SP500 Traders are Trying to Shift Through a Lot of “Noise”

The coronavirus situation in the U.S. is a clear bright spot with several health experts believing the country is close to reaching so-called “herd immunity” and expect to soon see a dramatic drop in new coronavirus cases.

Fundamental analysis

The good news is most people are getting back to normalcy and the economic activity is looking robust. That’s despite many businesses having a difficult time hiring help. As companies are having to offer higher and higher wages there is increasing worry about rising inflation. There is also more talk about the possible implications of looming tax hikes that are expected to pay for some of President Biden’s ambitious economic plans.

An investor note from Goldman Sachs warned that the planned corporate tax hike to 28% could decrease earnings for some of the mega-cap technology companies as much as -9% next year, while S&P 500 earnings overall could take an -8% hit.

The analysts also warned that the “FAAMG” stock complex (Facebook, Apple, Amazon, Microsoft and Google) could be at risk of a year-end selloff if the President’s capital gains tax hike is implemented.

These stocks account for nearly 30% of the S&P 500’s market cap gains over the last five years, meaning investors have earned close to $5 trillion over that time.

Investors may look to take some of those gains in 2021 to lock in the lower tax rate.

Some of the big money players and large funds have shifted to value and more traditional inflationary type plays. While the younger Robinhood and Wall Streets Bets crowd that was once pumping the high-flying tech sector are now looking at buying airline and concert tickets.

As always, you have to pay attention to money-flow and ask yourself who will provide the next round of big buying?

Today’s key economic data will be the Labor Department’s JOLTS report, which could provide a deeper look at what’s going on in the job market. Federal Reserve officials are also making the rounds today with at least five central bankers scheduled to speak, including Federal Reserve Governor Lael Brainard. Earnings on tap include Electronic Arts, Honda, Palantir, Toyota, and Vodafone

Continued Talk of Commodity Supercycle

The price of iron ore hit a record high on Monday in the latest sign of booming commodity markets, which have gone into overdrive in recent weeks as large economies recover from the pandemic. The steelmaking ingredient, an important source of income for the mining industry, rose 8.5 per cent to a record high of almost $230 a ton fueled by strong demand from China where mills have cranked up production. Other commodities also rose sharply, including copper. Keep in mind, in the past 12-months, corn and crude oil prices are up +95%, soybean oil up +125%, silver up +75%, lean hogs up +54%, cotton up +47%, sugar up +57%, lumber up +350%, stock market up +43%, Bitcoin up +215%.

Technical analysis

Yesterday’s levels played very well. SP500 is trading in a bearish zone now. The upper range is 4156. Middle-strength levels within this zone – 4124, 4092 and 4060. Weal levels – 4140, 4108 and 4076. Neutral zone 4156 – 4221. Middle strength level – 4188.5. Weak levels – 4172.25 and 4204.75. Keep in mind SP500 is close to first daily support around 4100. In order to place a trade, always watch price action at mentioned levels. Once level turns into support/resistance, consider going long/short.

Apple, Facebook Drive Nasdaq Futures Higher as Earnings Roll In

By Shivani Kumaresan

Apple Inc gained 2.7% in premarket trading after posting sales and profits ahead of Wall Street estimates, led by much stronger-than-expected iPhone and Mac sales.

Facebook Inc jumped 7.3% on beating analysts’ expectations for both quarterly revenue and profit, helped by a surge in digital ad spending during the pandemic, along with higher ad prices.

Other megacap companies, including Microsoft Corp, Alphabet Inc and Netflix Inc, rose between 0.2% and 1.1%.

Official data is likely to show that the number of Americans filing new claims for jobless benefits rose last week, while the Commerce Department is expected to report a 6.1% rise in first-quarter GDP.

More earnings reports from Dow components rolled in, with Caterpillar Inc rising 2.8% after the heavy equipment maker reported a rise in adjusted first-quarter profit. Drugmaker Merck & Co Inc, however, slid 3.2% on posting a 1.2% fall in quarterly profit.

Global shares extended gains after the Federal Reserve said it was too early to consider rolling back emergency support for the economy, and U.S. President Joe Biden proposed a $1.8 trillion stimulus package.

At the conclusion of the U.S. central bank’s latest policy meeting on Wednesday, Fed Chair Jerome Powell acknowledged the economy’s growth, but said there was not yet enough evidence of “substantial further progress” toward recovery to warrant a change in policy.

At 6:44 a.m. ET, Dow e-minis were up 177 points, or 0.52%, S&P 500 e-minis were up 30.25 points, or 0.72%, and Nasdaq 100 e-minis were up 138.75 points, or 1%.

Shares of electric vehicles companies, including Tesla Inc, Nikola Corp, rose 1.1% and 2.6%, respectively, as sales picked up speed in the first quarter, according to the International Energy Agency.

