Microsoft Hit By Worldwide Hack Attack

Dow component Microsoft Corp. (MSFT) could trade lower on Monday after a cybersecurity firm revealed at least 30,000 U.S. organizations, including local governments and small businesses, have been hacked by an aggressive Chinese cyber espionage unit. According to KrebsOnSecurity, the hack  exploits “four newly-discovered flaws in Microsoft Exchange Server email software, and has seeded hundreds of thousands of victim organizations worldwide with tools that give the attackers total remote control over affected systems.”

Microsoft Testing Breakout Support

Mr. Softee has sold off with other big tech names since posting an all-time high in February but has traded better the majority of its mega-cap peers, holding steadfastly to new support generated by a January triangle breakout. It bounced strongly at that price level and the 50-day moving average on Friday, in a perfect position to attract fresh buying interest. However, the post-market bombshell could have the final say on short-term price direction.

The Chinese hacking crew, dubbed “Hafnium”, is believed to be conducting “targeted attacks on email systems used by a range of industry sectors, including infectious disease researchers, law firms, higher education institutions, defense contractors, policy think tanks, and NGOs”. Microsoft responded by releasing an emergency update on Mar. 2, plugging security holes in Exchange Server versions 2013 through 2019.

Wall Street and Technical Outlook

Wall Street consensus has been pristine in the last year, with a ‘Buy’ rating based upon 30 ‘Buy’, 3 ‘Overweight’, and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $245 to a Street-high $315 while the stock ended the week more than $12 below the low target. This weak placement highlights Main Street caution after years of outsized share gains.

Microsoft entered a powerful uptrend in 2016 and hasn’t traded below the 20-month moving average in the last five years. It broke out above the February 2020 high in June, posting strong gains into the September peak at 232.86. Price action then eased into a symmetrical triangle, ahead of a January 2021 breakout that hit an all-time high at 246.13 in February. The stock has been testing new support since that time, with a decline through 224 signaling a failed breakout.

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

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

Microsoft Bullish Uptrend Expecting Small Dip to 38.2% Fibonacci

The Microsoft stock (MSFT) remains in a solid uptrend. Recently, a strong bullish breakout occurred after a sideways, consolidation zone.

This bullish breakout was expected in our previous wave analysis from September. This is also indicating the potential for more upside in 2021.

Price Charts and Technical Analysis

Microsoft 03.02.2021 daily chart

The MSFT stock seems to have completed an ABC (pink) pattern in wave 4 (purple) after a strong push up in wave 3 (purple). It was followed by a push up (wave 1 pink) and an ABC (grey) retracement in wave 2 (pink).

Let’s review the current situation:

  1. The current breakout is likely a wave 3 (grey).
  2. The failure for price to confirm a new higher high in recent days could be the end of the wave 3 and the start of a shallow wave 4 (grey) pullback.
  3. The usual retracements for waves 4 are shallow.
  4. WIth MSFT, the natural support zone (blue box) seems to be located at the previous resistance and the 21 ema support zone.
  5. The support zone is expected to create a bullish bounce (green arrow).
  6. Any deeper pullback places the uptrend in waiting mode (yellow pause button) or invalidates the current wave outlook (red stop button).

On the 4 hour chart, a small double top is indicating the difficulty for price action to break into higher ground. Some type of retracement or consolidation is expected:

  • A bearish pullback (orange arrows) should take price back to support (blue box) and the Fibonacci retracement levels of wave 4 (grey).
  • Price action could also build a shallow and sideways ABCDE triangle pattern (grey arrows).

Eventually a bullish bounce (green arrows) or breakout (blue arrow) is expected to take price action to higher levels again as long as price stays above the 61.8% Fib and especially the support trend line (green). Main targets are $250, $260, and $275.

Microsoft 03.02.2021 4 hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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

Microsoft Shares Hit All-Time Highs After Strong Quarterly Report

Microsoft Video 27.01.21.

Strong Results Push Microsoft Stock To New Highs

Microsoft reported its quarterly earnings yesterday after the market close. The company reported revenue of $43.08 billion and GAAP earnings of $2.03 per share, beating analyst estimates on both earnings and revenue.

The strong performance was driven by continued Azure growth, although other segments have also shown healthy increases in revenue. In addition, Microsoft provided strong guidance for the next quarter.

Microsoft CEO Satya Nadella commented: “What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry”. Judging by the company’s strong results, the company found ways to profit from this transformation.

Not surprisingly, analysts rushed to increase their price targets for Microsoft stock in order to reflect the recent performance. As a result, the stock attracted plenty of buyers during a challenging day for the market, and Microsoft shares tested all-time high levels.

Microsoft’s Report Shows That Big Tech Is Still Very Attractive

Worries about increased regulation for Big Tech companies have failed to curb investor enthusiasm as investors’ money continues to flow into the segment.

Microsoft’s report highlighted the main reason for this enthusiasm – Big Tech companies are well-equipped to thrive in the world disrupted by the pandemic.  Various Microsoft’s business segments showed solid growth as the company found numerous ways to benefit from increased demand in the digital space.

