S&P 500 Rallies 0.5%, Netflix Gains Nearly 7% on Upbeat Subscriber Outlook

Key Points

  • The S&P 500 and Nasdaq 100 indices rallied on Wednesday amid outperformance in big tech/growth stock names.
  • Netflix’s share price surged after the company said it expected to return to subscriber growth in Q3.
  • All three major US indices are above their 50DMAs, signaling a shift of near-term momentum.

S&P 500 and Nasdaq 100 Rally, All Major US Indices Hold Above 50DMA

Major US equity indices were mixed on Wednesday, with the more big tech/growth stock weighted S&P 500 and Nasdaq 100 indices outperforming while the Dow Jones Industrial Average came under modest pressure. The former two both managed to hit their highest levels in more than one month.

One key takeaway from US equity markets on Wednesday, however, is that all three of the major indices have managed to reconquer their 50-Day Moving Averages for the first time since April, signaling that the recent positive shift in momentum may have further legs.

Analysts said that a better-than-expected start to the US earnings season is giving the major indices tailwinds. Ahead, electric car-maker Tesla is set to report earnings after the close.

US equity markets shrugged off data showing that the sales of previously owned homes hit a two-year low in June, having dropped 14.2% YoY from their post-pandemic booming levels last summer. A slowing economy, worsening cost-of-living crisis and a sharp rise in interest rates has hurt the US housing market in recent months.

“Although the outlook is bleak, a vast majority of existing homes sold in June were on the market for less than a month”, said Jeffrey Roach, the chief economist at LPL Financial, as quoted by Reuters. “This indicates core underlying demand for home buying in the midst of a slowing economy”.

Big Tech/Growth Stocks Lead the Charge

The big tech/growth stock dominated Information Technology and Consumer Discretionary GICS S&P 500 sectors led the rally in US equity markets on Wednesday, boosted by stronger than expected Netflix earnings that sent the company’s share price surging. The streaming platform reported that it had lost nearly 1 million subscribers in Q2 but predicted that its subscriber tally would start growing again in Q3.

Netflix’s upbeat outlook for Q3 saw other members of the once-market leading FAANG group rally. FAANG stands for Facebook (now Meta Platforms), Apple, Amazon, Netflix and Google (whose parent company is called Alphabet). Alphabet, Meta and Amazon will all have reported earnings by the end of next week.

Elsewhere, another notable outperforming subsector of the US equity space was semiconductor makers. The Philadelphia Semiconductor index was up over 2.0% on Wednesday, with analysts citing the fact that the US Senate on Tuesday moved forward with legislation aimed at boosting the US semiconductor industry.

In notable individual movers, Merck & Co’s share price dropped after its Keytruda cancer therapy drug failed to meet end-point targets in a late-stage neck and head cancer trial.

Bitcoin Hasn’t Hit Rock Bottom Yet: Is The Crypto Winter Going to End or Has It Only Just Begun?

The price of Ethereum (ETH-USD) has also dropped by nearly 70% over the past three months for the first time in the history of the largest altcoin by capitalization.

The crisis in the cryptocurrency market has led to massive layoffs and liquidations in many large crypto companies, and crypto lending platforms are now under threat of bankruptcy. Coinbase and Crypto.com announced more than 1400 layoffs, the largest crypto investment fund Three Arrows Capital went into liquidation, and lending company Celsius suspended withdrawals for customers.

Mining companies faced difficulties due to falling profitability and began to sell mined Bitcoins to pay their operating costs and cover loans.

External Factor Pressure

The price of Bitcoin is largely correlated with the situation in the US stock market. The stock sell-off has seriously impacted Bitcoin and the crypto market as investors are doing away with risky assets.

In the second quarter, the US Federal Reserve implemented two aggressive interest rate hikes to cope with record-high inflation, fueling fears of a global recession. As a result, the percentage-wise decline in traditional asset indices has reached double-digit values.

The hardest hit were the stocks of high-growth technology names — the Nasdaq Composite dropping by 22.4% in the second quarter and showing its worst quarterly performance over 14 years.

Bitcoin has never experienced such strong pressure from external factors as it is now. Since the beginning of the year, the cryptocurrency has lost 57.3% in price, twice as much as the S&P 500 (-20.6%). Those who bought shares of companies such as PayPal (-64.2%), Netflix (-70%) and Shopify (-77%), suffered more losses. Even classic portfolio strategies in the US are showing their worst performance since the 2008 global financial crisis.

Still Falling

There are no reasons in sight for a change in the global downtrend in the market. From the point of view of macro prospects, a change in the trend for Bitcoin is possible only with the change in the rhetoric of the US Federal Reserve to a friendlier stance towards the stock markets. The prerequisite is the normalization of inflation and the stabilization of the economy.

Even worse, the likelihood of a further price decline is only increasing. In his recent speech to the US Congress, the head of the Fed acknowledged that there is a possibility of a recession. Previously, high growth in food prices against the backdrop of low unemployment was a typical picture on the eve of economic downturns.

The negative sentiment towards digital currencies on the part of regulators was exacerbated by the collapse of the TerraUSD stablecoin, as a result of which global authorities started talking about the shortcomings of the digital currency market and the need for stricter regulation.

No End In Sight?

Improvements in the stock exchange market are unlikely in the near future, which means that the price of Bitcoin in the third quarter will not demonstrate growth. A lot will also depend on geopolitics, new economic measures, prices for commodities, and the results of the elections to the US Congress in early November.

Some experts predict a possible rebound in the price of Bitcoin to $25,000. But, subsequently, there is a high chance that the cryptocurrency will continue to fall and begin a long consolidation in search of price lows below the $10,000 mark. Psychological factors are also playing against Bitcoin.

During a downtrend, positive news does not contribute to cryptocurrency exchange rates growth, while negative news, on the contrary, has a negative effect on the price. New price lows can provoke traders to a new reset of the cryptocurrency throughout the market. On the other hand, it can be an entry point for market newcomers looking to take advantage of the low price.

In many ways, long-term investors are guided by 2024, when the next Bitcoin halving will take place. The price of the coin will most likely update its historical highs after the landmark event, just as it has in the past history of the oldest cryptocurrency.

In any case, it can be quite a risky venture to buy any cryptocurrency now, as top instruments may well lose another 50% to 70% of their current value.

Netflix Falls After Inflation Exceeds Expectations

Key Insights

  • The U.S. reported that inflation reached multi-decade highs in May, putting significant pressure on markets. 
  • Netflix stock underperforms as traders are worried that high inflation will force some consumers to optimize their subscriptions. 
  • Netflix is trading at just 15 forward P/E, but the stock does not look too cheap as earnings estimates will likely move lower in the upcoming weeks. 

Netflix Falls Amid Broad Sell-Off In Tech

Shares of Netflix gained downside momentum together with other tech stocks after the U.S. reported that Inflation Rate increased by 8.6% year-over-year in May. Analysts expected that Inflation Rate would grow by 8.3%.