Amazon.com Inc, Twitter Inc, Mastercard Inc and Gilead Sciences Inc are also expected to report first-quarter earnings later in the day.

(Reporting by Shivani Kumaresan and Shreyashi Sanyal in Bengaluru; Editing by Saumyadeb Chakrabarty)

Futures Hover at Record Levels as Focus Turns to Tech Earnings, Fed

By Medha Singh

Electric carmaker Tesla Inc dropped about 3% in premarket trading after it marginally beat analysts’ expectations for quarterly revenue, helped by a jump in environmental credit sales to other automakers and liquidating some bitcoins.

Focus is now on results from Microsoft Corp and Alphabet Inc when they report after markets close. Apple Inc, Facebook Inc and Amazon.com Inc are slated to report later in the week. The five companies combined account for about 40% of the S&P 500’s market capitalization.

Overall earnings for S&P 500 companies are expected to jump 33.3% in the first quarter from a year earlier, according to Refinitiv IBES data.

The S&P 500 and the Nasdaq ended at record levels on Monday, with the tech-heavy Nasdaq completing a full recovery from its 11% correction that began in February.

Recent data indicating that the U.S. economy was set for a strong rebound, backed by vaccine distributions and unprecedented monetary and fiscal support, has provided much of that support.

The Fed is not expected to change its policy guidance at the end of its two-day meeting on Wednesday but could shine some light on U.S. central bank’s thinking on inflation, bond buying and risks to the financial system posed by soaring asset prices.

At 06:19 a.m. ET, Dow E-minis were down 4 points, or 0.01%, S&P 500 E-minis were up 2.5 points, or 0.06% and Nasdaq 100 E-minis were up 11 points, or 0.08%.

(Reporting by Medha Singh in Bengaluru; Editing by Anil D’Silva)

Earnings to Watch Next Week: Tesla, Alphabet, Microsoft, Facebook, Apple and Amazon.com in Focus

Earnings Calendar For The Week Of April 26

Monday (April 26)

IN THE SPOTLIGHT: TESLA

The California-based electric vehicle and clean energy company Tesla is expected to report its first-quarter earnings of $0.79 per share, which represents year-over-year growth of over 240% from $0.23 per share seen in the same quarter a year ago.

The high-performance electric vehicle manufacturer’s revenue would grow over 70% to $10.2 billion. The electric vehicle producer has beaten earnings per share and revenue estimates by over 60% of the time in the last two years.

“Updating the model for the 1Q deliveries of 184,800 which were over 20% above our forecast. We also made adjustments to our volume forecasts for the remainder of the year to account for the strong start while allowing for potential supply constraints and other factors. The net result is we raise our FY21 delivery forecast by 3% to 809k units,” noted Adam Jonas, equity analyst at Morgan Stanley.

“We note our FY volume is modestly below consensus as we allow for a ‘margin of safety’ given highly fluid supply chain issues impacting the industry. Our forward year volume forecast increases very slightly (approx. 1%) to 1.1mm units. This impact, along with some other minor adjustments to the model lifts our target to $900 from $880 previously. We do not change our bull or bear case valuations at this time.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 26

Ticker Company EPS Forecast
CBU Community Bank System $0.81
BOH Bank of Hawaii $1.18
DORM Dorman Products $1.02
FBP First Bancorp FBP $0.24
PHG Koninklijke Philips $0.29
OTIS Otis Worldwide Corp $0.62
CHKP Check Point Software Technologies $1.49
LII Lennox International $1.29
ACI AltaGas Canada $0.50
CAJ Canon $0.24
TSLA Tesla $0.79
RRC Range Resources $0.27
HTLF Heartland Financial USA $1.14
OMF OneMain Holdings $2.04
AXTA Axalta Coating Systems $0.42
AMKR Amkor Technology $0.41
TNET TriNet $1.32
SSD Simpson Manufacturing $0.92
PCH Potlatch $1.71
WRI Weingarten Realty Investors $0.41
CATY Cathay General Bancorp $0.78
IBTX Independent Bank $1.30
JJSF J&J Snack Foods $0.12
AIN Albany International $0.62
CNI Canadian National Railway USA $0.99
NXPI NXP Semiconductors $2.21
SBAC SBA Communications $2.45
AMP Ameriprise Financial $4.73
ARE Alexandria Real Estate Equities $1.85
SSNC SS&C Technologies $1.10
SUI Sun Communities $1.16
BRO Brown & Brown $0.56
PKG Packaging Of America $1.47
UHS Universal Health Services $2.15
MKSI MKS Instruments $2.17
AGNC American Capital Agency $0.64
CDNS Cadence Design Systems $0.74
MASI Masimo $0.88
RMBS Rambus $0.28
WWD Woodward $0.80
SANM Sanmina $0.82
TOP Topdanmark A/S kr5.74
KOF Coca Cola Femsa Sab De Cv $13.82
BAYRY Bayer AG PK $0.77
FIX Comfort Systems USA $0.56
SCCO Southern Copper $0.85
AMG Affiliated Managers $4.26
TV Grupo Televisa Sab $0.10
EGOV NIC $0.23
TOWN Townebank $0.65

Tuesday (April 27)

IN THE SPOTLIGHT: ALPHABET, MICROSOFT

ALPHABET: The parent of Google and the world’s largest search engine that dominates internet search activity globally is expected to report its first-quarter earnings of $15.45 per share, which represents year-over-year growth of about 57% from $9.87 per share seen in the same quarter a year ago.