While the stock is trading at more than 30 forward P/E, such valuation looks like the new normal for market leaders at the time of unprecedented support from governments and central banks.

In addition, the dominance of passive investing via funds is providing additional support to big stocks like Microsoft which have a big weight in the S&P 500 index.

In this light, Microsoft shares have good chances to continue their upside move as investors continue to search for any growth opportunity in the current market.

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

Short Squeeze Mania – Stocks Swoon

It’s officially “stonk season” in the markets. The IPO market continues to baffle, and SPACs continue to pop-up like weeds in your front yard.

Plus if you’ve seen GameStop (GME), AMC Entertainment (AMC), and Blackberry (BB) lately, you know the Robinhooders are at it again.

These speculative gambles are ridiculously frothy right now as hedge funds and institutions continue to try and cover their shorts. The moves these stocks are making are more detached from reality than the guy in a buffalo headdress at the Capitol 3 weeks ago.

Complacency is the most significant near-term risk to stocks by far, and I have been warning about this for weeks. It also reminds me of the Q4 2018 pullback ( read my story here ).

It’s also earnings season (for those who care, like analysts), and it’s time for some big swings and volatility.

Well, not entirely. Monday (Jan. 25) saw a sudden mid-day plummet and subsequent recovery, and Tuesday (Jan. 26) traded slightly down. Wednesday (Jan. 27) looks set to open lower – we will see how that ends up.

Earnings have so far impressed, though, and there were some big moves from individual stocks.

General Electric (GE) popped over 9% thanks to a healthy outlook for 2021 and better than expected industrial free cash flow.

Johnson & Johnson (JNJ) also saw a nice 3% gain after beating earnings. Investors are also eagerly anticipating results from its vaccine’s trial. Johnson & Johnson’s vaccine is one dose and does not require any crazy storage protocols like Pfizer (PFE) and Moderna’s (MRNA). Strong results and FDA approval could genuinely change the tide of the pandemic and vaccine rollout.

Earnings from Microsoft (MSFT) and Advanced Micro Devices (AMD) also came in after the closing bell and impressed as well. Microsoft posted record quarterly sales, and AMD exceeded $3 billion in revenue.

Does this mean we’re all clear now and can party like it’s 1999?

Not exactly. Plus, if you’re a stock nerd like I am, you don’t want to party like it’s 1999. Because that means 2000 will come—the end of one of the biggest parties, investors have ever seen. I’m talking about the dot-com bust.

Fair warning: the S&P 500 is still at or near its most-expensive level in recent history on most measures, and the Russell 2000 has never traded this high above its 200-day moving average.

The more GameStop pops, the more of a circus I think this market is. GameStop a $15+ billion company? Really? A correction at some point in the short-term would not be shocking in the least.

John Studzinski , vice chairman of Pimco, believes that market valuations are sound and reflect expectations of this eventual reopening and economic recovery by the second half of the year.

I agree on some level about the second half of the year. Outside of complacency, though, I have other short-term concerns.

For one, trillions in imminent stimulus could be useful for stocks but bring back inflation by mid-year. The worst part about it? The Fed will likely let it run hot. With debt rising and consumer spending expected to increase as vaccines are rolled out to the masses, the Fed is undoubtedly more likely to let inflation rise than letting interest rates rise.

All of this tells me that the market remains a pay-per-view fight between good news and bad news.

We may trade sideways this quarter- that would not shock me in the least. But I think we are long overdue for a correction since we haven’t seen one since last March.

Corrections are healthy for markets and more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

A correction could also be an excellent buying opportunity for what should be a great second half of the year.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market will happen.

In a report released last Tuesday (Jan. 19), Goldman Sachs shared the same sentiments.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth. Hopefully, you find my insights enlightening, and I welcome your thoughts and questions.

We have a critical week ahead with the Fed set to have its first monetary policy meeting of 2021 and more earnings announcements. I wish you the best of luck. We’ll check back in with you at the end of the week.

Small-caps are Too Hot to Handle

Figure 1- iShares Russell 2000 ETF (IWM)

As tracked by the iShares Russell 2000 ETF (IWM) , small-cap stocks underperformed the larger indices on Tuesday (January 26). The RSI is no longer technically overbought, but I still think that the Russell has overheated in the short-term. Stocks don’t just go up in a straight line without experiencing a sharp pullback. That’s just the nature of the beast.

Barron’s also claims that the Russell 2000/S&P 500 ratio has entered a powerful 15-year resistance area .

Nobody knows what will happen during this critical week of earnings, but I called a decline after the IWM began the week over a 70 RSI. Indeed the IWM is having a down week to this point, but it’s not sharply down enough for me to switch my call. Not even close.

I love small-cap stocks in the long-term, especially as the world reopens. Small-caps are also the most likely to benefit from Biden’s aggressive stimulus plan.

But the index has overheated. Period.

Before January 4, the RSI for the IWM Russell 2000 ETF was at a scorching hot 74.54. I called a sell-off happening in the short-term due to this RSI, and it happened.

After the RSI hit another overbought level of approximately 77 two Wednesdays ago (January 13), the IWM declined by another 1.5%. I said that Russell stocks would imminently cool down because the RSI was too hot, and precisely that’s what happened.

