Fed Rate Hike = Down Market

The Federal Reserve raised the Federal Funds Rate again as expected. Once that was announced at 2pm, banks went down. Technology stocks moved up after the announcement, but everything fell in the last half hour of trading. I would expect to see more downward movement to start Thursday with a reversal mid day that will turn into a end of the month sell for the last 2 hours and into Friday.

The market is near new highs with many stocks near recent resistance levels that

many stocks moved through, but retracted beneath in the last hour and in the case for Boeing earlier in the week. I drew them up on my watch list to share here.

Based on the higher interest rates, move lower from resistance levels, and end of the month sell off I would expect things to move down for Thursday and Friday. I would expect stocks to break through resistance levels in the next 2 weeks. 

Trump Policies and Market Performance Pt2

By Donald Trump getting his tax reform bill passed at the end of 2017, it added another leg to the market growth that we may not see end for years to come. Everyone with money to invest has enjoyed positive returns for the past 10 years since the mortgage failures of 2008. A new level of excitement came through with the passing of the tax reform bill that reduces corporate and personal income taxes. From the first day of trading in 2018, the market went straight up to hit a peak on January 27th.

The market started to dip in February, but pulled back harder after the first round of earnings were announced. This first round of earnings in

2018 was for the 4th quarter of 2017 which caused a high level of confusion for investors. Investors were expecting higher earnings, which wasn't going to be the case as companies had more incentives to write off capital expendentures in 2017 rather than carry them into 2018 where they won't have as big of effect due to the lower tax rate. This was amplified after Alphabet (GOOGL) reported their 4th quarter earnings. from that point, everything dipped lower. 

In the middle of the 2017 4th quarter earnings season, Trump changed the Federal Reserve Chairman to Jerome Powell. The market likes to test new Fed Chairmans and this was definitely the case as he came into his job with the desire to raise interest rates as many times as possible to strengthen the dollar. Then we finally got into the changes from the tax bill as companies started reporting their 1st quarter earnings in April. 

The market started moving up again around the 1st quarter earnings, but every time it tried to move forward, it would retreat with new tariff news. The market doesn't like uncertainty and tariffs have uncertainty written all over them. The market was over sold in February but did come back to retest those lows as the new tax rate led to many companies changing accounting procedures to maximize their tax break. 

The drop in corporate taxes in the 1st quarter earnings created a higher level of expectation in the 2nd quarter earnings reports that were almost impossible to reach. This was especially true in technology stocks as many of them have beat their earnings estimates, but would guide down expectations for the remainder of the year. Everything has a tendency of rotating as we have seen rotation move away from retail. I would expect the rotation to move back to technology stocks in the 4th quarter. 

We are coming to the end of the 3rd quarter which means we are about to enter its earning season. I would expect to see everything continue to move up for the remainder of the year as the earnings reports will be better and better. Disappointment by few companies will not affect the market as in the past 6 months. By the end of the year, Donald Trump will forge a new trading agreement with China which will send the market higher. 

If a new trading agreement is not made with China, the market will go higher in the 1st quarter of 2019 as the auto stocks will boom with their most profitable quarter ever due to the lower personal tax rate creating larger refunds and when people get large tax refunds, they buy new cars. 

If you don't know what to invest in, pick a no cost mutual fund with Schwab, Fidelity or Robinhood. If you don't have your money working for you, you have nobody to blame but yourself.

Trump Policies and Market Performance Pt1

Donald Trump has dominated news with his Twitter antics that make him almost unbearable with his messed up opinions. Unfortunately Trump's Twitter is so bad it overshadows all the good he is doing for the economy. For each good thing has brought a bad thing. Trump has changed the Fed Chairman, imposed trade tariffs and lowered the corporate tax rate which have improved the economy but caused so issues along the way.

The change of the Federal Reserve Chairman from Jane Yellen to Jerome Powell was unnecessary as Yellen was doing a good job with gradual rate increases. Powell came in with an agenda to strengthen the US Dollar with increasing the Fed Funds Rate as many times as possible. The dollar was excessively weak and has strengthened. While our currency has improved, other economies of the world have struggled. Turkey's failure should not affect the US economy, but the opposite is not true. Turkey will continue having problems as we increase our rates. An increase in rates will increase our problems as well.

An increase in interest rates will ultimately trickle back to everyone in the United States in more than one form. Raising interest rates affect loans businesses need for improvement and growth. When businesses have problems with money they cut back on employees. The effect is compounded when the mortgage interest rates increase to the point where people stop buying bigger homes because they can only afford the high prices smaller homes. When people stop buying the large homes, builders stop build over prices multi-family housing for rental and sales. The increases in rates and homes is compounded by the increasing cost of materials due to tariffs. Did someone say inflation?