The Mountain View, California-based internet giant would post revenue growth of more than 25% to around $42.2 billion. It is worth noting that the company, on average, has delivered an earnings surprise of over 25% in the last four quarters.

Alphabet’s better-than-expected results, which will be announced on Tuesday, April 27, would help the stock hit new all-time highs. Alphabet shares surged more than 30% so far this year. On Friday, the stock closed 2.1% higher at $2,299.93 – close to the record high of $2,304.09.

GOOGL still favorable set up after strong YTD gains. GOOGL has outperformed major indices YTD as investor sentiment turned positive. Our checks have been broadly positive, indicating accelerating momentum in the ad business and sustained strength in Cloud,” noted Brent Thill, equity analyst at Jefferies.

GOOGL remains a top large-cap pick as we believe it should benefit in 2021 from ad spend recovery, pent-up demand for Google Cloud, and call options on Waymo and other non-advertising initiatives.”

MICROSOFT: The Redmond, Washington-based global technology giant would report its fiscal third-quarter earnings of $1.76 per share, which represents year-over-year growth of over 25% from $1.40 per share seen in the same quarter a year ago. The world’s largest software maker’s revenue would rise over 17% to around $41 billion, up from the $35.02 billion a year earlier.

“An improving spending environment drives several sources of potential upside to Q3, most prominently around the hybrid cloud engine (Azure + Server Products) and Windows OEM. Strong positioning for multiple secular trends and an attractive valuation make MSFT a Top Pick in Software,” noted Keith Weiss, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 27

Ticker Company EPS Forecast
PCAR PACCAR $1.29
ENTG Entegris $0.72
NVS Novartis $1.57
CROX Crocs $0.88
MMM 3M $2.25
MSCI Msci $2.29
JBLU JetBlue Airways -$1.68
PII Polaris Industries $1.54
GLW Corning $0.42
HAS Hasbro $0.66
AWI Armstrong World Industries $0.96
UBS UBS Group $0.52
ABB ABB $0.28
BP BP $0.43
UPS United Parcel Service $1.63
ST Sensata Technologies $0.74
CNC Centene $1.65
SYF Synchrony Financial $1.50
IVZ Invesco $0.62
TRU TransUnion $0.80
SCL Stepan $1.43
FELE Franklin Electric $0.39
RTX Raytheon Technologies Corp $0.88
ABG Asbury Automotive $3.58
LECO Lincoln Electric $1.18
ROP Roper Industries $3.32
SHW Sherwin-Williams $1.65
DTE DTE Energy $2.09
FISV Fiserv $1.13
MMC Marsh & McLennan Companies $1.70
GE General Electric $0.02
WM Waste Management $1.00
CEQP Crestwood Equity Partners $0.34
LLY Eli Lilly $2.12
ADM Archer-Daniels Midland $1.00
ECL Ecolab $0.82
PHM PulteGroup $1.19
HUBB Hubbell $1.67
PPBI Pacific Premier Bancorp $0.63
SSTK Shutterstock $0.70
UMBF UMB Financial $1.47
GPK Graphic Packaging $0.25
PSB PS Business Parks $1.67
RNST Renasant $0.63
CHE Chemed $4.20
MANH Manhattan Associates $0.32
USNA USANA Health Sciences $1.58
TXN Texas Instruments $1.56
SYK Stryker $1.98
MDLZ Mondelez International $0.69
MXIM Maxim Integrated Products $0.75
COF Capital One Financial $4.17
TER Teradyne $1.04
PFG Principal Financial $1.35
APAM Artisan Partners Asset Management $1.10
CALX Calix $0.20
VALE Vale $1.01
MATX Matson $1.86
AMGN Amgen $4.00
EIX Edison International $0.67
ENPH Enphase Energy $0.41
SBUX Starbucks $0.52
ATRC AtriCure -$0.41
AMD Advanced Micro Devices $0.44
TRMK Trustmark $0.61
EGP EastGroup Properties $1.39
WSBC WesBanco $0.70
ROIC Retail Opportunity Investments $0.24
OKE ONEOK $0.77
IEX IDEX $1.41
V Visa $1.27
NOV National Oilwell Varco -$0.23
CSGP CoStar $2.40
OLN Olin $1.34
MSFT Microsoft $1.76
BYD Boyd Gaming $0.44
ESS Essex Property $3.04
EQR Equity Residential $0.68
TX Ternium $2.29
EHC Encompass Health Corp $0.80
GOOGL Alphabet $15.45
QTS QTS Realty $0.65
BXP Boston Properties $1.55
UDR UDR $0.48
FTI FMC Technologies -$0.08
GOOG Alphabet $15.45
CHRW C.H. Robinson Worldwide $0.97
FFIV F5 Networks $2.39
FEYE FireEye $0.07
CB Chubb $2.45
TENB Tenable Holdings Inc $0.06
ILMN Illumina $1.36
NAVI Navient $0.78
HIW Highwoods Properties $0.87
AAT American Assets $0.35
JNPR Juniper Networks $0.25
ACGL Arch Capital $0.50
FIBK First Interstate BancSystem $0.73
NCR NCR $0.47
TKC Turkcell $0.17
AJRD Aerojet Rocketdyne $0.46
ZBRA Zebra Technologies $4.39
MKL Markel $12.29
AMX America Movil Sab De Cv Amx $0.33
MSTR Microstrategy -$0.19
VIST Vista Oil Gas $0.07
IBA Industrias Bachoco Sab De Cv $1.54
BSBR Banco Santander Brasil $0.19
SAN Banco Santander $0.11
OMAB Grupo Aeroportuario Del Centro Nort $0.37
NMR Nomura -$0.21
IRBT Irobot $0.06
HSBC HSBC $0.60
ATLCY Atlas Copco ADR $0.40