Consider this too. In its entire history as an index, the Russell has never traded this high above its 200-day moving average.

Small-caps may have priced in vaccine-related gains by now, and some stimulus optimism may have been priced in too.

I hope small-caps decline before jumping back in for long-term buying opportunities. I love where these stocks could end up by the end of the year.

SELL and take profits if you can- but do not fully exit positions . If there is a deeper pullback, this is a STRONG BUY for the long-term recovery.

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

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

Thank you.

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

* * * * *

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

 

Microsoft Shares Hit Record High on Robust Q2 Profit; Target Price $285 in Best Case

The global technology giant Microsoft’s shares hit a record high on Tuesday after the company reported better-than-expected earnings in the fiscal second quarter as the COVID-19 pandemic boosted demand for cloud computing and gaming consoles.

The world’s largest software maker’s revenue increased 17% to $43.1 billion, beating the Wall Street consensus estimate of $40.18 billion. Diluted earnings per share came in at $2.03 in the quarter ended December 31, 2020, which represents year-over-year growth of about 34.4% from the same quarter last year when the company reported $1.51 per share.

The software giant’s net income surged 33% to $15.5 billion and operating income jumped 29% t was $17.9 billion.

Following this upbeat result, Microsoft shares hit an all-time high, rising about 4% to $240.92 in extended trading on Tuesday. However, the stock surged over 40% in 2020.

Microsoft is benefiting from a second wave of digital transformation as well as strength in gaming, which helped the company once again drive material upside compared with its revenue and EPS outlook for the quarter. Guidance for the third quarter was nicely above consensus as well. Azure remains strong, while consumer-related revenue was once again ahead of our expectations as the global lockdowns continued this quarter,” said Dan Romanoff, equity analyst at Morningstar.

“Importantly, commercial bookings and RPO, two forward-looking metrics, both continue to outpace revenue growth. We remain impressed with Microsoft’s ability to drive revenue and margins at this scale and we believe there is more to come on both fronts. Results continue to underscore our thesis, which centers on customer adoption of hybrid cloud environments with Azure. Microsoft continues to use its dominant position of on-premises architecture to allow customers to move to the cloud easily and at their own pace, which we believe will continue over the next five years. Quarterly strength along with upside to guidance and a variety of minor model tweaks drive our fair value estimate to $263 from $235 per share. We still see loosely 10% upside to this high-quality wide-moat name,” Romanoff added.

Microsoft Stock Price Forecast

Twenty-three analysts who offered stock ratings for Microsoft in the last three months forecast the average price in 12 months at $253.30 with a high forecast of $285.00 and a low forecast of $235.00.

The average price target represents a 9.03% increase from the last price of $232.33. All those 23 analysts rated “Buy”, according to Tipranks.

Morgan Stanley gave a base target price of $260 with a high of $330 under a bull scenario and $165 under the worst-case scenario. The firm currently has an “Overweight” rating on the technology giant’s stock.

Several other analysts have also recently commented on the stock. Barclays raised the target price to $269 from $250. Wedbush upped the price objective to $270 from $260. Evercore ISI increased the target price to $260 from $250. Credit Suisse Group set a $235.00 price target. The brokerage currently has a buy rating on the software giant’s stock.

In addition, Bank of America reaffirmed a buy rating and issued a $256.00 target price. UBS Group set a $243.00 target price and gave the stock a buy rating. Pritchard Capital upgraded Microsoft from a neutral rating to a buy rating and increased their price target to $272 from $229.

Analyst Comments

“Strong positioning for public cloud adoption, large distribution channels and installed customer base, and improving margins support a path well beyond $1 trillion market cap. Durable double-digit NT rev growth is supported by Azure (winning in public cloud), data center (share gains and positive pricing trends), O365 (base growth and ARPU uplift) and LinkedIn. GM % improvement, continued opex discipline and strong capital return lead to durable teens total return profile,” said Keith Weiss, equity analyst at Morgan Stanley.

“At 26x CY22e GAAP EPS, Microsoft (MSFT) trades at a premium to the S&P, warranted due to MSFT’s premium return profile. Multiple expansion will likely come from gaining comfort in the durability of commercial business gross profit dollars.”

Check out FX Empire’s earnings calendar

Surprise! Nasdaq Led Weekly Gains

Surging, gaining…come again?

Wasn’t tech supposed to wither away and die thanks to be big bad Democrat boogeymen? Wasn’t the radical Biden tax agenda and regulatory framework supposed to send your favorite tech stocks plummeting? Wasn’t Biden’s tax plan supposed to take an estimated 5-10% off the earnings per share?

For now, it seems like the market is putting more of its hopes into Biden’s $1.9 trillion stimulus plan and ignoring his tax and regulation plans. As Treasury Secretary and former Fed Chair Janet Yellen claimed, Biden’s primary focus is aiding American families (i.e., stimulus, low-interest rates) and, for now, not raising taxes.