The high Inflation Rate is a bearish catalyst for Netflix stock for several reasons. First, the Fed will be forced to raise the rate aggressively in order to curb inflation. This is bearish for tech stocks in general.

Second, Netflix may face additional problems as consumers analyze their budgets amid high inflation and cut “unnecessary” subscriptions.

What’s Next For Netflix Stock?

Analyst estimates for Netflix have been moving lower after the release of a disappointing quarterly report in April. Currently, the company is expected to report earnings of $10.91 per share in 2022 and $11.97 per share in 2023, so the stock is trading at 15 forward P/E.

While such valuation levels may look cheap for Netflix, traders should keep in mind that the company’s growth is slowing down. In addition, the situation in the economy is worse than previously expected, which could hurt Netflix’ financial performance.

In this light, it remains to be seen whether speculative traders will rush to buy Netflix stock at current levels. This year, the stock touched lows near the $163 level, and a broad sell-off in the general market may push Netflix back to these levels.

To keep up with the latest earnings updates, visit our earnings calendar.

Walt Disney Near Two-Year Low Ahead of Report

Dow component Walt Disney Co. (DIS) reports Q2 2022 results next week, with analysts looking for a profit of $1.19 per-share on $20.04 billion in revenue. If met, earnings-per-share (EPS) will mark a 51% profit increase compared to the same quarter last year, when renewed Covid restrictions delayed reopening plans. The stock rallied to 157 after beating Q1 estimates in February but that buying spike marked the highest high in the last three months, ahead of a major decline that’s relinquished 25% of its value.

Politics vs. Profits

The Mouse has lost nearly 45% in two months since posting an all-time high above 200 in March, close to repeating 2020’s 49% somersault. Worse yet, the company is entangled in hot-button social justice issues, practically ensuring that half of its diverse customer base is angry with its actions. That’s no way to protect an American brand that’s defined wholesome family entertainment since “Steamboat Willie” was released in 1928.

Disney rallied in 2020 on the rapid growth of its streaming service but recent subscriber numbers have been mixed, for the same reason that Netflix Inc. (NFLX) recently warned about subscriber losses in the second quarter. Many who were stuck at home with kids in the first year of the pandemic subscribed to Disney+ to keep them engaged between Zoom school sessions. That phenomenon ’pulled forward’ future sales, generating a classic saturated market for streamers.

Wall Street and Technical Outlook

Wall Street has been asleep at the wheel during the Disney decline, generating an ‘Overweight’ consensus based upon 21 ‘Buy’, 2 ‘Overweight’, and 8 ‘Hold’ recommendations. Worse yet, price targets currently range between a low of $130 and a Street-high $229 but the stock will trade on Friday more than $20 below the low target. This huge disconnect highlights the failure of analysts to measure the financial impact of the Netflix warning and social justice controversy.

Walt Disney finally cleared 2015 resistance at 122 in December 2020, entering a brief uptrend that hit an all-time high at 203.02 in March 2021. The subsequent decline sliced through the 2019 high in January 2022, signaling a failed breakout that’s dropped the stock to levels first struck in April 2015. Disney pays no dividend so that horrific performance translates into a zero seven-year return, making it one of the Dow’s worst performers.  Accumulation has dropped to a 10-year low at the same time, further darkening the long-term outlook.

Catch up on the latest price action with our new ETF performance breakdown.

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

Market Volatility – Traders Must Adapt Or Risk Losing Their Shirts

Global money is continuing to flow into the US Dollar making it one of the primary safe-haven trades.  This may eventually trigger a broader and deeper selloff in U.S. stocks. As the USD continues to strengthen corporate profits for US multinationals will begin to disappear.

It’s imperative to assess your trading plan, portfolio holdings, and cash resources. Experienced traders know what their downside risk is and adapt as needed to the current market environment.

If you still have money invested in Amazon, Netflix, PayPal, or one of the many other stocks that are sinking fast there is no easy way out. Your options are:

  1. Hold tight and “hope” for a rally to recover part of your money.
  2. Reduce some of your position to “limit your downside” in case the bottom really falls out, and then sell the balance after a bounce of 5-8%.
  3. Move to cash, “bite the bullet”, get a good night’s sleep, take a break, reassess, and live to come back and trade another day.

NASDAQ Enters Bear Market Territory

The NASDAQ peaked at around 3.1618% of its Covid 2020 high-low range the week of November 21, 2021.

  • THEN – the QQQ ETF’s first swing down was -21% over a 16-week period (4 months).
  • THEN – a brief 3-week rally, retraced around 61.8%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: QQQ – 23.32% from its peak and -21.27% YTD is in a bear market.

QQQ • Invesco QQQ ETF Trust • NASDAQ • Weekly

market volatility - QQQ chart

AMAZON Breaking Down -35%

Amazon AMZN peaked at around 3.1618% of its Covid 2020 high-low range the week of July 12, 2021.

  • THEN – AMZN made a double top the week of November 15, 2021.
  • THEN – the first swing down was -28.91% over a 16-week period (4 months).
  • THEN – after a brief 4-week rally, retraced a little more than 61.8% of its initial downswing.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: AMZN -35.74% from its peak and -25.39% YTD is in a bear market.

AMZN • AMAZON.COM, INC. • NASDAQ • Weekly

market volatility - amazon chart

Netflix Plummets -72% In 5 Months

Netflix NFLX peaked at around 2.382% of its Covid 2020 high-low range the week of November 15, 2021.

  • THEN – NFLX’s first swing down was -17% over a 5-week period.
  • THEN – a brief 3-week rally, NFLX retraced only 25%.
  • THEN – the second swing down was -43% over a 4-week period.
  • THEN – only less than a 2-week rally retraced around 33%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: NFLX – 72% from its peak and -68.40% YTD is most definitely in a bear market.

NFLX • NETFLIX, INC. • NASDAQ • Weekly

market volatility - netflix chart

PAYPAL Drops -73% In 9 Months

PayPal PYPL peaked at around 5.1618% of its Covid 2020 high-low range the week of February 16, 2021.

  • THEN – PYPL put in a double top the week of July 26, 2021.
  • THEN – the first swing down was -14% over a 4-week period.
  • THEN – a brief 4-week rally, retraced about 61.8%.
  • THEN – the second swing down was -39% over a 14-week period (3.5 months).
  • THEN – a 6-week sideways rally retraced only around 10%.
  • THEN – resumed its downtrend by taking out its previous low.

THEREFORE – according to the -20% Bear Market Rule: PYPL – 73% from its peak and -53.39% YTD is most definitely in a bear market.

PYPL • Paypal Holdings, Inc. • NASDAQ • Weekly

market volatility - paypal chart

Drawdowns Have a Critical Impact

We need to remember the larger the loss the more difficult it is to make up. A loss of 10% requires an 11% gain to recover, however, a 50% loss requires a 100% gain to recover, and a 60% loss requires an even more daunting 150% gain to simply return to break even.