Wednesday (April 28)

IN THE SPOTLIGHT: FACEBOOK, APPLE

FACEBOOK: The world’s largest online social network is expected to report its first-quarter earnings of $2.35 per share, which represents year-over-year growth of over 37% from $1.71 per share seen in the same quarter a year ago.

The Menlo Park, California-based social media conglomerate would post revenue growth of over 33% to around $23.6 billion. It is worth noting that the company, on average, has delivered an earnings surprise of over 22% in the last four quarters.

“Monetization Potential: We are positive on FB’s monetization roll-out of Instagram as well as FB’s ability to continue to innovate and improve its monetization (Canvas Ads, Dynamic Ads, video). Combined with the high and growing engagement we see monetization upside going forward,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Investing from Position of Strength to Drive Faster Long-Term Growth: We are modeling ~28% GAAP opex (excl. one-time items) growth in 2021, implying an incremental ~$15bn in opex. Our base case model implies opex per employee moderates in ’21 while FB hiring remains roughly flat on an absolute basis. We believe FB will grow EPS at a ~29% CAGR (2019-2022).”

APPLE: The consumer electronics giant would post its second-quarter earnings of $0.99 per share, which represents year-over-year growth of over 54% from $0.64 per share seen in the same quarter a year ago. The iPhone manufacturer would post revenue growth of over 33% to around $77.6 billion.

“We expect the strength of Apple’s broad portfolio of products & services to help re-rate AAPL shares, amplified by today’s product launch event. We forecast Product growth of 43% Y/Y and Services growth of 19% putting us at $80.2B in revs and $1.03 in EPS for the March Q, 4-5% ahead of consensus,” noted Katy Huberty, equity analyst at Morgan Stanley.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 28