Inflation appears inevitable as we have more people working, interest rates are rising and tariffs are increasing the cost of materials regardless of where they come from. Really the tariffs are imposed to raise the cost of materials we import so they are above the higher cost of domestic materials. Should US materials cost more when Trump has reduced the corporate tax?

Donald Trump passed the most comprehensive tax reform that the US has ever had. By lowering the domestic tax, companies have less to pay domestically which means higher profits and reduction of the need to export production to import the final products. This should be the end result although all that it has been used for this year has been tfor companies to waste money by buying back stock. Buying back stock reduces the amount of stock supply on the market which should increase the price of the stock as demand increases. That sounds like more inflation which is not the intended purpose.

The intended purpose of the tax reform was to help companies keep jobs in the United States with more production in the United States. By having more money available should mean more employment and higher paying jobs. There is the problem. While the profits increase for companies, they don't pay their employees that much more. It was nice to see some huge companies pay incentives to employees earlier this year, but this trend will not live long.

What does appear to be building strength is inflation. Inflation kills returns when related to interest rates and the best hedge for inflation is investment in company stock. That circles us back to the desire to buy stock when there is less available for us to buy. Now that all of this is in place, I will break down the effects of the tax reform on the market in the next blog,

Market Update to Trends

The Dow finally hit a new high this past week on strength from Boeing and JP Morgan without help from Apple. Since Boeing was at $337 it has rallied to $372 which is only a few points away from its all time high. JP Morgan rallied within pennies of it's all time high established earlier this year on the back of a strong 10 year Treasury Note rate above 3%. This week everything is going to be tested if the Fed raises the Fed Funds Rate on Wednesday. If that rate goes up, everything will come down for the next day with a reversal happening mid day on Thurday.

It might be surprising that Apple is not participating in the rally especially since they just introduced the most innovative technology to come to wearables with their new watch being FDA approved to perform electrocardiograms. Those who still have a iPhone with a button will probably upgrade in the next few months so Apple's future looks pretty strong and even stronger as everything is funneled to their service business. I see Apple setting up to be a huge long term play although I would never own a Apple product because I feel Samsung is far superior. 

So what is going on with FANG? Facebook, Amazon, Netflix and Alphabet all appear to be in trading patterns for the next couple of weeks. Facebook is floating between 158 and 165 and may trend further down after reporting earnings despite having no debt. Amazon passed a trillion in market cap and came down from there to trade in a range. I feel it is still over priced and we might get something funky from their earnings to show that they are not growing subscribers and earnings slow down. Netflix domination in subscribers will not be affected by other companies trying to take market share as Disney is not close. Alphabet's Google appears to be the beneficiary of problems with Facebook although you would not be able to tell it by the stock price. 

Alphabet (GOOGL) along with FANG is in a trading range. Netflix is trading between 350 and 372 while Alphabet is trading between 1160 and 1195. For the past couple of weeks we have seen Alphabet close around 1190 only to drop 15 to 20 points on Friday and a little further on Monday. Tuesday's have been up and Wednesday's have started down near the low for the week that was established in the last week but moving up for the rest of the day on Wednesday and Thursday only to fall again on Friday. This is almost identical to what happened last year when Alphabet was trading between 918 and 942. Last year it broke out higher 2 weeks before earnings as it passed the prior high and shot higher after the earnings for the 3rd quarter were announced. 

This brings me my next blog as to what happened with the 4th quarter earnings, the first half of 2018 and the Trump policies. 

Changing Investments

If you follow my blog, you know that I follow Alphabet (GOOGL) closely and try to make good trades from it. That has not been successful every day so I looked at my watchlist and saw opportunities that I did not take advantage of because I had stuck on Alphabet options. Most of these stocks I would have told you the direction they were going. I will have to be more mindful with what I pick moving forward. Hope this helps you see how I follow stocks and when I thought they were good opportunities.

Upward Moving Market

Tesla appeared to have bottomed last week after their newly hired accountant left and Apple appeared to have a short term bottom last Thursday as it did not go below 217. This presented a huge opportunity to capitalize on this movement back up. I don't believe that Apple will react positively to the new iPhone announcement on Wednesday, but you could have made some nice profits from Thursday to Tuesday with Call Options. Apple could go higher and pass it's all time high recently established, but think it will be resistance first.

I took advantage of Boeing opening on Tuesday below 340 as it went to 337 and bounced off of it. Boeing moved up to 346 which made for nice profits in one day on Call Options.