Recovery time also varies significantly depending upon the magnitude of the drawdown. A 10% drawdown can typically be recovered in weeks or a few months while a 50% drawdown may take several years to recover. Depending on a trader’s age they may not have the time to wait on the recovery nor the patience. Therefore, successful traders know it’s critical to keep their drawdowns within reason as most of them this principle the hard way!

Prepare yourself for Market Volatility

Especially in times like these, traders must understand where opportunities are and how to turn this knowledge into profits. As our models generate new information about trends or a change in trends, we will communicate these signals expeditiously to our subscribers and to those on our trading newsletter email list. Our core objective is to protect our valuable capital while identifying suitable risk vs reward opportunities for profits in new and emerging trends.

What Strategies Can Help You Navigate the Current Market Trends?

Learn how we use specific tools to help us understand price cycles, set-ups, and price target levels in various sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, we expect very large price swings in the US stock market and other asset classes across the globe. We believe the markets have begun to transition away from the continued central bank support rally phase and have started a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern begin to drive traders/investors into Metals and other safe-havens.

Historically, bonds have served as one of these safe-havens, but that is not proving to be the case this time around. So if bonds are off the table, what bond alternatives are there and how can they be deployed in a bond replacement strategy?

We invite you to join our group of active traders and investors to learn and profit from our three ETF Technical Trading Strategies. We can help you protect and grow your wealth in any type of market condition by clicking on the following link: www.TheTechnicalTraders.com

Chris Vermeulen
Chief Market Strategist
Founder of TheTechnicalTraders.com

Netflix Is Down By 39%, Here Is Why

Key Insights

  • Netflix stock dives after the company reports that net subscribers decreased by 200,000 in Q1 2022. 
  • The company’s subscriber forecast for Q2 2022 shocks the market. 
  • Netflix’ growth story is busted, and the company needs to come up with positive catalysts to break the current downside trend. 

Netflix Stock Collapses As The Company Predicts A Loss Of 2 Million Subscribers In Q2 2022

Shares of Netflix found themselves under strong pressure after the company released its first-quarter report. Netflix reported revenue of $7.87 billion and earnings of $3.53 per share, beating analyst estimates on earnings and missing them on revenue.

The market focused on the company’s subscriber data as Netflix said that it lost 200,000 subscribers in Q1 2022. More, the company believes that net subscribers will decrease by as much as 2 million in the second quarter of 2022.

The market is clearly shocked by this news, and Netflix stock is down by 39% during the current trading session. Other stocks in this market segment, like Disney  and Paramount, are also moving lower.

What’s Next For Netflix Stock?

Netflix has been a classic growth stock for years, so investors were focused on the company’s subscriber numbers and potential revenue opportunities rather than the company’s valuation.

Currently, analysts expect that Netflix will report earnings of $10.96 per share in 2022 and earnings of $14.17 per share in 2023, so the stock is trading at 15 forward P/E.

Such valuation levels look cheap for one of the leading tech stocks, but earnings estimates have been moving lower in recent months and they will decline after the earnings report.

Recent market action shows that tech stocks get severely punished if the market has doubts about their ability to grow. Examples include Roku (from $490 to $98), Zoom (from $588 to $95), Peloton  (from $171 to $20).

In this light, it remains to be seen whether speculative traders will rush to buy Netflix shares after the huge pullback which took the stock from the $700 level to the $215 level.

Netflix promised to monetize shared passwords and explore a move into advertising, but the company will have to come up with tangible evidence of the success of such initiatives before the market is ready to view it as a growth stock again.

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

A Volatile Week Ahead for Financial Markets?

European markets opened lower this morning due to the deepening crisis in Ukraine, with the caution likely to find its way back to US markets this afternoon. In the currency space, the mighty dollar rose to a fresh two-year high during early trade, supported by rising treasury yields and Fed hike bets. Gold slipped after almost kissing $2000 in the previous session, while oil benchmarks steadied after jumping on Monday.

Despite the public holiday in most of Europe yesterday, this is shaping up to be another volatile and eventful week for global markets. The latest comments from the World Bank have added to the cocktail of caution that will most likely influence sentiment over the next few sessions.

The bank cut its global growth forecast for 2022 by nearly a full percentage point to 3.2% from its previous estimate of 4.1%, thanks to the war in Ukraine, soaring inflation, and the lingering effects of Covid-19. Later today, the International Monetary Fund (IMF) will release its updated global economic outlook with markets expecting a downgrade for growth this year. Such a development may hit investor confidence, sweetening appetite for safe-haven assets.

On the earnings front, Johnson & Johnson and insurance company, Travelers will report their latest results before the opening bell. Streaming giant Netflix will release its earnings after the market close. Traders will also focus on speeches from financial heavyweights Fed Chair Jerome Powell and ECB President Christine Lagarde later this week.

Dollar Flexes Muscles Across the FX space

The dollar tightened its grip on its throne this morning by rising to a fresh two-year high as investors braced for more aggressive U.S rate hikes. Markets have fully priced in a 50bp rate hike at the Fed’s May meeting, with the odds of another half-point rate hike in June very high. Given how the dollar has appreciated against every single G10 currency this month, bulls are certainly in a position of power to drive prices higher.

When considering how the week ahead will be filled with more speeches from Fed officials, this could fuel upside gains if they all sing a hawkish tune. Indeed, we heard from arch-hawk Bullard overnight who signaled an openness to a 75bp hike. The dollar index (DXY) has the potential to challenge 103.00 if a solid daily close above 101.00 is secured.

Commodity Spotlight: Gold

After rallying within a hair’s length of $2000 in the previous session, gold is trading back around $1974 as of writing. With numerous competing themes likely to influence market sentiment this week, gold may find itself pulled and tugged by conflicting forces. Heightened geopolitical risks and global growth concerns could trigger risk aversion, sending investors rushing towards gold’s safe embrace. However, an appreciating dollar, rising Treasury yields, and Fed hike expectations may create multiple obstacles down the road.

Looking at the technical picture, gold has the potential to trend higher, but prices seem to be forming another range. Support can be found at around $1960 and resistance at $2000. A move back below $1960 could trigger a selloff towards $1920. Alternatively, a solid breakout above $2000 may open the doors towards $2009, $2015, and $2050, respectively.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Sellers Lock and Load Ahead of Netflix Report

Netflix Inc. (NFLX) reports Q1 2022 results after Tuesday’s closing bell, with analysts projecting a profit of $2.92 per-share on $7.95 billion in revenue. If met, earnings-per-share (EPS) will mark a 21% profit decline compared to the same quarter in 2021, when pandemic restrictions added to subscriber growth. The stock collapsed in January, posting a 21% sell gap after lowering Q1 guidance to just 2.5 million new subscriber additions.

Is Slow Growth Permanent?