Ticker Company EPS Forecast
SHOO Steven Madden $0.19
IPG Interpublic Of Companies $0.16
SNY Sanofi $0.83
GD General Dynamics $2.31
APH Amphenol $0.44
SIRI Sirius XM $0.06
LIVN LivaNova PLC $0.15
SLAB Silicon Laboratories $0.76
HUM Humana $7.21
AVY Avery Dennison $2.01
OSK Oshkosh $1.14
NYCB New York Community Bancorp $0.27
DAN Dana $0.46
MAS Masco $0.66
TEVA Teva Pharmaceutical Industries $0.58
ETR Entergy $1.24
BA Boeing -$1.17
EVR Evercore Partners $2.63
ROL Rollins $0.11
YUM Yum Brands $0.85
PAG Penske Automotive $1.81
BCO Brinks $0.71
R Ryder System $0.58
CIT CIT $0.98
TDY Teledyne Technologies $2.59
TKR Timken $1.20
OC Owens Corning $1.42
SAIA Saia $1.37
SWK Stanley Black & Decker $2.56
MCO Moody’s $2.80
PB Prosperity Bancshares $1.38
BSX Boston Scientific $0.30
GIB CGI Group USA $1.03
CME CME $1.75
ROK Rockwell Automation $2.15
SPOT Spotify -$0.57
GRMN Garmin $0.88
SIX Swiss Exchange -$1.29
IART Integra LifeSciences $0.56
BPOP Popular, Inc. $1.91
BXMT Blackstone Mortgage $0.61
AER AerCap $1.13
LFUS Littelfuse $1.92
VRT Veritas Pharma $0.12
SLGN Silgan $0.71
HELE Helen Of Troy $1.56
HES Hess $0.36
ADP ADP $1.82
NSC Norfolk Southern $2.55
SC Santander Consumer USA $1.45
RJF Raymond James Financial $2.09
PPC Pilgrim’s Pride $0.27
PSA Public Storage $2.70
FORM FormFactor $0.39
PTC PTC $0.72
EQIX Equinix $6.63
VVV Valvoline Inc $0.37
ESI Itt Educational Services $0.32
MXL MaxLinear $0.50
CLR Continental Resources $0.30
BSMX Santander Mexico Fincl Gp Sab Decv $0.17
PDM Piedmont Office Realty $0.47
WCN Waste Connections $0.67
AVB AvalonBay Communities $1.94
PGRE Paramount Group $0.21
AGI Alamos Gold $0.13
EBAY eBay $1.07
MAA Mid-America Apartment Communities $1.61
OI Owens-Illinois $0.28
QCOM Qualcomm $1.67
ALGN Align Technology $2.00
DRE Duke Realty $0.39
NGVT Ingevity Corp $1.07
AZPN Aspen Technology $1.16
NLY Annaly Capital Management $0.26
FB Facebook $2.35
MC Moelis & Company $0.87
NOVA Nova Mentis Life Science Corp -$0.34
MGM MGM Resorts International -$0.86
MTH Meritage Homes $2.52
GRUB GrubHub $0.03
CNO CNO Financial Group $0.50
WERN Werner $0.63
CONE CyrusOne $0.98
AR Antero Resources $0.39
AMED Amedisys $1.43
KRC Kilroy Realty $0.99
EXR Extra Space Storage $1.48
AFL Aflac $1.20
AVT Avnet $0.56
BLKB Blackbaud $0.63
WELL Welltower Inc $0.75
TROX Tronox $0.27
AUY Yamana Gold USA $0.07
AM Antero Midstream Partners $0.22
CNMD CONMED $0.43
CHX ChampionX Corp $0.05
RE Everest Re $4.55
HOLX Hologic $2.62
CDE CoEUR Mining $0.08
MOH Molina Healthcare $3.78
TYL Tyler Technologies $1.31
AXS Axis Capital $0.65
SIGI Selective $0.97
NOW ServiceNow $1.34
CAKE Cheesecake Factory -$0.15
MUSA Murphy USA $0.83
MTDR Matador Resources $0.37
ALSN Allison Transmission $0.90
RNR Renaissancere $0.74
PEGA Pegasystems $0.02
CCS Century Communities $1.52
UCTT Ultra Clean $0.82
TTEK Tetra Tech $0.75
CINF Cincinnati Financial $1.27
F Ford Motor $0.15
ASGN On Assignment $1.10
AAPL Apple $0.99
WH Wyndham Hotels & Resorts Inc $0.25
ORLY O’Reilly Automotive $5.27
ISBC Investors Bancorp $0.29
LOGI Logitech Internationalusa $0.96
SID Companhia Siderurgica Nacional $0.28
YMZBY Yamazaki Baking ADR $1.17
GSK Glaxosmithkline $0.59
LPL Lg Display $0.29
TS Tenaris $0.06
TOTDY Toto $0.51
UMC United Microelectronics $0.10
ASX Advanced Semiconductor Engineering $0.12
DB Deutsche Bank $0.49
FNF Fidelity National Financial $1.28
WWW Wolverine World Wide $0.38
DISCA Discovery Communications $0.66
DISCB Discovery Communications Discb $0.66
DISCK Discovery Communications Disck $0.66
EAT Brinker International $0.79
FCNCA First Citizens Bancshares $12.11
PAC Grupo Aeroportuario Del Pacifico $0.64

Thursday (April 29)

IN THE SPOTLIGHT: AMAZON.COM

The eCommerce leader for physical and digital merchandise is expected to report its first-quarter earnings of $9.98 per share, which represents year-over-year growth of about 100% from $5.01 per share seen in the same quarter a year ago.

The Seattle, Washington-based multinational technology giant would post revenue growth of about 40% to around $105.1 billion. It is worth noting that the company, on average, has delivered an earnings surprise of about 187% in the last four quarters.

“We expect strong 1Q21 results with revenue and Op Inc. 3% & 11% above consensus estimates. Key rev. drivers include eCommerce, AWS, Adv., & Sub. rev. Our 1Q21 Op Inc. est. is driven by AWS & Adv., offset partially by COVID-19 costs. 2Q21 revenue guide is key, we expect AMZN eCommerce growth of +15% y/y despite tough comps. We remain bullish on’21 Op margin expansion, our est. is 17% above consensus,” noted John Blackledge, equity analyst at Cowen.

