically the communication services sector, which may have a weight of 10 percent in the SP500 index. This new sector will be created by moving all titles from the telecommunications industry, which previously had a weight of 2 percent in the SP500 index. After this, the telecommunication sector will probably cease to exist. In addition, several IT and consumer goods companies will most likely be transferred to this new communications services sector.

Among the stock titles that should complete the emerging communications services industry by moving from the IT sector are Alphabet (Google), the dominant social networking player Facebook, as well as EA, Activision and Take-Two Interactive games. Verizon and AT&T will most likely move from the telecommunications sector. From the consumer discretionary sector, Netflix, Disney, 21st Century Fox, and a number of more companies may join the new communications sector in the near future.

What might be the impacts of changes on investors? There are many of them, and in the long run, many of them are crucial. They relate, for example, to the nature of the sectors, including impacts on growth outlooks, dividend yield, exposure to the cloud or AI trends, automatic or forced the rebalancing of portfolios of hundreds of ETF funds and other aspects.

These changes may have a major impact on the IT sector, which has grown to a quarter of its weight in the SP500 index and, has begun to dominate the index. The two major companies which might be affected by this are Facebook and Alphabet, the two main growth drivers with a very high market capitalization. The ‘new’ technology sector may, therefore, have lower expected future revenue growth, earnings per share and a lower margin than the current or future new communications services sector. The largest companies in the technology sector after this change will probably be Apple (19 percent) and Microsoft (16 percent), followed by Intel (5 percent). These are companies with lower valuations, measured for example by the P/E or P/S multiples, and which also have a lower regulatory risk. On the other hand, these companies have a significantly lower growth outlook and weaker exposure to growing cloud services and artificial intelligence. The nature of the IT sector is changing significantly, so investors focusing on growth titles may be able to assess current changes by rebalancing out their portfolios.

On the contrary, new money can be moved to the newly emerging communications sector. This will probably provide an appealing vision of future growth, as Alphabet, Facebook and Netflix will most likely move here. However, this growth dynamics should be moderated by the AT&T and Verizon telecoms companies, which are growing in the same way as the whole economy (for example, they are defensive stocks). In return, they may provide higher revenue stability and higher dividend yields.

Analysis and opinions provided herein are intended solely for informational and educational purposes and don’t represent a recommendation or an investment advice by TeleTrade. Indiscriminate reliance on illustrative or informational materials may lead to losses.

This article was written by Peter Bukov, one of TeleTrade’s leading analysts. 

The Driverless CopyPortfolio Investment Strategy is Your Chance to Invest in the Future of the Automobile Industry

The “smart” revolution is all around us, as a growing number of common items are becoming highly technological. It happened with the telephone, it happened with TV, it happened in numerous fields of industry – and now it’s happening in the automotive industry. Self-driving cars are very much a reality, and we will be seeing them in rising numbers on the road within the next few years. This evolution of the personal car, which over the years incorporated more and more technology into it, has resulted in a vehicle that no longer needs a human driver – and the financial potential is incredible.

The driverless car will be one of the most tech-heavy products available to consumers, and as such, will combine numerous components from both automakers and high-tech companies. To learn more about the different aspects of the autonomous car industry, projected to become a $7 trillion market(1) eventually, read this blog post.

Being such an innovative field on the one hand, yet being developed by some of the world’s largest, and most recognizable, companies on the other, the driverless car industry presents an interesting thematic investment opportunity. However, since it involves companies from different industries, operating in various markets around the world, building a thematic investment portfolio to track the industry can be challenging. That is why, here at eToro, we are launching the Driverless investment strategy, through which the members of the eToro community can invest in this sector.

The Driverless CopyPortfolio: Composition

This managed portfolio strategy contains an array of global companies, ranging from automakers, through hardware manufacturers, to software companies developing computer vision, navigation systems and other solutions relevant to the sector. The companies span several industries and have an overall impressive global presence – and are all part of the trend that will make driverless cars a common part of our daily lives in the coming years:

Car Manufacturers

  • Tesla (TSLA) – Elon Musk’s electric car company has established itself as one of the most intriguing players in both the tech and automotive industries in the US. The company is developing driverless cars and trucks and is one of the pioneers in automotive innovation.
  • Fiat Chrysler (FCA.MI) – One of the largest automotive corporation in the world, Fiat Chrysler has a strong presence in both the North American and European automobile markets, and is working on its own self-driving car.
  • Toyota (TM) – The world’s largest automakers, Japanese Toyota is known to be a highly reliable carmaker, have a strong international presence, and pioneering innovative technologies, such as one of the world’s first mass-produced hybrid personal cars.
  • Honda (HMC) – Another Japanese carmaker, Honda’s name has also become synonymous with quality, for both family cars and high-end sports cars and luxury sedans. Honda is also working on a driverless car, declaring 2025 as the target year for a nearly fully-autonomous vehicle.
  • Ford (F) – The world’s first automotive company is still one of the most influential carmakers out there. The company has announced plans for robot cars for ride-hailing and delivery purposes and will be testing them in Miami in the near future.
  • Renault (RNO.PA) – The French car giant has taken great strides in the autonomous car department: Its Symbioz concept model has generated positive reviews, both for its extremely advanced artificial-intelligence-assisted driving and its innovative approach of including the smart car as an integral part of the smart home of the future, positioning it as a notable player in the industry.
  • BMW (BMW.DE) – The German luxury car maker is a prominent player in driver-assistance technology, such as self-parking systems, which exist in some of its high-end brands. Therefore, it is no wonder that the company has been very public about its plans for creating a completely autonomous vehicle in the future.
  • Volkswagen (VOW3.DE) – Pledging to add electric motors to all of its models by 2030(2), this German giant is also researching completely autonomous cars. The VW I.D. Vizzion concept model unveiled by the company is a fully self-driving car, that doesn’t even have a steering wheel or pedals – it is designed to do all of the driving for the passenger.
  • General Motors (GM) – The largest car manufacturer in the US, GM is no stranger to innovation. In the early 1990s, GM completed the development of the world’s first serial electric car, the EV1. Despite later being pulled from production, GM has proved that it is ready for big changes in serial manufacturing – a quality that will serve it well when the market tilts towards the driverless.
  • Tata Motors (TTM) – India’s largest car manufacturer, which is part of a $151 billion conglomerate, is actively testing autonomous micro-cars. According to Tata, it might be one of the first companies to roll out mass-produced self-driving cars.
  • Caterpillar (CAT) – One of the largest heavy industry vehicle manufacturers in the world, Caterpillar is developing driverless trucks that could revolutionize many industries. In fact, the company is no stranger to automation, as several of its products already include self-driving trucks and other heavy vehicles, used by mining and construction companies around the world.
  • Delphi (DLPH) – This auto parts company is one of the world leaders when it comes to electrical systems and software for vehicles. Its products could play an instrumental part in the linking of cars to advanced computer system required for autonomous driving.
  • Ferrari (RACE) – The Italian supercar’s name is synonymous with luxury and speed. While it has distanced itself from the autonomous car space, it did declare that it is working on a fully electric supercar, which will rival the likes of Tesla.
  • Volvo (VOLV-A.ST) – Swedish carmaker Volvo already has high-tech driver-assistance solutions in some of its models, which is a significant step in the direction of a fully autonomous vehicle.

Software Companies

  • Alphabet (GOOG) – Google’s parent company is also the owner of Waymo, a company who already has self-driving cars roaming the streets of Silicon Valley. Unlike some other tech companies, who’ve kept their progress under wraps, Waymo has been very public with its driverless car prototypes and their performance.
  • Alibaba (BABA) – The Chinese retail giant is known for its massive interest in technological innovation. Therefore, it is no wonder that the company has confirmed that it is also in the race for developing a self-driving car, alongside other tech companies.
  • Baidu (BIDU) – Perhaps one of the strongest competitors in the race of launching the first road-ready autonomous car, Baidu has enjoyed the support of the Chinese government and is manufacturing and testing autonomous cars and buses. According to the company’s Apollo project timeline, Baidu will have a fully autonomous car ready for mass production by 2021.
  • Microsoft (MSFT) – One of the largest tech corporations in the world, Microsoft is also heavily involved in implementing its technology in driverless cars. Some of the cars that use Microsoft’s technology are already being tested in several locations around the world.
  • Blackberry (BBRY) – The former smartphone giant has pivoted into other areas in recent years, including software development. Blackberry is developing software that will be used in the autonomous car industry and has a partnership in place with Chinese giant Baidu.
  • Intel (INTC) – According to the company, Intel has a chip in virtually every self-driving car that is being tested today. Moreover, the company strengthened its grip on the market by acquiring Mobileye, a startup which develops computer vision driver-assisting technology, for a whopping $15 billion.