Analysts have raised guidance to 2.8 million during the quarter, well below previous estimates of 5.7 million. That number could be over-optimistic, given price hikes, industry saturation, loss of some international markets, and broad macro headwinds that have impacted consumer buying decisions.  Adding to risk, Q2 marks the streaming giant’s historically weakest quarter, with the onset of spring encouraging folks to engage in more outside activities.

Monness Crespi Hardt analyst Brian White offered a somber preview of the report, noting that “Although the content on Netflix has been exceptional over the past couple of years, nefarious forces appear to be lurking beneath the surface of Netflix’s post-lockdown recovery, either in the form of a slower-than-expected healing process after the pandemic-driven pull forward, a weaker-than-expected global economy, or a platform that has simply hit a near-term growth wall.”

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 21 ‘Buy’, 3 ‘Overweight’, 16 ‘Hold’, and 2 ‘Underweight’ recommendations. In addition, two analysts recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $330 to a Street-high $700 while the stock is set to open Monday’s session just $10 above the low target. It pays to be skeptical about these ratings, given the chronic failure of analysts to accurately predict slowing subscriber growth.

Netflix broke out above 2018 resistance near 400 in April 2020, entering an uptrend that stalled above 575 in July. It cleared that barrier in September 2021, posting an all-time high at 700.99 in November, ahead of a downturn that failed the breakout about two weeks before January’s horrific Q4 report. The stock bounced after falling to a two-year low in March, but the uptick failed to end the string of lower highs and lower lows. In turn, this bearish price action exposes additional downside through the 300 level.

Catch up on the latest price action with our new ETF performance breakdown.

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

Netflix Shareholders Looking For a Lift

Netflix Inc. (NFLX) shareholders hope for a big rally in reaction to the Q1 2022 earnings report on April 19, still shell-shocked after the first quarter’s massive sell gap and 35% haircut. The stock has carved decent upside since March’s two-year low but price action still hasn’t mounted a single level broken in the mini-crash. Accumulation has settled at 2019 levels at the same time, when the streaming giant was trading in the 280s.

Looking at Growth Estimates

Market players will be squarely focused on subscriber growth, acquisition costs, and geographical sales, looking for a sizable uptick in the 221.8 million customers on board at the end of 2021. It’s estimated that Netflix has penetrated 29% of the world’s broadband users and 33% of Pay TV subscribers. A small increase in these metrics would have a massively positive impact on revenue but each point requires huge effort in our ultra-saturated streaming market.

J.P. Morgan analyst Doug Anmuth has an ‘Overweight’ rating and lofty $605 target on the stock. He expects 300 million subscribers worldwide by 2025, marking an addition of 79 million subs in just three years. He expects Asia Pacific to grow at a rapid pace, with just 17% of potential customers now subscribed to the service. Other international markets could cancel out slowing growth in the U.S.A. and Canada, with projections for an increase of 27 million subs into 2025.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating, based upon 21 ‘Buy’, 3 ‘Overweight’, 16 ‘Hold’, 2 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $330 to a Street-high $700 while the stock is set to open Friday’s session about $48 above the low target. This placement looks accurate, given slowing growth and a lingering hangover after windfall sub additions in the first year of the pandemic.

Netflix broke out above the 2018 peak at 423 in April 2020, entering a powerful uptrend that stalled in the 570s in July. It mounted that barrier in August 2021, lifting in a vertical wave ending at 701 in November. It failed the August 2021 breakout in January 2022 and the April 2020 breakout after missing earnings two weeks later. A March breakdown through the January low near 350 failed, yielding a short-term buying signal that’s still in force.

Catch up on the latest price action with our new ETF performance breakdown.

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

Indie Movie Targets NFTs for Fund Raising

Key Insights:

  • Indie film director Miguel Faus turns to the NFT market to fund his debut film.
  • Independent filmmakers see NFTs and DAOs as a new avenue to fund films.
  • BlockbusterDAO, Quentin Tarantino, and platform FF3 have led the way.

NFT activity has been rampant since the start of the year. The surge has been industry agnostic, with music, film, fashion, and art taking a greater interest in digital assets and the Metaverse.

It hasn’t just been NFTs and the Metaverse that have seen activity spike. This year, DAOs have become another source of fund-raising.

Indie Movie Makers Find Ideal a Partner in NFTs

Historically, major film studios have called the shots in the movie industry. However, independent filmmaking has been on the rise in recent years, supported by streaming platforms such as Netflix Inc., Hulu, Disney+, and Prime Video. Streaming platforms have given independent film audiences access.

The latest Indie film to go NFT is reportedly ‘Calladita.’ Director Miguel Faus has turned to crypto to fund his debut feature film.

Crowdfunding for ‘Calladita’ commences on 2nd March. NFTs and other rewards are on offer to those who contribute. In addition, financiers of the movie are to receive NFTs that will include stills and videos.

One film character is an art gallery owner who has an NFT collection. Backers of the movie can have their NFTs displayed as part of the NFT collection shown in the film.

Web3 and the End of Film as We Know It

Since the start of the year, several events suggest a seismic shift in the film industry.

Quentin Tarantino went ahead with an auction of 7 NFTs that included never-seen-before footage from Pulp Fiction. Tarantino went ahead with the auction despite a Miramax lawsuit. The first of the seven “TarantinoNFT” sets, based on the Ethereum (ETH) blockchain, fetched $1.1m in January before Tarantino hit pause due to market volatility.

While Tarantino was not raising money for an indie film, news of a BlockbusterDAO drew plenty of interest in late December. The DAO is looking to revolutionize the film industry by turning Blockbuster Video into the “first-ever DeFilm (Decentralized) streaming platform and a mainstay of both Web3 brands and products”.

One other platform also looking to revolutionize the film industry is FF3. FF3 aims to give filmmakers a platform to finance movies with NFTs.

Aligned with Miguel Faus’s vision, investors would have ownership of collectible NFTs that owners could sell in the NFT marketplace. On FF3, investors would also have a share of film revenues.

For indie moves, cryptos, NFTs, and new platforms could deliver a new era for the broader film industry.

The highest-grossing independent film of all time was reported to be Mel Gibson’s 2004 “The Passion of the Christ,” which had worldwide ticket sales of $622.3m, at the time of release and a production budget of just $25m, fully funded by Mel Gibson himself.

ViacomCBS Sells Off After Mixed Quarter

ViacomCBS Inc. (VIAC) is trading lower by more than 11% in Tuesday’s pre-market after posting a Q4 2021 profit of $0.26 per-share, missing estimates by $0.19. Revenue beat expectations by more than $500 million, rising 16.4% year-over-year to $8.0 billion. Paramount+ and Showtime streaming services added 9.4 million subscribers, reaching a global total of 56 million. New subs beat 6.4 million estimates by a wide margin. The free Pluto service posted strong growth as well, adding 10 million new users.

Investments Overpower Revenue Growth

The cost to obtain subscribers rose, similar to headwinds faced by rivals Netflix Inc. (NFLX) and Walt Disney Co. (DIS), who are also chasing a dwindling pool of potential customers. The company failed to disclose bottom line results for its streaming business, leading analysts to conclude the divisions are still losing money. That isn’t good news because VIAC profits remain dependent on stagnating legacy media that includes Nickelodeon, MTV, and Comedy Central.