Alphabet (GOOGL) opened lower Tuesday and dropped to 1166 where it bounced off and moved up to 1188 very quickly in the first hour of trading. Alphabet moved down while Amazon continued moving up. Alphabet bounced off 1180 to go higher and touched 1190. Those were 2 nice movements that could be profitable as this is what I call an up week for technology stocks as last week was down. 

Tesla Bottom

I failed to mention movement in Tesla on Friday. It was announced that

Tesla's newly hired accountant resigned Friday morning which drove the stock down big and it went down to 252 shortly after the market opened Friday morning. It rebounded quick and it was a positive sign when it did not go lower than 260 after the upward movement. This was a sign that the bottom was formed and it should be positive next week. It opened higher on Monday, dipped down some before going higher by the end of the day. I would expect to see Tesla's stock to return to the 300 mark this week as it closed today at $285.50.

Home Depot and Roku ran up more today and everything else appeared down except for canapy stocks that regained more than what they lost on Friday. FANG all opened higher and dipped lower throughout the decade. Apple is 10 points off the high and came down below 218 as I expected  Of the big tech companies, Facebook appeared to be the only one to hold most of the gain today.

Boeing was down a good amount today  I believe that it was sold off a little too much and expect if it should make it below 338 it will shoot much higher.

Friday Tariff Flustered Market

The August jobs report came in a little softer than what the market was looking for as everything went down after it was released before the market opened. Most everything moved up during the day until around 1pm when Trump announced more tariffs on China. Everything immediately sank to the lows of the day and most rebounded from there with the exception of Apple. In the last half hour of trading it was announced that the tariffs will affect Apple more than expected which knocked 3 points off Apple. I expected Apple to move down before moving higher. I don't think it is done moving down as it should get below 218 before taking off to new highs next month.

Boeing was doing well this week until Friday when it went down after the jobs report. It bottomed for the day after the tariff announcement as it moved up from there. Verizon got a downgrade earlier this week that appears to be wrong as it dropped a point and made it up in a day. Verizon is a stock to hold and unfortunately not one to use with options unless it had sharp movement in one direction and expects to bounce.

EA was down and looked to have bottomed at 111 where it bounced. Today it moved sharply higher to 116 before giving back a point. Based on where it fell from based on a delay of a new game and the new games that have been released between Madden, NBA Live and this weekend's Overwatch turnament, EA should move up further by Monday and possibly for the rest of the week. I would expect it to hit somewhere between 118 and 122 by Tuesday if not Monday. I bought 115 Calls for September 14 when it was at 114 on Friday.

Facebook appears to have bounced off 160 and I would expect to see it move higher next week but may come back to retest that base if they have any negative news. I would expect positive news regarding Instagram advertising coming very soon and push Facebook above 180 in the next month. Twitter on the other hand may be close to a bottom and should bounce from this current level of $30/share, but unlike Facebook, Twitter doesn't have an additional platform to use as a wildcard like Facebook.

On to my day trade... Alphabet appeared to have bottomed yesterday as it didn't go past the bottom. It was a learning lesson as you don't expect it to reverse until you see a bottom has formed. You should never attempt to time the bottom as it will be obvious if it is to bounce. I mention this because Thursday I was early to buy a Call Option as I expected it to bounce higher, but should have waited and could have bought at a better price. I sold at a loss because it was going down further and did not have proof that it was reversing. If I did not sell that Call Option earlier, I could have sold it for a profit by the end of the day because it moved up above 1180 as that was the strike price that I bought when it was around 1173.

Now I will reference my 1 and 5 minute chart numbers with the following descriptions:

1. It might have been better that I did not make that kind of profit on that one Call
   
   Option on Alphabet on Thursday because I might have held it to be higher on Friday. Higher is where Alphabet moved after if opened below 1170. 
2. Based on how it appeared to be done moving down on Thursday, I waited for a sign that it was going up and bought 2 1175 Call Options when it was close to 1175. 
3. It appeared to stop moving up when it got to 1189 and I got out of my Calls as it moved down from there.
4. Based on the upward movement 2 weeks ago, it appeared that Alphabet dropped to 1183 where it closed on Thursday and would move much higher than the prior day high of 1189. I mentioned 2 weeks ago that this is dangerous to expect that to happen as it doesn't happen like that too often especially on Fridays. I lost a little of my gains on attempting to relive 2 weeks ago miss. As a learning lesson, there is not enough movement downward to expect upward movement unless the stochastic indicated that it bottomed with little price movement downward. I sold that call for a loss when I saw it move further downward below 1181. 
5. From the tariff news, Alphabet moved down 10 points very quickly and
   
   appeared to want to bounce off that which it did. Based on my belief that it is going to move up for the next week since the bottom was formed on Thursday, I thought this might be a great opportunity for a bounce. Unfortunately option prices are priced higher on movement upward than when it settles even if higher on the last day of the option contract. 
6. It did move back to 1181 which is 10 points off that tariff low. Once again, I bought a little late or early and sold early as I did not trust it to move up higher. 