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE APRIL 29

Ticker Company EPS Forecast
RDSA Royal Dutch Shell £0.83
AGIO Agios Pharmaceuticals -$1.23
STM Stmicroelectronics $0.39
JHG Janus Henderson Group PLC $0.82
THRM Gentherm $0.58
FBC Flagstar Bancorp $2.65
CAT Caterpillar $1.93
TFX Teleflex $2.44
CNX Consol Energy $0.28
CBRE CBRE Group Inc $0.70
AMT American Tower $2.32
BLMN Bloomin’ Brands $0.34
TREE LendingTree -$0.21
TAP Molson Coors Brewing -$0.12
MO Altria $1.04
SAH Sonic Automotive $0.94
TROW T. Rowe Price $2.90
VC Visteon $0.32
TW Towers Watson $0.43
HSY Hershey $1.82
CCOI Cogent Communications $0.18
KEX Kirby $0.14
SPGI S&P Global Inc $3.13
BAX Baxter International $0.64
SO Southern Co. $0.83
SWI Solarwinds $0.19
BGCP BGC Partners $0.19
COHU Cohu $0.79
CWT California Water Service -$0.06
CFR Cullen/Frost Bankers $1.42
LH Laboratory Of America $7.34
TMHC Taylor Morrison Home $0.76
GPI Group 1 Automotive $4.39
NEM Newmont Mining $0.80
FMX Fomento Economico Mexicano Sab $8.67
AOS A.O. Smith $0.56
WAB Westinghouse Air Brake Technologies $0.85
WEX WEX $1.58
COLB Columbia Banking System $0.63
WLTW Willis $3.26
PATK Patrick Industries $1.32
VLY Valley National Bancorp $0.29
MMP Magellan Midstream Partners $0.87
KHC Kraft Heinz $0.60
IP International Paper $0.59
BC Brunswick $1.45
KIM Kimco Realty $0.30
KDP Keurig Dr Pepper $0.31
TMO Thermo Fisher Scientific $6.69
EEFT Euronet Worldwide $0.35
MTSI MACOM Technology Solutions $0.47
EXLS ExlService $0.99
AIT Applied Industrial Technologies $0.98
COR CoreSite Realty $1.33
STRA Strayer Education $1.49
IDA IdaCorp $0.83
GNRC Generac $1.87
ALNY Alnylam Pharmaceuticals -$1.73
XEL Xcel Energy $0.61
AIMC Altra Industrial Motion $0.76
TPX Tempur Sealy International $0.51
OSTK Overstock $0.07
NOC Northrop Grumman $5.48
FCN FTI Consulting $1.18
MDC MDC $1.37
SYNH Syneos Health Inc $0.74
BMY Bristol-Myers Squibb $1.83
DPZ Dominos Pizza $2.94
ATI Allegheny Technologies -$0.24
CMCSA Comcast $0.59
CG Carlyle $0.54
MRK Merck & Co $1.62
PCG PG&E $0.27
MA Mastercard $1.57
MCD McDonalds $1.81
LKQ LKQ $0.63
CMS CMS Energy Corporation $1.19
AGCO AGCO $1.11
ICE Intercontinental Exchange $1.30
PH Parker-Hannifin $3.75
CFX Colfax $0.39
BCE BCE (USA) $0.58
EME EMCOR $1.17
ABMD Abiomed $1.10
ERJ Embraer -$0.33
TXT Textron $0.47
CARR Carrier Global Corp $0.38
PRFT Perficient $0.68
KBR KBR $0.46
CHD Church Dwight $0.80
WST West Pharmaceutical Services $1.42
ADS Alliance Data Systems $3.23
CTXS Citrix Systems $1.42
NVT nVent Electric PLC $0.35
CUZ Cousins Properties $0.70
RMD ResMed $1.22
CUBE CubeSmart $0.45
TXRH Texas Roadhouse $0.59
GLPI Gaming And Leisure Properties $0.83
KLAC KLA-Tencor $3.59
OFC Orate Office Properties $0.55
FIVN Five9 $0.13
TEX Terex $0.22
X United States Steel $0.91
CRUS Cirrus Logic $0.69
SWKS Skyworks Solutions $2.34
WDC Western Digital $0.67
SWN Southwestern Energy $0.25
ACHC Acadia Healthcare $0.45
DLR Digital Realty $1.57
BVN Compania De Minas Buenaventura $0.11
GILD Gilead Sciences $2.02
AEM Agnico Eagle Mines USA $0.57
COLM Columbia Sportswear $0.33
TWTR Twitter $0.14
AJG Arthur J. Gallagher $1.83
FHI Federated Hermes Inc $0.77
PEB Pebblebrook Hotel -$0.44
CWST Casella Waste Systems $0.04
CXP Columbia Property $0.33
CPT Camden Property $1.23
COG Cabot Oil Gas $0.33
SGEN Seattle Genetics -$0.59
ATR AptarGroup $0.90
LPLA LPL Financial $1.58
EVTC Evertec $0.53
EXPO Exponent $0.43
DXCM Dexcom $0.31
ZEN Zendesk $0.12
PFPT Proofpoint $0.39
THG Hanover $0.75
FSLR First Solar $1.00
FBHS Fortune Brands Home Security $1.04
FWRD Forward Air $0.56
MMSI Merit Medical Systems $0.37
SPSC SPS Commerce $0.38
INT World Fuel Services $0.28
SKYW SkyWest $0.89
ERIE Erie Indemnity $1.41
POWI Power Integrations $0.55
ROG Rogers $1.79
OMCL Omnicell $0.67
BIO Bio-Rad Laboratories $2.50
HIG Hartford Financial Services $0.75
EMN Eastman Chemical $1.91
HP Helmerich & Payne -$0.61
EBS Emergent BioSolutions $1.55
PACB Pacific Biosciences Of California -$0.45
AMZN Amazon $9.98
FTNT Fortinet $0.74
NATI National Instruments $0.31
ALGT Allegiant Travel -$2.59
FTV Fortive Corp $0.60
MHK Mohawk Industries $2.80
BMRN BioMarin Pharmaceutical $0.27
VRTX Vertex Pharmaceuticals $2.76
MGNX MacroGenics -$0.51
KMPR Kemper $1.35
MDRX Allscripts Healthcare Solutions $0.15
COP ConocoPhillips $0.60
SHEN Shenandoah Telecommunications $1.01
USM United States Cellular $0.43
MTZ MasTec $0.77
GT Goodyear Tire & Rubber $0.08
TDS Telephone Data Systems $0.44
ETN Eaton $1.25
REGI Renewable Energy $0.20
PRAH PRA Health Sciences Inc $1.34
HUBG HUB $0.46
TPR Tapestry Inc $0.30
PRGO Perrigo $0.56
BLDR Builders Firstsource $0.81
BBD Banco Bradesco $0.10
TPL Texas Pacific Land $5.79
ASEKY Aisin Seiki Co $0.88
NLSN Nielsen $0.32
ARW Arrow Electronics $2.27
CLGX CoreLogic $0.97
TFSL Tfs Financial $0.07
UBSI United Bankshares $0.74
GRA W.R. Grace $0.73
PTCT PTC Therapeutics -$1.59
INSM Insmed -$1.02
TOELY Tokyo Electron Ltd PK $1.25
BBVA Banco Bilbaoizcaya Argentaria $0.15
GOL Gol Linhas Aereas Inteligentes -$0.91
SRCL Stericycle $0.59
AUOTY AU Optronics $0.33
CX Cemex Sab De Cv $0.03
PBR Petroleo Brasileiro Petrobras $0.12
TOT Total $0.85
AMRN Amarin -$0.03
TWOU 2U -$0.23
LYG Lloyds Banking $0.07
BEN Franklin Resources $0.74