KeyBanc Capital Markets analyst Brandon Nispel upgraded the stock to ‘Sector Weight’ ahead of the report, simultaneously sounding the alarm about tough market conditions. As he notes “VIAC fundamentals going forward are poor and expectations are high for EBITDA/FCF, both of which are likely to decline in 2022 given ramping streaming investment. However, we worry that accelerating subscriber growth and breakdown of profitability between legacy Media and DTC could lead to improving sentiment and overenthusiasm could ensue à la 2021.”

Wall Street and Technical Outlook

Wall Street consensus stands at a modest ‘Hold’ rating, based upon 10 ‘Buy’, 1 ‘Overweight’, 13 ‘Hold’, 0 ‘Underweight’, and 3 ‘Sell’ recommendations. Price targets currently range from a low of $32 to a Street-high $67 while the stock is set to open Tuesday’s session on top of the low target. This dismal placement highlights investor dissatisfaction with ViacomCBS’s progress-to-date, fueled by the 69% decline since the stock topped out at 102 in March 2021.

ViacomCBS was created in December 2019 by the merger of Viacom and CBS, keeping the old CBS chart going forward. It rose more than 60 points into March 2021, and turned tail, crashing 60% in just four sessions. Aggressive sellers returned in October after six months of sideways action, breaking support in the upper 30s. A test at the 200-day moving average has failed twice, giving way to a selling spiral that could now break the 2021 lows in the upper 20s.

Catch up on the latest price action with our new ETF performance breakdown.

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

Coinbase Welcomes Former SEC Official Scott Bauguess

Regulation is very important when it comes to new investment assets, such as cryptocurrencies because it gives investors regulatory clarity. 

The U.S. Securities and Exchange Commission (SEC) ex-employee announced on his Twitter account that yesterday was his first day at Coinbase. He is now the new VP for Global Regulatory Policy in the cryptocurrency exchange, as you see below:

In his new position, he will work with the authorities in order to have a better regulatory environment for new investors that want to enter the crypto world.

Coinbase keeps investing in its global adoption, last Sunday, Coinbase paid $14 million on a commercial ad during the Super Bowl game. 

The ad was a QR bouncing for 1 minute that gets you to a Coinbase’s webpage. The commercial got so much attention that the ad got 20 million visits in just 1 minute and crashed the website, but moments later Coinbase announced that they were back online.

About Scott Bauguess

Scott Bauguess graduated in 1992 as an Electrical Engineer from the University of Illinois Urbana-Champaign. 

His previous experience before Coinbase was working 12 years in the SEC.

He was the Deputy Director of the Division of Economic and Risk Analysis for 6 years. Before that, he worked as an Assistant Director and as a Senior Financial Economist in the SEC.

In his earlier days, he worked six years as an electrical engineer at Motorola Solutions. Then he was a Doctoral Candidate at Arizona State University for five years. 

Besides his new position at Coinbase, he is a faculty member at the University of Texas’s McCombs Business School.

It’s Not the First Time That a Former SEC Employee Joins Coinbase

Last month, Thaya Knight, the former counsel to Commissioner Elad Roisman at the SEC, joined Coinbase to work as its senior public policy manager. Knight was also the counsel of the SEC Commissioner Hester Peirce between 2018 and 2019.

Earlier this month, Brian Rocha, a former Netflix, Warner Bros, and The Walt Disney Company employee joined Coinbase as the new Head of Content Strategy. 

In September 2021, Shalin Pei, a former Facebook employee, joined Coinbase as its Senior Product Design Manager.

Considering the huge attention of Coinbase’s Super Bowl commercial, there is no doubt Coinbase will keep growing.

Why Snap Stock Is Up By 47% Today

Snap Stock Rallies After Strong Quarterly Report

Shares of Snap jumped after the company released its fourth-quarter report. Snap reported revenue of $1.3 billion and adjusted earnings of $0.22 per share, easily beating analyst estimates on both earnings and revenue. Snap stated that 2021 was its first full year of positive operating cash flow and free cash flow.

Daily active users (DAUs) totaled 319 million, up 20% on a year-over-year basis. This was a material success compared to the recent report from Meta Platforms, which showed a decline in DAUs and led to a major sell-off of Meta stock.

The average revenue per user (ARPU) increased from $3.49 in Q3 2021 to $4.06 in Q4 2021, serving as an additional bullish catalyst for Snap stock.

Yesterday, Snap stock was under significant pressure as traders sold the company’s shares “in sympathy” with the sell-off in Meta stock. However, Snap’s quarterly report was so strong that the stock gained more than 45% in just one trading session.

What’s Next For Snap Stock?

Snap’s gains look impressive, but traders should keep in mind that the company’s shares touched highs near the $83 level in September 2021, so the stock is still down by more than 55% from its all-time high levels.

In 2022, Snap is expected to report earnings of $0.53 per share, so the stock is trading at 68 forward P/E. Earnings estimates will likely move higher after the strong earnings report, but the stock will still remain in the high-PE zone.

In this light, the near-term performance of Snap stock will depend on whether the market is ready to buy into high-PE stocks again. Recent weeks have been volatile as traders were worried about high inflation and higher Treasury yields.

The yield of 10-year Treasuries is already close to the 2.00% level, which could put more pressure on expensive tech stocks. The recent sell-offs in high-profile names like Meta Platforms, Netflix, and PayPal have also hurt sentiment. Thus, it remains to be seen whether traders will be ready to push Snap stock higher after the strong one-day move.

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

Best Oversold Stocks to Buy for February 2022

At my research firm, MAPsignals, we track the Big Money looking for trends. We believe Big Money analysis can alert you to market and sector trends. Here’s what daily buys and sells look like over the last year (clearly the selling is deepening):

See the red bars? Those are stocks we believe are getting sold. When red bars run rampant, good names can get crushed. They can become what I call “oversold.”

And that can mean opportunity. Let’s look at five stocks seeing lots of red that appear to be near-term oversold: SHOP, TSLA, NFLX, NVDA & FB.

Up first is Shopify, Inc. (SHOP), the e-commerce platform.

Even though great companies’ stocks can be volatile, like SHOP over the past year, they’re worthy of attention, especially on pullbacks. Check out Shopify:

  • 1-month performance (-41.8%)
  • Recent Big Money sell signals

To show you what our Big Money signals look like on a stock, have a look at all the buys (green bars) and sells (red bars) in SHOP over the past year:

Clearly, that’s a lot of red, especially in January.

Looking more broadly, Shopify has been a high-quality stock for years. The blue bars in the chart below show when SHOP was likely being bought by a Big Money player and also a high-ranking stock, according to MAPsignals.