But nothing is for sure with this stimulus. Republicans will resist it, and some moderate Democrats may do so as well. With Vice President Kamala Harris as the only tiebreaker for a Democrat majority in the Senate, Biden needs all the support he can get to pass this aggressive stimulus.

I maintain my view that the market is too complacent, and that we are about to enter a correction at some point in the short-term. It still reminds me of the Q4 2018 pullback. (read my story here).

For one, valuations are absurd. Tech IPOs are a circus, the S&P 500 is at or near its most-expensive level in recent history on most measures, and the Russell 2000 has never traded this high above its 200-day moving average.

While stimulus could be useful for stocks in the short-term, it could almost certainly mean the return of inflation too by mid-year. The worst part about it? The Fed will likely let it run hot. With debt rising and consumer spending expected to increase as vaccines are rolled out to the masses, the Fed is undoubtedly more likely to let inflation rise than letting interest rates rise.

Others, however, believe that the market reflects optimism that the global economy will recover with the eventual lifting of COVID-related restrictions and more widely-available vaccines. John Studzinski , vice chairman of Pimco, believes that market valuations are strong and reflect expectations of this eventual reopening and economic recovery by the second half of the year.

All of this simply tells me that the market remains a pay-per-view fight between good news and bad news.

We may trade sideways this quarter- that would not shock me in the least. But I think we are long overdue for a correction since we haven’t seen one since last March.

Corrections are healthy for markets and more common than most realize. Only twice in the last 38 years have we had years WITHOUT a correction (1995 and 2017).

A correction could also be an excellent buying opportunity for what should be a great second half of the year.

Therefore, to sum it up:

While there is long-term optimism, there are short-term concerns. A short-term correction between now and Q1 2021 is possible. I don’t think that a decline above ~20%, leading to a bear market will happen.

In a report released last Tuesday (Jan. 19), Goldman Sachs shared the same sentiments.

My goal for these updates is to educate you, give you ideas, and help you manage money like I did when I was pressing the buy and sell buttons for $600+ million in assets. I left that career to pursue one where I could help people who needed help, instead of the ultra-high net worth. Hopefully, you find my insights enlightening, and I welcome your thoughts and questions.

We have a critical week ahead with the Fed set to have its first monetary policy meeting of the year and big earnings announcements on the horizon. Best of luck, have an excellent trading week, and have fun! We’ll check back in with you all mid-week.

Are We in a Tech Bubble or Not?

Figure 1- Nasdaq Composite Index $COMP

Some of the hottest performing tech stocks announce earnings this week such as Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Tesla (TSLA) (yes I consider Tesla more of a tech stock than a car stock), and more.

Pay very close attention.

Although I am bullish on specific tech sectors such as cloud computing, e-commerce, and fintech for 2021, I’m concerned about the mania consuming tech stocks.

Tech valuations, and especially the tech IPO market, terrify me. It reminds me a lot of the dot-com bubble 20-years ago. Remember, the dot-com bubble was a major crash in the Nasdaq after excessive speculation and IPOs sent any internet-related stock soaring. Between 1995-2000 the Nasdaq surged 400%. By October 2002, the Nasdaq declined by a whopping 78%.

I have no other words to describe it besides the Nasdaq right now as a circus. Will the bubble pop now? That remains to be seen. But the similarities between now and 2000 are striking.

I am sticking with the theme of using the RSI to judge how to call the Nasdaq. An overbought RSI does not automatically mean a trend reversal, but with the Nasdaq, this appears to have been a consistent pattern over the last few weeks.

The Nasdaq pulled back on December 9 after exceeding an RSI of 70 and briefly pulled back again after passing 70 again around Christmas time. We also exceeded a 70 RSI just before the new year, and what happened on the first trading day of 2021? A decline of 1.47%.

The last time I changed my Nasdaq call from a HOLD to a SELL on January 11 after the RSI exceeded 70, the Nasdaq declined again by 1.45%.

The Nasdaq has an RSI of around 72 again, and I’m switching the call back to SELL. The Nasdaq is trading in a precise pattern and I am basing my calls on that pattern.

I still love tech and am bullish for 2021. But I need to see the Nasdaq have a legitimate cooldown period and move closer to its 50-day moving average before considering it a BUY.

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

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

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

Thank you.

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

* * * * *

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

 

Biden’s Presidency from a Market Perspective

Chief Market Analyst of XTB group discusses Biden’s presidency from a market perspective.

Watch this video to learn:

  • Key themes of Joe Biden’s presidency
  • Chances and risks for the markets
  • Present market situation on indices, fx and commodities
  • Key calendar positions for this week

Other top news this week include:

Nasdaq Hits Yet Another Record Close

The major indices closed mixed on Wednesday (Dec. 16), as the Nasdaq hit yet another record close amidst stimulus optimism and the Fed’s dovish tone.