Hardware Manufacturers

  • Apple (AAPL) – The world’s largest company has a strong presence in numerous fields of technology – and autonomous driving is no exception. Apple has been quite secretive about its driverless plans, but reports suggest the company is developing a brand new self-driving car of its own.
  • Nvidia (NVDA) – Since an autonomous car requires great computing power, it is in need of strong processors. Nvidia is one of the world’s leading manufacturers of processors for some of the most performance-based computer functions, such as the real-time rendering of graphics-heavy computer games. Therefore, it is only natural that the company will also be taking part in making processors for self-driving cars.
  • STMicroElectronics (STM.MI) – Europe’s largest semiconductor manufacturer, ST is also one of the companies taking part in creating the computerised “brains” that will steer the cars of the future.
  • Infineon (IFX.DE) – This German chipmaker is developing semiconductors used in both driver-assistance systems and driverless cars. Teaming up with leading car makers, such as German luxury brand Audi, Infineon could serve a major role in the future of the automotive industry.
  • Texas Instruments (TXN) – Developing semiconductors and various sensors for more than 80 years, Texas Instruments is making its way into the autonomous driving realm. In 2017, the company unveiled a new array of sensors that can be used for autonomous cars, drones and more(3).
  • Advanced Micro Devices Inc (AMD) – A power player in the microchip industry, AMD is known for offering computing solutions that are more affordable than its main competitors, without compromising on performance. The company started hiring personnel for its AMD automotive department, which strongly suggests it is venturing into the field.
  • Dialog Semiconductor (DLG.DE) – This German semiconductor manufacturer has reportedly been involved in the early stages of Apple’s self-driving cars. While currently it seems that Apple chose to go another way, Dialog does have the capability to become a leading developer of hardware for autonomous vehicles.
  • MaxLinear (MXL) – Developing hardware such as semiconductors and radio transmitters, this American company is directing some of its efforts into developing components to serve the self-driving car industry.
  • NXP Semiconductors (NXPI) – This Dutch semiconductor manufacturer already has a strong foothold in the autonomous car industry, as it is one of the companies chosen by Chinese Baidu to help construct its driverless cars.
  • Skyworks (SWKS) – Based in the US, Skyworks Solutions has manufactured some wireless transmitters that are being used for autonomous features in current cars. The company’s experience in the field could serve as a strong foundation for its future business in the driverless car space.
  • HELLA (HLE.DE) – A well-known supplier of parts and subsystems for the automotive industry, HELLA has announced that it is strategically entering the driverless space in 2018(4).
  • EnerSys (ENS) – This battery producer has its products powering numerous cars and aerospace vehicles. As the automobile market shifts towards being driverless and electric, EnerSys could be a dominant player, producing the batteries powering these vehicles.
  • Visteon (VC) – This car electronics and computing company spun off from Ford in the year 2000. Visteon has developed a unique platform for driverless cars, which enables the car’s computer to decipher its surroundings and drive itself.

Each stock within the investment strategy’s composition is given equal allocation, and it is rebalanced by the eToro Investment Committee periodically. The minimum investment using the Driverless investment strategy is $5,000.

Investing in the self-driving car industry

It is obvious that there are numerous players and various companies operating in the driverless car space. In coming years, it is likely that more companies, both existing and new, will join the industry, while the autonomous car becomes a mass-produced, global phenomenon. As the industry takes form, eToro enables you to become part of the first wave of investors to take part in this exciting new automotive/technology sector. Using the Driverless CopyPortfolio, you can access a fully allocated, managed investment portfolio and gain exposure to the autonomous car industry.

IoT Platform Wars Have Begun, Blockchain Might Foster a Win-Win for All Stakeholders

Internet of Things (IoT) is here to stay because big data is the future of business and IoT provides a seamless way to gather this data. IoT simply refers to billions of devices connected to the Internet, assigned IP addresses to actively collect and share data. IoT can effectively transform otherwise “dumb” devices into smart devices that could take part in both machine-to-machine communications and machine-to-human communications for a seamless merger of digital and physical words.

Analysts at Gartner expect that the IoT industry will continue to grow and the number of IoT devices in use will reach 20.4 billion by 2020. The analysts also noted that total spending on IoT endpoints and services will reach $2.9 trillion by 2020. Interestingly, getting consumers to ditch their current devices in favor IoT enabled devices still appears to be an uphill task. This piece provides insight into how blockchain could facilitate the faster adoption of IoT in the mass market.

The platform wars in IoT

In mobile technology, the war of platforms is predominantly between Apple’s (NASDAQ:AAPL) iOS and Google (NASDAQ:GOOGL)’s Android OS. In the desktop, the platform battle is predominantly between Microsoft Corporations (NASDAQ:MSFT) Windows and Apple’s MacOS. In gaming, there’s an ongoing platform war between Microsoft’s Xbox and Sony’s PlayStation.