When you see a lot of blue, like SHOP did in 2019 and 2020, it can be very bullish:

Source: www.MAPsignals.com

Those blue signals indicate Big Money buying and strong fundamentals. As you can see, Shopify’s recent numbers have been strong, making it worthy of attention at these levels:

  • 1-year EBITDA growth rate (+4.1%)
  • 1-year sales growth rate (+85.6%)

Next up is Tesla Inc. (TSLA), the electric vehicle maker.

Check out these technicals for TSLA:

  • 1-month performance (-24.2%)
  • Recent Big Money sell signals

It’s been getting hammered recently:

But now let’s look long-term. These are the top buy signals Tesla has made since 2016. The Big Money has been on it for a while:

Source: www.MAPsignals.com

Let’s look under the hood. As you can see, Tesla has had rock-solid, double-digit growth in earnings and revenue:

  • 1-year EBITDA growth rate = (+30.7%)
  • 1-year sales growth rate = (+28.3%)

Another growth name is Netflix (NFLX), the streaming entertainment service.

Strong candidates for growth usually have Big Money buying the shares. Netflix has historically had that. But recently, it’s full of red, which could be an opportunity:

  • 1 month performance (-36.9%)
  • Historical Big Money signals

Below are the blue Big Money signals NFLX has made since 2016. That’s the JUICE!

Source: www.MAPsignals.com

Now let’s dig deeper. Netflix’s growth in earnings is impressive, as is its sales growth. I expect more of the same in the coming years:

  • 1-year EBITDA growth rate = (+25.3%)
  • 1-year sales growth rate = (+18.8%)

Number four on the list is NVIDIA Corporation (NVDA), which is a dominant semiconductor company.

Here are the technicals important to me:

  • 1 month performance (-29.1%)
  • Historical Big Money signals

Recently, it’s been a choppy downward slide, with more Big Money selling than buying:

But NVIDIA has been a Big Money darling for a while. Below are the Big Money buy signals for NVDA since 2016:

Source: www.MAPsignals.com

Let’s look under the hood. Despite its price slide, NVIDIA has been growing earnings nicely and generated huge sales:

  • 1-year EBITDA growth rate = (+19.7%)
  • 1-year sales growth rate = (+52.7%)

Our last growth candidate is Meta Platforms, Inc. (FB), formerly Facebook, the social media giant. From September 2021 on, Big Money buying has given way to steep declines:

Check out these technicals:

  • 1-month performance (-14.9%)
  • Historical Big Money signals

Meta is a high-quality stock since it’s made my Top 20 report. As you can see below, it’s been a Big Money favorite since 2016. Right now, it’s on a pullback and could be an opportunity.

Source: www.MAPsignals.com

Now let’s look below the surface a bit. Earnings have been growing decently, and there’s been sizeable sales growth:

  • 1-year EBITDA growth rate = (+3.3%)
  • 1-year sales growth rate = (+21.6%)

The Bottom Line

SHOP, TSLA, NFLX, NVDA & FB represent the top oversold stocks for February 2022. They’ve been sold a lot lately…perhaps too much. Strong, fundamentally-sound stocks seeing near-term sell signals are worthy of extra attention because of their long-term potential.

To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com

Disclosure: the author holds long positions in TSLA & NFLX in personal accounts and NFLX in managed accounts.

Investment Research Disclaimer

https://mapsignals.com/contact/

 

Why Netflix Stock Is Up By 8% Today

Netflix Stock Rallies After Analyst Upgrade

Shares of Netflix gained strong upside momentum and moved back above the $400 level after an upgrade from Citi analysts.

While the analyst upgrade served as a material driver for Netflix stock, it should be noted that other tech stocks are also performing well today. For example, Tesla stock is up by 7% while NVIDIA stock is gaining 4% during the current trading session.

It looks that traders have decided to pick up shares of oversold tech giants that have been severely punished during the recent sell-off in the tech space, which was triggered by rising Treasury yields. While the yield of 2-year Treasuries stays close to recent highs, the market’s appetite for risk is growing, and traders move back to fast-growing tech companies.

What’s Next For Netflix Stock?

Netflix stock has found itself under serious pressure after the company released its quarterly report. The company reported revenue of $7.71 billion and earnings of $1.33 per share, easily beating analyst estimates. However, the company’s subscriber additions missed analyst estimates, causing a massive sell-off which pushed the stock from the $520 level to the $380 level.

Analysts expect that Netflix will report earnings of $10.96 per share in 2022, so the stock is trading at roughly 38 forward P/E which is not cheap. In addition, earnings estimates have been cut materially after the recent report, and it remains to be seen whether analysts will continue to believe in the fast growth of Netflix.

Back in November, Netflix stock made an attempt to settle above the $700 level, so it’s not surprising to see that speculative traders decided to pick some shares when they traded near the $400 level. However, the stock is not cheap even after the massive sell-off, and its near-term dynamics will depend on whether the market is ready to move funds back into high-PE growth stocks.

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

Netflix Grinding Out Long-Term Top

Netflix Inc. (NFLX) reports Q4 2021 results after Thursday’s closing bell, with market watchers expecting the streaming service to post a profit of $0.82 per-share on $7.71 billion in revenue. If met, earnings-per-share (EPS) will mark a 31% decline compared to the same quarter last year, when social distancing underpinned subscriber growth. The stock fell 1% after warning about Q4 results in October but recovered quickly, posting an all-time high about one month later.

Hit or Miss Entertainment Pipeline

Analysts are worried that creative execution remains ‘predictably erratic”, compounded by the high volume of new releases. Sadly, for every “Squid Game” mega-hit, Netflix has produced a treasure-trove of unwatchable garbage like the quickly cancelled “Cowboy Bebop”.  In addition, expensive one-off releases that include the poorly-reviewed ‘Red Notice’ have attracted a generous number of eyeballs but are showing little power to stoke slumping subscription rates.

The Benchmark Company analyst Matthew Harrigan reiterated his ‘Sell’ rating recently, warning that price increases could adversely impact bottom line growth, As he notes, “Valuation is vulnerable to inflationary expectations, given limited immediate free cash flow and possible consumer recalcitrance in tolerating price increases. All else equal, an increase in anchored inflation expectations to 4% from 2% … would lower our fair 2022 NFLX valuation to $390.”

Wall Street and Technical Outlook

Wall Street consensus now stands at a ‘Moderate Buy’ rating based upon 26 ‘Buy’, 7 ‘Overweight’, 10 ‘Hold’, 1 ‘Underweight’, and 3 ‘Sell’ recommendations. Price targets currently range from a low of $342 to a Street-high $800 while the stock is set to open Thursday’s session about $180 below the median $700 target. This poor placement highlights Main Street apathy due to high valuation, slowing subscription growth, and the broad rotation out of growth plays.

Netflix broke out above 2018 resistance at 425 in April 2020 and entered a powerful uptrend that topped out below 600 in July. That resistance level held into a September 2021 advance that ended just above 700 in November. Price action since that time has been dismal, yielding a failed breakout and persistent downdraft that’s quickly approaching broad support near the July 2020 low. The 18 month return to investors has now dropped to zero, consistent with a long-term top.