News Recap

  • Although the Dow Jones closed lower by 44.77 points, or 0.15%, the S&P 500 gained for the second day in a row and rose by 0.18%. The Nasdaq closed once again at a record high and gained 0.5%.
  • Sentiment for the day started negatively after the Commerce Department reported a steeper-than-expected drop in U.S. retail sales. The department stated that retail sales fell by 1.1% in November compared to estimates of 0.3%.
  • Cautious optimism that some sort of stimulus could be passed before the end of the year encouraged investors.
  • According to Politico , Congress was on the brink of a $900 billion stimulus deal that would include a new round of direct payments to consumers. However, that package would exclude the more contentious areas of liability shields for businesses and state and local aid.
  • We have reached the deadliest weeks of the COVID-19 pandemic. More than 300,000 total COVID-19 related deaths have now been confirmed in the U.S., with over 16 million confirmed cases. Additionally, US officials reported 3,400 new COVID-19 deaths – a daily record.
  • After an FDA panel officially endorsed Moderna (MRNA) – following a review which confirmed safety and efficacy earlier in the week – the big day is finally here. On Thursday (Dec. 17), the FDA will officially vote on Moderna’s vaccine. This will strongly complement the mass deployment of Pfizer (PFE) and BioNTech’s (BNTX) vaccine.
  • The Federal Reserve ’s announcement on monetary policy was largely as dovish as expected. The Fed vowed to continue its asset purchase program at the current rate, “until substantial further progress has been made toward the committee’s maximum employment and price stability goals.”
  • Microsoft (MSFT) and Salesforce (CRM) led the Dow with gains of 2.4% and 1.6%, respectively, while Walgreens (WBA) was the laggard and declined 2.15%.
  • Moderna (MRNA), despite its big week ahead, dropped 6.9%.

While there is some short-term uncertainty and mixed sentiment, there is some general consensus: While the short-term may see some pain and/or mixed sentiment, it may be worth it for the medium-term and long-term optimism.

The overwhelming majority of market strategists are bullish on equities for 2021- despite near-term risks. Outside of the pandemic raging to out of control levels, another near-term risk that has been largely overlooked is the Senate runoff election in Georgia. Investors have largely already priced in a divided government – however, if Republicans end up losing both seats in Georgia, this could potentially upend everything.

According to Jimmy Lee, CEO of the Wealth Consulting Group ,

“I think that we can get a little bit of consolidation before year-end just due to normal selling at the year-end for rebalancing or tax loss harvesting. Also, depending on where the pulse is for the Senate race in Georgia, investors might want to get ahead of that if they think that capital gains taxes may go up in the future…So that could cause some additional selling before year-end and we could get a little bit of a pullback. But I am very bullish on equities at this point. And I do think we may get a little bit more of a rotation into the economy-opening sectors.”

Meanwhile, progress on the stimulus package appears to be more optimistic than many expected in the near-term.

“The odds of a fiscal deal before year’s end have been improving,” Goldman Sachs economists led by Jan Hatzius wrote in a note Tuesday (Dec. 15). “While we had expected a smaller package to pass now with a larger package waiting until early 2021, it appears increasingly likely that most of this could pass this week.”

While markets for the rest of 2020 (and perhaps early 2021), will wrestle with the negative reality on the ground and optimism for an economic rebound, the general consensus appears to be looking past the short-term painful realities, and focusing more on the longer-term – a world where COVID-19 is expected to be a thing of the past and we are back to normal.

In the short-term, there will be some optimistic and pessimistic days. On other days, such as Wednesday (Dec. 16) (and in my opinion this will be most trading days), markets will trade largely mixed, sideways, and reflect uncertainty. Therefore, it is truly hard to say with conviction what will happen with markets in the next 1-3 months. However, if a stimulus deal passes within the next week, it could mean very good things for short-term market gains.

In the mid-term and long-term, there is certainly a light at the end of the tunnel. Once this pandemic is finally brought under control and vaccines are mass deployed to the general public, volatility will stabilize, and optimism and relief will permeate the markets. Stocks especially dependent on a rapid recovery and reopening such as small-caps should thrive.

Due to this tug of war between sentiments, it is truly hard to say with any degree of certainty whether another crash or bear market will come.

Therefore, to sum it up:

While there is long-term optimism, there is short-term pessimism. A short-term correction is very possible. But it is hard to say with conviction that a big correction will happen.

Nasdaq Hits Another Record Close – Too Good to Be True?

Is the Nasdaq’s performance since its sharp sell-off last Wednesday (Dec. 9) too good to be true? Truthfully, I don’t know. But it’s very possible – especially if shut down measurements become harsher and stricter and investors return to the “stay-at-home” trade that led markets from April through the end of October.

Additionally, I still have many concerns about tech valuations and their astoundingly inflated levels. Last week’s IPOs of DoorDash (DASH) and AirBnB (ABNB) reflect this and invoke traumatic memories of the dotcom bubble era. I believe that more pullbacks along the lines of last Wednesday (Dec. 9) could inevitably come in the short-term. Frankly, it would make me feel far more confident about initiating tech positions as well for the long-term.

Pay close attention to the RSI. While an overbought RSI does not automatically mean a trend reversal, I called keeping a very close eye on this for the Nasdaq. Last Wednesday’s (Dec. 9th) Nasdaq pullback after it exceeded a 70 RSI reflects that.