Friday (April 30)

Ticker Company EPS Forecast
LYB LyondellBasell Industries $2.51
AVNT Avient Corp $0.72
BCPC Balchem $0.80
JCI Johnson Controls $0.49
HOCPY Hoya Corp $0.81
CL Colgate-Palmolive $0.79
BCS Barclays $0.41
AON AON $4.05
HUN Huntsman $0.58
PNM PNM Resources $0.19
XOM Exxon Mobil $0.60
CHTR Charter Communications $4.25
PSX Phillips 66 -$1.28
ITW Illinois Tool Works $1.90
GWW Grainger $4.31
HRC Hill-Rom $1.43
POR Portland General Electric $0.87
BSAC Banco Santander Chile $0.41
ABBV AbbVie $2.81
WY Weyerhaeuser $0.88
WPC W. P. Carey $0.51
SHLX Shell Midstream Partners $0.35
CVX Chevron $0.90
NWL Newell Brands Inc $0.13
MITSY Mitsui & Company $10.53
CLX Clorox $1.47
LAZ Lazard $0.88
LHX L3Harris Technologies Inc $2.96
KMTUY Komatsu $0.32
BNPQY BNP Paribas ADR $0.59
APELY Alps Electric $0.27
ALNPY ANA Holdings ADR -$0.90
PSXP Phillips 66 Partners $0.83
AZN Astrazeneca $0.68

 

Microsoft to Invest $1 Billion in Malaysia to Set up Data Centres – Malaysian PM

The announcement on what would be the U.S. tech giant’s biggest investment in Malaysia comes after the country in February gave conditional approvals for Microsoft, Google, Amazon and state telecoms firm Telekom Malaysia to build and manage hyper-scale data centres and provide cloud services.

It also comes after the country saw foreign direct investments (FDI) plunge by 68% last year, the biggest decline in Southeast Asia.