Catch up on the latest price action with our new ETF performance breakdown.

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

In The Spotlight – Big Wall Street Banks as the Main Power in S&P 500

Banks’ earnings

Big Wall Street banks are in the spotlight right out of the gate with Goldman Sachs set to release results before markets open. They will be followed by Bank of America, Morgan Stanley, and U.S. Bancorp tomorrow (Wednesday). Bank results got off to a mixed start on Friday. JPMorgan Chase, Citigroup, and Wells Fargo all topped profit estimates for Q4 but JPMorgan and Citi delivered disappointments in other areas.

In particular, investors are nervous about higher expenses that cut into Q4 profits for both JPMorgan and Citi and which both banks forecast would continue to weigh on results in 2022. JPMorgan and Citi also saw -11% decreases in trading revenue, with fixed income trading down by double digits for both.

There are also signs of slowing loan growth that some analysts worry is an early sign of slowing consumer demand for big-ticket items as inflation continues to climb. While banks will eventually benefit from higher U.S. interest rates that are anticipated in the year ahead, a big pullback in consumer lending is a threat to some of the more lofty Wall Street expectations had for the sector in 2022.

Global economy

Globally, not a lot changed over the extended weekend. China might have provided a bit of a surprise with additional monetary easing into a struggling GDP and sagging real estate prices. It’s worth noting, Omicron has now been detected in Beijing for the first time, just three weeks before the city is due to host the Winter Olympics. Now the Chinese are shutting down and suspending the sale of Olympic tickets to the public.

Tensions remain heated between Hong Kong activists and Chinese government officials. North Korea launched its fourth missile test this month. After North Korea’s missile test last week, the US announced sanctions on eight North Korean and Russian individuals and entities for supporting North Korea’s ballistic missile programs.

Tensions between the U.S. and Russia seem to be headed in the wrong direction with Russia over the weekend moving troops and equipment into Belarus for joint military exercises.

The so-called “Allied Resolve” drills are set to take place near borders with NATO members Poland and Lithuania, as well as Ukraine where Russia has maintained its alarming military presence.

Most U.S. military experts don’t really think Russia has any real intentions of invading Ukraine or any other EU country. However, Western countries also have increased their military presence along borders and other strategic locations which increases the chances that a broader conflict could “accidentally” be sparked.

Europe’s gas supplies are also at risk as Russia continues to dangle the threat of cutting them off. Most of the tension stems from Russia’s demand that former Soviet countries be barred from entering NATO, something the U.S. and other NATO allies have refused.

In the USA, we are heading deeper into earnings season and investors are going to be paying close attention to costs and expenses. As I mentioned, late last week, JPMorgan warned that higher expenses and higher spending on hiring in 2022 could create some headwinds.

Looking ahead, it will be interesting to see how many executive teams start providing guidance and warnings that corporate expenses are rising faster than anticipated and what if any damage will be due to profit margins?

Remember, some companies have said they are passing the additional rising costs on to the consumer while other companies are eating a majority of the higher expenses in an attempt to gain more market share.

How the stock market decides to differentiate the strategy and style could greatly impact money flow and valuations. Goldman Sachs, J.B. Hunt, Charles Schwab, Citrix, Concentrix, and Interactive Brokers report earnings today.

Data to watch

Tomorrow we have Alcoa, Bank of America, Kinder Morgan, Morgan Stanley, Procter & Gamble, and United Airlines.

Thursday we have American Airlines, Baker Hughes, Netflix, and Union Pacific.

Then next week we have big names like Apple, Boeing, Caterpillar, McDonalds, Microsoft and Verizon reporting earnings.

Let’s also not forget next week we have the first Fed FOMC meeting of the new year.

With the U.S. Federal Reserve getting ever closer to implementing its first rate hikes, which most anticipate will begin in March, investors are growing less enchanted with some of the high-growth and momentum stocks that saw outsized share price gains last year.

This trend is most evident in the tech-heavy Nasdaq where nearly half of the index’s stocks have fallen by -50% from their recent peaks. The Nasdaq itself is only down by about -7% from its most recent record high. The selloff has been very much concentrated in highly-leveraged companies that have yet to deliver a profit, as the prospect of higher rates reduce future profit potential. Earnings results from these high-fliers will likely be harshly scrutinized as Wall Street tries to separate the “wheat from the chaff,” so to speak.

On the economic data front, Empire State Manufacturing and the NAHB Housing Market are today’s highlights.

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

Markets Wary Of Oil And Bond Yield Highs, As Focus Shifts To Corporate Earnings

Asian shares were a mixed bag on Tuesday due to the absence of cues from Wall Street following a national holiday in the United States. But European and U.S. equity futures are flashing red amid a jump in Treasury yields, as investors brace for the Federal Reserve to raise interest rates four times this year to tame inflation.

Brent crude ventured to its highest level since 2014 due to geopolitical tensions in the Middle East, while gold struggled for direction above $1810. In the currency arena, king dollar pushed higher while the yen weakened this morning after the Bank of Japan concluded a two-day policy meeting with no major changes.

This will certainly be a big week for financial markets as investors juggle the various themes influencing global sentiment. Equity markets will look to company results for some direction as the fourth-quarter earnings season gets into full swing. Reports from the US banks who have so far reported paint a mixed picture with JP Morgan Chase, a financial bellwether, closing down more than six per cent on Friday after the bank said rising costs would curtail profits in 2022 even as it posted record full-year earnings. Heavyweights such as Goldman Sachs and Bank of America, as well as Netflix among many others will be under the spotlight this week.

The burning question on the minds of investors could be what impact rising inflation and the emergence of the Omicron variant will have on final quarter earnings. Should we witness another mixed or disappointing week of results, this could sap more confidence from stock market bulls, especially when considering that the broader S&P500 index is already down over 2% so far this year.

A wild week ahead for the Pound?

The British pound could be injected with volatility this week due to the series of key economic reports and potential political drama at Westminster.

Market expectations already remain elevated over the Bank of England raising interest rates next month, with traders pricing in around an 91% chance of a 25bp rate hike. The argument for higher rates may be reinforced this week if the pending data meets or exceeds forecasts.

On the political front, Prime Minister Boris Johnson remains under pressure to resign over ‘partygate’. Given how it has been reported that as many as 30 letters of no confidence in Boris Johnson have been submitted by Tory MPs, things are bound to get heated. A total of 54 letters of no confidence would have to be submitted to Sir Graham Brady, chairman of the 1922 Committee of backbench MPs, for a vote to be held.

Looking at the technical picture, GBPUSD remains bullish on the daily charts. However, there seems to be resistance around the 200-day Simple Moving Average at 1.3734. A decline towards 1.3600 could be on the cards after such a strong run since the December lows, before bulls snatch back momentum for a push towards 1.3700 and 1.3830.