The Nasdaq has sharply rallied in the week since then. But its RSI is nearly 69. Monitor this . If the index goes on another bull-run and hits more record closes, it could surely exceed an RSI of 70 by the end of market close on Thursday (Dec. 17). I did not make a conviction call last week but I will now- if the RSI exceeds 70 this time, take profits- but don’t fully exit .

One thing I do like is how stable the volume has been this week and since the sharp sell-off last week. Stable volume is a good thing, especially if one is concerned about volatility. Low volume, especially a declining trend, means that there are fewer shares trading. Lower volume also means less liquidity across the index, and an increase in stock price volatility.

On pessimistic days, having NASDAQ exposure is crucial because of all the “stay-at-home” trade. However, positive vaccine-related news always induces the risk of downward pressure on tech names – both on and off the NASDAQ. What concerns me most are sharp sell-offs due to overheating and mania. Don’t ever let anyone tell you “this time is different” if fears of the dot-com bubble are discussed. History repeats itself, especially in markets.

It is very hard to say with conviction to sell your tech shares though. However, as I said before – if the RSI exceeds 70 again – consider selling some shares and taking profits. For now, however, the NASDAQ stays a HOLD .

For an ETF that attempts to directly correlate with the performance of the NASDAQ, the Invesco QQQ ETF (QQQ) is a good option.

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

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Thank you.

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

* * * * *

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

 

Gold’s Momentous Rally From 2000 Compared To SPY & QQQ – Part II

In Part I of this research article I highlighted the incredible rally in Gold related to a 2020 Anchor point and how that rally in Gold compared to the QQQ and SPY.  In this second Part I am going to highlight the price appreciation in the QQQ and SPY in comparison to Gold since 2009.  It is important to understand how the equities/stocks have rallied in comparison to Gold because the ratio of valuation levels in equities/stocks compared to Gold appears to show when price disparities become outrageous and begin to revert.

Part I of our research showed the 2000 anchor point ratios, where we saw that Gold appreciated faster than the QQQ and the SPY over the span of the past 20 years.  You’ll also see that the QQQ and SPY have appreciated very quickly over the past 5+ years in an attempt to close the gap.  This represents a shift in how traders view opportunities in different asset classes.

9 TO 9.5 YEAR GOLD DEPRECIATION CYCLE ENDED IN 2018 – WHAT NEXT?

We will now shift the anchor point to January 1, 2009, to see how the markets have reacted to valuations since the downturn created by the Global Financial Crisis.  The starting point is to determine how Gold, the QQQ, and the SPY have rallied since this major event in the global markets, and at what ratio.  Ideally, we would have seen moderately uniform appreciation ratios over the past 10 years. This would mean that traders placed nearly equal enthusiasm for higher valuations in the QQQ, SPY, and Gold. As we will see below, this is not the case.

Taking a look at this first Monthly 2009 Anchor ratio chart below, we see the QQQ is the big winner with a current ratio level above 9.0.  This suggests that the QQQ has rallied over 900% since the January 1, 2009 anchor price.  The SPY has rallied to current levels near 3.9.  This suggests that the SPY has rallied over 390% since the January 1, 2009 anchor point price levels.  Gold has only rallied to levels near 2.1 on this chart.  This suggests that Gold has been ignored as an asset class and has failed to keep up with the rally in the QQQ and the SPY over the past 10+ years.

This chart also suggests that traders focused more on the appreciation and expectations related to the NASDAQ/Technology sector over the past 4+ years as a source of asset growth.  Companies like Amazon, Facebook, Netflix, Microsoft, and others became the “hot symbols”  while the SPY and Gold fell away from investors’ focus.  This has happened before in the late 1990s with the DOT COM rally.  Traders and speculators jumped in on what appears to be a never-ending rally in the technology sector only to be shocked by the eventual collapse of that sector in early 2000.  Could the same thing happen again?

THE DOT COM DAYS ALL OVER AGAIN?

If we were to take a look at a different perspective of this same data in the chart below, using the January 1, 2009 date as an anchor point, the rally in the QQQ compared to the recent rally in Gold takes on a completely different perspective.  This chart shows the appreciation of the QQQ compared to Gold since 2009 has rallied more than 4.60 (460%).  The price of Gold on January 1, 2009, was 883.00 and the current price of Gold is $1875.80.  The price of the QQQ on January 1, 2009, was 29.77 and the current price of the QQQ is 288.40.  This suggests that the QQQ rallied 460% higher than the rally in Gold over this span of time.

This raises an interesting point that the current rally in the QQQ is similar to the extreme highs we saw in early 2000 near the DOT COM peak.  Even though, on the 2000 anchor ratio chart,  the QQQ ratio seems small compared to the 2000 anchor levels, the 2009 anchor ratio chart shows a different rate of appreciation based on the January 1, 2009 anchor point.  The biggest difference is the relationship between the origination points (being near the Global Financial Crisis lows) and the bigger rally in the QQQ compared to the rally in Gold.  What this suggests is that the QQQ has rallied much more extensively than Gold over the past 11 years – which is very similar to the DOT COM rally peak.