Malaysia has defended itself as an investment destination, with the finance minister recently saying it was looking at incentives to help attract more FDI.

It has said the investments from these cloud service providers will total between 12 billion ringgit and 15 billion ringgit ($2.91 billion-$3.64 billion) over the next five years.

As part of the Bersama Malaysia initiative, Microsoft will establish its first “datacentre region”, which consists of multiple data centres, in Malaysia to manage data from various countries, Prime Minister Muhyiddin Yassin told an event marking the launch of the programme.

“The upcoming datacenter region will be a game-changer for Malaysia,” Microsoft Executive Vice President Jean-Philippe Courtois said in a statement, adding it will enable the government and businesses to “transform” their operations.

Under the programme, Microsoft will also assist up to a million Malaysians in getting digital skills by the end of 2023.

(Reporting by Liz Lee; Editing by Muralikumar Anantharaman)

Twitter Gains Amid Clubhouse Buyout Speculation

Twitter, Inc. (TWTR) shares added nearly 3% Wednesday after Bloomberg reported that the social media giant considered acquiring popular invitation-only audio-chat app, Clubhouse. The platform allows users to host shows, listen to panel discussions and engage in live chats.

People familiar with the matter said both parties discussed a possible valuation of $4 billion for Clubhouse but added that the negotiations had ceased. A potential buyout would have brought across the app’s 10 million active weekly users and complemented Twitter’s own recently launched beta-stage audio offering, Spaces. Such is the success of the Clubhouse app, other tech companies, including Facebook, Inc. (FB), Microsoft Corporation (MSFT), and Salesforce.com, inc. (CRM) have begun to develop similar features on their social media platforms.

As of April 8, 2021, Twitter stock has a market value of $55.1 billion and trades up 27.41% YTD. Over the past 12 months, the shares have surged nearly 170%. From a valuation standpoint, the stock trades 46% above its five-year average forward earnings multiple of 49 times.

Wall Street View

In February, Piper Sandler analyst Thomas Champion bumped up the investment firm’s price target on the stock to $61 from $45 while reiterating his ‘Neutral’ rating. Champion believes the company sits well-positioned to capitalize on daily active user growth it gained from the U.S. election. He also likes improvements the social media giant has made to its products and advertising.

Elsewhere, the stock receives 25 ‘Hold’ ratings, 10 ‘Buy’ ratings, 4 ‘Sell’ ratings, and 1 ‘Underweight’ rating. Twelve-month price targets range from a Street-high $95 to a low of $30. Through Wednesday’s close, the shares trade 5% below the median analyst price target of $72.50.

Technical Outlook and Trading Tactics

Twitter’s share price has remained in a steady uptrend since the 50-day SMA crossed above the 200-day SMA last summer. After a recent retracement to the 50-day SMA, the stock has regained upside momentum, with the MACD moving above its trigger line to generate a buy signal.

Active traders who buy here should look for an initial retest of all-time high (ATH) at $80.75, followed by a possible move higher. Protect against losses by placing a stop-loss order either beneath the 50-day SMA or under last month’s swing low at $59.28, depending on personal risk tolerance.

For a look at today’s earnings schedule, check out our earnings calendar.

Microsoft Targets 50,000 Jobs with LinkedIn ‘re-skilling’ Effort

By Stephen Nellis

The jobs will be in what Microsoft calls its “ecosystem” of companies that use or help sell its products.

The effort started last year as pandemic-related business closures hit service workers much harder than technology workers and other white-collar employees who could work from home. LinkedIn made free many of its paid digital skills training courses, covering topics such as software development, data analysis and financial analysis.

LinkedIn said it will extend the free courses until the end of this year. Microsoft and LinkedIn had aimed to get 25 million people to try the courses and said Tuesday that the figure hit 30.7 million, most from the United States but with many from almost every other part of the world.

“I wasn’t expecting 91 participants from Antarctica,” Microsoft President Brad Smith said in a blog post announcing the results.

Microsoft, which said it found that digital training courses work best when supported by local nonprofit groups who help people learning new skills, said it would work with those groups to place 50,000 people in jobs that require technology skills over the next three years. The program will initially focus on the United States but expand beyond that starting next year.

The push is one of the first times that Microsoft has worked closely with LinkedIn and its GitHub software coding tool service, both of which Microsoft has allowed to operate with relatively autonomy.

(Reporting by Stephen Nellis in San Francisco; Editing by Leslie Adler)

Total, Microsoft to Cooperate on Net Zero Emissions

Total will sell some “green” electricity to Microsoft while Total will use more of Microsoft’s cloud software and technology platforms, they said in a joint statement.

Total said it would help Microsoft secure renewable energy through power purchase agreements (PPAs), and that a first such PPA of 47 MW had been agreed for Microsoft’s Spanish operations.

(Reporting by Sudip Kar-Gupta; editing by Jason Neely)

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.

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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!

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.

 

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.