Next week I would expect to see Alphabet to move higher and probably back to 1260, but don't know that I would care to hold any options over night next week as more tariff news or regulation movement from Washington could push tech to open lower before moving higher. 

Tech Hit Hard While Dow Jones Moved Up

Micron led chip stocks lower as Amazon, Facebook and Alphabet went lower also. They dropped lower than yesterday, but appeared to have bounced off the bottom and I would expect a strong move up by next week. Home Depot and Boeing moved up as they seem to catch all of the money that was leaving tech. In the afternoon it appeared that money returned to tech as the big Dow Jones stocks sold off a little in the afternoon.

There were some big moves down that I expect to see a reversal in the next week.

• Alphabet (GOOGL) was 1269 last Thursday and today's low was 1263
• Amazon was 2050 2 days ago and hit 1945 today.
• Apple was at almost at 230 and was under 223 today.
• Facebook was 177 last Thursday and today 160.
• Micron was over 51 last Thursday and today was 44.

Micron appears to be the lowest cost of all of them with a Price to Earnings ratio under 5. Apple has proved to have a strong following since Warren Buffet investing in them so I don't know that it will drop further. These could go lower with more tariff talk over the next few days, but lately we have seen moves up despite tariff talks. If there were going to be a drop due to tariffs I don't believe that we would see as much upward movement in Boeing and Home Depot.

Alphabet is what I like to trade options due to the great movement. I found today's chart was similar to yesterday's, but looked to be the opposite from last Thursday. It appears to be a sign that tech is reversing as Netflix got an upgrade before the market opened. Nonetheless GOOGL moved sharply down from open and bounced off 1163, then moved up and quickly dropped to 1165 where it gained footing and moved above 1183.

On Friday I would expect to see a small movement down followed by strong upward movement for Friday. It could move down on Monday ,but I would expect to see large upward movement on Tuesday if we don't get it on Monday.

Testifying Brings Down the Market

Facebook, Google and Twitter were set to testify in Washington today. They started dipping lower last Friday which continued yesterday and fell harder today. Google did not show because Congress wanted a CEO and not the representative that Google wanted to send. Google got bad flack from it and the parent company Alphabet sank hard. What was interesting is that Alphabet found a bottom and bounced off of it by 25 points. It was a great day to own some Put Options. See my chart below.

It was interesting that Alphabet moved higher, but Facebook, Amazon, Twitter and other tech companies did rebound a little but closed near the lows for the day. It was suggested that Alphabet could go lower on Thursday due to their vacancy at the capital. Based on what I see, they might have a small dip on Thursday but I would expect to see everything to go up for the rest of the week and the first part of next week also. 

September Trading Down

Markets were closed in the United States for Labor Day on Monday. On Tuesday Amazon opened to another new high with news on entering the India market to compete with Flipkart. Amazon became the 2nd company to one trillion dollars in market capitalization. Boeing bottomed early today at 339.50 and went up 7 from there. AMD was up over 10% today as excitement is moving towards AMD and away from Intel. I find this funny when Apple computers ,Chromebooks and Windows tablets use Intel processors.

Retail stocks moved up as predicted today with Best Buy moving back above 80 and Home Depot moved sharply up within 2 points of it's all time high established back in January. Apple moved up a little which was nice to see as Samsung announced that they will be releasing a foldable phone this year. In the past Apple would drop on any competition news. Apple has shown a negative impact from iPhone announcements and that day is coming soon.

Alphabet (GOOGL) continued to sell off on Tuesday as it opened lower than Friday's close. In the first few minutes it went up from 1222 to 1228 and went down from there. Alphabet appeared to find a bottom at 1211 as it bounced off and moved up to 1221 before back peddling the rest of the day and found a new bottom at 1209.

Hindsight is 20/20 and I actually missed my exit point as it was found on the 1 minute chart which I had on my screen next to the 5 minute chart. As I indicated in my 1 minute chart and in past blogs that you should look for movements of approximately 10 points when trading Alphabet. Tomorrow is a new day with Facebook and Twitter testifying for Congress with Google being left out because Congress wanted a higher up instead of their qualified representative. I would expect to see some sort of positive news before the market opens for Alphabet where it will open 10 points higher and fall from there as the testifying begins.