A PRECIOUS METALS APPRECIATION PHASE HAS BEGUN

When we take into consideration the 9 to 9.5 year cycles that my research team and I believe represent appreciation/depreciation cycles, we begin to understand that Gold has under-appreciated over the span of time from 2009 to 2018 and that the new cycle of Precious Metals appreciation has just started in 2019.  If our cycle research is correct, this new phase of precious metals appreciation will last until 2028 or so – very likely driving metals prices much higher to close the ratio gap shown on this chart.

We expect the ratio level to fall to levels near 1.60 to 2.50 over the next few years (possibly lower) as the price of Gold rallies faster than the price of the QQQ.  Over time, the QQQ may continue to still appreciate in some form, but that would suggest that Gold would still continue to appreciate at a faster rate to close the gap in the ratio level.

We believe the key ratio high level, shown on the chart above with a dark blue vertical line, may be the valuations peak (at least for now).  It aligns with our cycle interpretation and suggests that the late stage rally in the QQQ from mid-2018 may be a speculative exhaustion rally.  As the QQQ and SPY stay near all-time highs and Gold fails to advance substantially higher, this ratio will not change very much from the current levels.

Take a look at the 2000 Anchor QQQ to Gold Ratio chart from Part I of this research article.  The ratio levels did not start to change until the QQQ and SPY has clearly started to decline in late 2000 to early 2001 and when Gold started to move moderately higher.  Remember, Gold did not really start to break higher and start a real uptrend until after 2003/04 – this is when we start to see the ratio decline at a faster rate.

Currently, with Gold trading near 1892 and the QQQ and SPY trading near all-time highs, our researchers believe we are very close to a peak in the equities/stock market based on these ratios.  We also believe the 2009 Anchor chart ratio would have to fall below 3.5 to initiate a new “change of trend” trigger based on our research.  The current volatility in the markets suggests we will likely see a very wide range of price rotation before any new trends are established (up or down).  But we do see similarities in the current setup compared to the 2000 setup in terms of how the QQQ and SPY have reached lofty ratio levels while Gold has stalled near a base/momentum level.

Should our interpretations turn out to be accurate, we would start to see Gold appreciate higher at a faster rate over the next 2 to 3+ years while the QQQ and SPY potentially enter a moderately sideways or downward price trend (possibly somewhat similar to the 2000 to 2006 QQQ price rotation).

The QQQ Monthly chart below highlights the incredible parabolic upside price trend that has initiated  in early 2020 and how price has extended upward at almost extreme rates on expectations and speculation.  We believe any breakdown of this trend may prompt another 2000~2004 type of sideways market correction resulting in a reversion of the ratios we’ve highlighted in the charts above.  Any downside rotation in the QQQ to levels below 252 will likely breach the middle channel level of this recent parabolic upside price trend and result in the start of the reversion event.

The US elections, new policies and pending US economic shutdown (possibly for 30 to 60+ days as suggested by Joe Biden’s team) will shock the markets if it happens.  We are not fortune-tellers and are not able to clearly see what will happen in the future, but we can tell from the ratio charts and the QQQ chart, above, that very heavy price speculation has driven the markets into an upside rally mode and we are concerned above “how and when” it ends.  It may be that the rally continues for a number of years – or it may already be nearing an end.  Our researchers believe the peak level in 2018 on our ratio chart, after the last 9 to 9.5 year cycle completed, is showing us that the upward price cycle has already likely ended and we are transitioning into a renewed Precious Metals/Gold appreciation phase.

Imagine how powerful it would be for you to be able to trade only the strongest and best-performing assets across the spectrum while being able to take advantage of technical patterns and multiple re-entry triggers.  If you want to learn how we can help you find and identify great trading opportunities, then please visit www.TheTechnicalTraders.com to learn about my proprietary trading systems using my exciting ”Best Asset Now” strategy and indicators. You can also sign up for my daily pre-market video reports that walks you through the charts of all the major asset classes every morning.

Enjoy the rest of your weekend!

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

NOTICE AND DISCLAIMER: Our free research does not constitute a trade recommendation or solicitation for readers to take any action regarding this research.  We are not registered financial advisors and provide our research for educational and informational purposes only.

 

Microsoft Surges Off Intermediate Support

Dow component Microsoft Corp. (MSFT) is trading at a 3-week high on Thursday after an analyst upgrade, adding to gains posted following Tuesday’s U.S. presidential election. The stock fell 5% at the end of October despite beating Q1 2021 profit and revenue estimates by wide margins.  Market watchers blamed modest Q2 revenue guidance for the sell-the-news reaction, which has now been fully repealed.

Microsoft Reports Strong Quarter

The company booked exceptionally strong results in the Intelligent Cloud Segment in the fiscal fourth quarter, with Azure posting 48% revenue growth year-over-year. The Productivity and Business Processes segment grew 11% year-over-year, underpinned by Teams corroborative software and Office Commercial products. Windows Server growth waned, generating a new headwind, but the current price is discounting that sales slump.

Oppenheimer analyst Timothy Horan upgraded Microsoft from ‘Perform’ to ‘Outperform’ and raised their price target to $260 ahead of Thursday’s opening bell, stating “a Biden presidency should improve relations with China where Microsoft has significant exposure while a Republican majority Senate should prevent higher corporate taxes. We also expect treasury yields to stay low, making MSFT’s 3% FCF yield attractive.”