Commodity spotlight – Oil

Brent crude marched into Tuesday’s session, with prices climbing to fresh seven-year highs as geopolitical tensions bubbled in the Middle East. Iran-backed Yemini fighters claimed to have launched drone strikes on the United Arab Emirates, the third-biggest OPEC producer. Brent is up almost 2% this week and has appreciated close to 13% since the start of 2022. Prices are above $87.70 this morning, with bulls eyeing $88 and $90 as upside targets.

Commodity spotlight – Gold

Gold could be flung into the firing line this week if the dollar regains its mojo and Treasury yields rally. The precious metal has displayed resilience in recent sessions and even took advantage of a softer dollar to push back above $1810.

However, given gold’s zero-yielding nature, the path ahead could be bumpy and perilous for the precious metal as interest rate rises become a reality. Although other factors such as inflation risks and Omicron uncertainty may support gold bugs, the pressure is piling up on gold.

Looking at the technical picture, prices remain within a choppy range. A breakdown below $1810 could open the doors towards $1800, 1786, and $1770. Should $1810 prove to be reliable support, bulls may eye $1831 and $1845.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Best Stocks, Crypto, and ETFs to Watch – Bank of America, Netflix, Ethereum in Focus

Bank of America Corp. (BAC) sold off in sympathy with JPMorgan Chase and Co. (JPM) in Friday’s session, reacting to the Dow component’s surprisingly weak quarterly revenue. A second day of lower prices on Tuesday could set up a strong buy-the-news reaction when BAC reports in Wednesday’s pre-market session. The stock has the highest relative strength in the elite money center group and is nearing a critical test at 2006’s all-time high in the mid-50s.

Netflix Inc. (NFLX) has been sold aggressively in recent weeks, dropping 27% and failing a breakout above resistance at 600. The streaming giant bounced into Friday’s close after announcing an increase in monthly subscription prices. However, the hike is a two-edged sword because subscriber churn (new subs plus cancellations) could escalate, canceling out revenue gains. The company is likely to comment on the decision when it reports Q4 2021 earnings after Thursday’s closing bell.

SPDR S&P Retail ETF (XRT) fell to a 10-month low on Friday after December Retail Sales ex-auto fell 2.3%, compared to expectations for a 0.2% increase. The shortfall, during the critical holiday sales season, suggests that inflation is impacting consumer buying behavior. Even so, retailers reported strong October and November results, stoked by fears that supply chain disruptions could generate empty shelves. Despite that early buying pressure, smart traders will be watching the fund for a sell signal that offers timely short sale profits.

Ethereum (ETH) could be bottoming out after a two-month slide that relinquished 60% of the cryptocurrency’s value. ETH broke out above May resistance at 4,400 in November, failing the breakout just three weeks later. The subsequent decline reached support at the 50-week moving average about one week ago, with that level narrowly aligned at the .618 Fibonacci rally retracement level. Weekly Stochastics remains in a bearish cycle but is nearing the oversold level, with a bullish crossover set to issue an intermediate buying signal.

Dividend paying stocks continue to outperform growth and value plays in 2022 as investors look for ways to protect portfolios from rising inflation. Dow component Proctor & Gamble Co. (PG) could benefit from this rotation when it reports Q2 2022 earnings on Wednesday. The company is expected to earn $1.65 per-share on $20.34 billion in revenue during the quarter, with that profit perfectly matching results during the same quarter last year. PG, which posted an all-time high on Jan. 6, pays a respectable 2.18% annual dividend yield.

Catch up on the latest price action with our new ETF performance breakdown.

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

Key Events This Week: Busy Week of Asian policy Meetings Amid Policy Tightening Angst

Here are the key economic events and data releases to look out for this week:

Monday, January 17

CNH: China 4Q GDP, December industrial production and retail sales
US markets closed for Martin Luther King Jr. holiday

Tuesday, January 18

JPY: Bank of Japan decision
EUR: Germany ZEW survey expectations
GBP: UK November jobless claims, December unemployment
Goldman Sachs Q4 earnings

Wednesday, January 19

EUR: Germany December inflation
GBP: UK December inflation
GBP: Bank of England Governor Andrew Bailey speech
Bank of America Q4 earnings
Morgan Stanley Q4 earnings

Thursday, January 20

CNY: PBOC loan prime rate decision
JPY: Japan December external trade
AUD: Australia December unemployment
EUR: European Central Bank publishes Dec meeting account
USD: US weekly initial jobless claims
US crude oil: EIA inventory report
Netflix Q4 earnings

Friday, January 21

JPY: Japan December inflation
GBP: BOE policy maker Catherine Mann speech, UK December retail sales
EUR: Eurozone January consumer confidence

The potential for the removal of the liquidity punchbowl (aka monetary policy tightening) is dominating the market’s thinking at present.

The strong US CPI report released last week added more pressure on the US Federal Reserve to stat lifting rates earlier than once thought, potentially as soon as March. We’ve had numerous FOMC members recently marking a more hawkish bias to the committee’s views, including notably, the fabled dove Brainard in her Fed chair nomination appearance before the Senate.

Another Fed official, Waller, also mentioned the chance of five rates hikes this year, although he doesn’t favour a 50bp hike in March. It’s worth remembering that it is a US holiday on Monday, so their markets are closed, and the blackout period has started before the next Fed meeting on 26 January so there won’t be any more Committee members to listen out for on the wires.

Company earnings also continue with more bulge bracket US banks releasing their fourth quarter results. US stocks notched their second straight weekly decline, pushed lower by disappointing earnings from financial industry bellwether JPMorgan Chase which has clouded an already mixed outlook for the US economy.

S&P 500 daily chart

Asian policymakers in focus

We kick off the week with Chinese fourth quarter GDP (4% y/y vs. 3.3% est.), as well as December’s industrial production (4.3% vs. 3.7% est.) and retail sales (1.7% vs. 3.8% est.). The full-year GDP came in at 8.1%, slightly above the median estimate by economists but well above the government’s 2021 target of over 6%. Still, the data confirmed that the final quarter was losing momentum but the real test for the domestic economy will come in the first quarter of this year, due to current regional lockdowns on top of the ongoing woes in the property sector.

With this in mind, the PBoC lowered both the one-year medium-term lending facility rate abd the seven-day reverse repurchase rate by 10 basis points respectively, a move not seen in nearly two years, and also injected more liquidity into the financial system via US$110 billion in loans.

The Bank of Japan meeting on Tuesday is also getting some airtime after “sources” said it is thinking of a rate hike at some point beyond this year and debating how to manage the messaging. Inflation is picking up and possibly risks to prices may now be described as “balanced” but hitting the 2% inflation target is still a long way off.

USD/JPY daily chart

UK data to add pressure to the BoE

We get the usual mid-month data dump in the UK with signals about labour market strength, the pace of consumer price inflation and retail sales. These are the last official updates before the BoE meeting on 3 February, with CPI expected to rise above the forecast 5% going forward and a labour marker remaining tight.

GBP/USD daily

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.