Interestingly, in the IoT segment, there are many different platforms – the likes of IBM, Microsoft, GE, Bosch, Siemens and hundreds of emergent start-ups are trying to build the market-leading IoT platform.

Unfortunately, the fragmented nature of the IoT platform market also makes it hard for OEMs (original equipment manufacturer) to know which platform would make the best business sense for IoT integration with their devices. The current conundrum of the IoT platform wars is that OEMs don’t want to build devices for a platform that doesn’t have any existing users. The fact that OEMs are cautious about pitching their tent on a platform that doesn’t have users also means that IoT devices aren’t being produced as fast as one would have imagined.

Blockchain could incentivize a faster adoption of IoT in the mass-market

Blockchain technology in practical terms is a decentralized network on which users can transfer unique pieces of digital property to other users with the guarantee that the transfer is secure, visible to everybody on the network, and such that the legitimacy of the transfer cannot be challenged. Blockchain technology could encourage data-sharing that would facilitate the mainstream adoption of IoT systems.

A blockchain-based platform could be open sourced, making it easy for all OEMs to build devices that can be integrated to function in an IoT marketplace without being forced to adopt a protocol from any single platform. For instance, blockchain-based IOTW is a platform trying to transform all IoT devices into micro-mining rigs for the cryptocurrency. Many of the existing devices are being retroactively outfitted with IoT capabilities. However, these devices often end up running outdated software that requires consistent manual patches and upgrades.

With IOTW, users don’t need to buy new hardware or commit to repetitive software upgrades on their existing devices. All that is required for existing devices to connect to the IOTW ecosystem is a firmware upgrade from an open SDK solution. Interestingly, once the device is turned on, it will serve the dual purpose of participating in an IoT marketplace and mining cryptocurrencies without any significant increase in power consumption.

More interesting is the fact that IoT device owners will be rewarded with IOTW coins for participating in its data marketplace. The coins can then be used to buy media content, services, or goods in open markets. Device owners can also leverage the coins to pay for services or spare parts on their devices. The IOTW is based on the Ethereum platform and can be exchanged with Ether coins.

2 stocks facilitating growth in the IoT Space

While most IoT companies come out with promises of how they intend to take over the world with their futuristic projects; investors can look at opportunities to make short, medium, and long-term plays. Below are 2 IoT stocks to add to your watchlist as we head into Q4 2018.

Intel Corporation (NASDAQ:INTL)

Intel Corporation (NASDAQ:INTL), is the second largest and highest valued semiconductor and chipmaker in the world. Intel has a strong footprint in the global IoT market, having unveiled its IoT platform for coordinating and managing the security and connectivity of connected devices in 2014. Over the last three years, Intel has worked with some of the largest tech firms to integrate Intel IoT platform with open standards for increased interoperability.

Intel Chart
Intel Chart

In the last three year since launching its IoT division, the shares of Intel have climbed by 74.31% and its quarterly revenue has surged 17.26% as seen in the chart above. In Q2 2018, Intel reported earnings of $1.04 per share on revenue of $16.96B. The reported top and bottom line did outperform the consensus analysts’ estimate of earnings of $0.96 per share on earnings of $16.77B. For what it’s worth, Intel has consistently delivered a positive surprise on price and EPS estimates in the last three quarters.

Texas Instrument Incorporated

Texas Instrument Incorporated (NASDAQ:TXN) is another major stakeholder in the global IoT market. In 2014, Texas Instruments cemented its presence in the IoT space when it introduced its Internet of Things (IoT) ecosystem for third-party cloud providers to enable devices manufacturers to use it’s TI technology to connect to the IoT more easily and rapidly. By leveraging Texas Instruments’ processors, a microcontroller (MCU), and wireless connectivity solutions; companies such as LogMeIn, IBM, Spark, Thingsquare, ARM, 2lemetry, and ARM have been able to launch a wide cross-section of IoT solutions across multiple sectors.

Texas Instruments
Texas Instruments

In the last 4 years of launching its IoT ecosystem, the shares price of Texas Instruments has surged by 147% and its quarterly revenue has increased by 14.74% in the same period as seen in the chart above. In Q2 2018, Texas Instruments reported earnings per share of $1.40 on revenue of $4.02 billion to beat the consensus analyst estimate of earnings of $1.30 per share on revenue of $3.96 billion. It is also important to note that Texas Instruments has consistently delivered a positive surprise on price and EPS estimates in the last three quarters.