Wall Street And Technical Outlook

Wall Street consensus is immaculate, with a ‘Strong Buy’ rating based upon 22 ‘Buy’ and 0 Hold’ recommendations. In addition, not a single analyst is recommending that shareholders sell their positions. Price targets currently range from a low of $235 to a Street-high $260 while the stock is now trading $12 below the low target.  Disconnects between traders and analysts often reflect unrecognized internal issues but the company does seem to be significantly under-valued.

The stock broke out above the February 2020 high at 190.70 in June and added about 35 points into September’s all-time high at 232.86. A broad-based tech decline then set into motion, dropping Microsoft into 50-day moving average support a few weeks later. It’s now ejecting off that level for the second time, trading within 10 points of the prior high.  Long-term relative strength readings have turned south in the last two months, raising odds for continued rangebound action, rather than a sustained assault on new highs.

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

Anticipation Builds Ahead Of Microsoft Earnings

Dow component Microsoft Corp. (MSFT) reports fiscal Q1 2021 earnings on Oct. 27, with analysts expecting a profit of $1.36 per-share on $35.8 billion in revenue. The stock sold off more than 6% after the Q4 release in July, despite beating top and bottom line estimates. Market watchers blamed the sell-the-news reaction on overly-high expectations for the cloud and commercial products divisions. The stock recovered those losses into August and posted an all-time high in early September.

Microsoft And TikTok

Buying pressure resumed after Mr. Softee threw its hat into the ring in the TikTok drama, seeking to acquire the company while jumping through political hoops in China and the United States. Oracle Inc. (ORCL) eventually won the coveted prize but continued conflict between nations suggests that Microsoft was lucky to walk away empty-handed and redirect attention to core services and the Nov. 10 release of the next-generation Xbox console.

Morgan Stanley analyst Keith Weiss discussed the revenue boost expected from the Xbox release earlier this month, stating, “The fiscal year 2021 console cycle and the addition of Bethesda highlight incremental growth opportunities for Microsoft’s gaming franchise, w/ a potential ~$80 billion value for the gaming subscription biz alone. Our bottom up work suggests the console cycle should not derail a broader margin expansion story. Overweight.”

Wall Street And Technical Outlook

Wall Street has been bullish on the big tech powerhouse for years, with a current ‘Moderate Buy’ consensus based upon 23 ‘Buy’ and 3 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines at this time. Price targets currently range from a low of $208 to a Street-high $260 while the stock is set to open Monday’s U.S. session about $16 below the median target. There’s plenty of potential upside after a strong strong quarterly report, given this humble placement.

Microsoft broke out above the first quarter high at 190.65 in June and added more than 40 points into the September peak. It then sold off with broad benchmarks, testing the 50-day moving average for more than 5 weeks before surging off a small base earlier this month. Accumulation readings are hovering near new highs, supporting continued upside, but monthly cycles are flashing overbought technical readings. This conflict suggests two-sided action through most or all of the fourth quarter.

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

Microsoft Bullish Bounce After Inverted & Shoulders Chart Pattern

SM:

  • Microsoft stock (MFST) is building a bearish retracement. Our Elliott Wave software is indicating red daily candles and a strong pullback BUT the entire trend is heavily up
  • Microsoft is testing the shallow Fibonacci retracement levels of potential wave 4 (purple). This is expected to act as a potential support and bouncing spot.
  • The 1 hour chart broke above the resistance trend lines after building an inverted head and shoulders pattern. But price action must break above the key resistance too

Microsoft stock (MFST) is building a bearish retracement, similar to the enter stock market. Our Elliott Wave software is indicating red daily candles and a strong pullback BUT the entire trend is heavily up (huge spaces between long-term moving averages). What’s next for this chart?

Price Charts and Technical Analysis

Microsoft daily chart

Microsoft is testing the shallow Fibonacci retracement levels of potential wave 4 (purple). This is expected to act as a potential support and bouncing spot. Price could either break above the 21 ema to confirm the bullish continuation. Or price action could retest the deeper 50% Fib, the 144 ema, and previous top (green boxes). The first target for the bulls is the previous top. A break below the 61.8% Fib makes the wave 4 pattern less likely (red x).

The 1 hour chart (see below) broke above the resistance trend lines (dotted purple) after building an inverted head and shoulders pattern (green boxes). But price action must break above the key resistance too (orange box) otherwise the pair remains in uncertain territory. A break below the bottom makes the upside less likely (red x). A bullish breakout (green arrows) should see price move up towards the Fibonacci targets (red circle).

Microsoft one hour chart

Good trading,

Chris Svorcik

The analysis has been done with the indicators and template from the SWAT method (simple wave analysis and trading). For more daily technical and wave analysis and updates, sign-up to our newsletter

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

 

 

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 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!

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Deepta Bolaky, Market Analyst at GO Markets.

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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.

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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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Chris Weston, Head of Global Research at Pepperstone.

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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.

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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.

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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).

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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.

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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).

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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.

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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.

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