Tail of 2 Days

Please check out my YouTube channel for my audio description of the market this week.  

After the market close on Tuesday, Apple announced a lower revision of

their earnings expectation for the first quarter of 2019. This is crazy since we are about to enter earnings season for fourth quarter of 2018. Regardless it drove the market down hard on Thursday with the exception of Netflix and Verizon.

Apple cited reduced sales in China and the trade war having an impact. I was surprised that Amazon and Alphabet (GOOGL) weren't down more. Amazon just broke below 1500 and Alphabet didn't go below 1022. I felt this was a strong sign.

China's market went up on Friday with the expectation of trade talks sooner than later. It drove the US markets up from open and they rallied more after Fed President Powell spoke with Janet Yellin and Ben Bernanke. The market heard positive news that they are reading the market and inflation is not rising. They don't believe that rates will increase more, but they are all wrong.

Inflation is muted because of the huge drop in oil, gasoline and other commodities. As they rise, they will show in I is real as well as s full employment will drive up the price of goods. The Fed will raise rates as planned 2 to 3 times this year.

With more rate increases, the market will experience more volatility. The

best case for a sustainable rally in the market is from great earnings, larger sales and a trade deal with China. Sales will work themselves out as Americans will experience the largest tax reduction and spend that money.

Trading: Thursday was such a negative day that you could have bought Puts at open or waited for everything to come back near the open price to buy Put Options. Selling at the end of the day was best.

Friday proved to be completely opposite of Thursday and Call Options were the best. I traded QQQ on Thursday and Home Depot on Friday.

Update to the Market and Expectations

I stopped writing my blog a while back because I went to a trading class to learn to be better. I have found success in trading, but more importantly cutting my losses quickly, being more patient if to wait for my trade to be in favor, and switch positions when I got the direction wrong.

There is money to make going up and down. The bull market is still alive, but needs a pull back to go higher. Recessions are started by bank failure and we don't have any bank failure. We have banks that did some unethical practices, but they are not going out of business for it. As a matter of fact these banks have money set aside for such regulatory fines Wells Fargo and now Goldman Sachs is being dealt.

On Wednesday, I don't believe that the Federal Reserve will raise interest rates because lending is down, unemployment is going to rise, and the trade issues are hurting everyone. Unfortunately we still have Tuesday to get through first.

Tuesday always starts first in Asia and their markets are going to open lower and fall further. This will make our futures go down over night and we will open lower than today's bottom. The average retail investor will sell right to the people with the big money who are buying. Tuesday will be not go straight up until we know what is happening with the Federal Reserves interest rate hike. 

Netflix and Chilled, Interest Rates and Market Correction

Netflix reported a blow out 3rd quarter Tuesday afternoon. The stock rose as high as $400 before

settling around $385 and then opened Wednesday morning at $380. From there it went down along with FANG. Facebook, Amazon, and Alphabet found a bottom earlier than Netflix. Netflix found it's bottom around 355 before moving up for the afternoon. I like to see if that number will hold, but so far on Thursday is barely hanging on. Alphabet bottomed at 1115 which should be a key point to pay attention to on Thursday.

Today Alphabet opened higher at 1130 and went straight down to 1114 before bouncing up and then retesting that level at which I bought Call Options and it didn't hold as it went down to 1110. Much of the downward movement in stocks is due to the Federal Reserve minutes noting they still expect to raise interest rates 3 more times next year in addition to again in December. Rising interest rates is what Trump expects will kill the economy and he is right.

Higher interest rates cost all businesses more. Businesses finance expansion with the issuance of debt and small businesses may use debt to help with daily cash flow. Start up businesses may utilize debt to help establish themselves. Consumers use loans to purchase vehicles, homes and luxury items. If the businesses are being squeezed and the consumers have less desire to purchase higher end items, everyone loses, not just the housing sector.

The housing sector has extra constrains between higher material cost along with higher rates consumers have to pay for the mortgage loans. I believe the ultimate problem is the housing sector got fat and greedy from low interest rates for so long. Because interest rates were so low, people wanted larger houses that are larger than what they actually need. Where are they building homes for the average family? It isn't in Orlando, Florida.

Moving forward, Americans are going to have some of the largest tax refunds at the beginning of 2019. Housing may benefit some but with higher interest rates, not as much that will make a difference for the long term. People buy cars when they get big tax refunds regardless of the interest rates so I think Ford is positioning themselves to be the best along with Tesla. I think with Ford and Tesla at their 52 week lows they are a value and a growth buy for 2019 and investors will be happy by August of 2019.

Let the Mergers Begin!!!

• The biggest news for the day was the Fed Funds Rate increasing .25% and Fed Chairman Powell's speech about the state of the economy. The rate increase was expected and the market traded like it through out the day. Most things were up, dropped at 2pm when it was announced, went up during his speech and dropped hard for the last half hour of the day. Based on this reaction, I would expect the market to drop a little more on Thursday and turn around mid day
• Boeing dropped sharply more on news that an airline was considering dropping their airplane order. This should not be a big deal as they have a long list of customers waiting for new planes. I would expect to see Boeing move up for the rest of the week as it was over sold.
• Tesla was up and down for the day and back up again. After the market close it
  
  was announced that Elon Musk is going to buy more shares. He is already the largest shareholder and he will own around a third of Tesla. I would expect to see shares jump on Thursday on this news.
• The banks were down in the day and were the first to spike when the interest rate was announced at 2pm. They were also the first to fall in the last hour of trading. I would expect to see them lead the way in the next couple of days.
• Home Depot was down sharply at open and fell below 200. When ever this happens it should be bought with Call Options. It still ended the day down, but still above 200. Home Depot typically has great Thursday afternoons and Fridays. 
• SunRun was up again breaking through the 14 mark. Its PE ratio is low and has more run to move up under the sun. lol
• H&R Block was a great buy if you got it at $24 or less. They moved up to 24.70 during the day which was good movement for this stock that typically has little movement. Like Macy's and L Brands, this was a great buy based on earnings, dividends as the depressed forecasted earnings drove it down yesterday afternoon. I would expect to see it back to the 30 range when a couple of analyst upgrade it in the next couple of weeks. I would not purchased Call options on it unless they were 2 months out. Given the low volatility, they could be purchased at a great price.

Friday Market Up Again

• Once again there was news about Apple phone sales are slowing because suppliers have announced they are receiving less orders from Apple. I find this funny since we have an idea of where they are made (China), but Apple is secretive and uses multiple suppliers for so many parts. Because of the news Apple dropped 3 points at open and recovered some during the day.
• Home Depot and Boeing dropped at open with everything else including Alphabet. By 10:45AM everything changed direction and moved up. Home Depot has run up strongly this week from 190 to 197. I would expect to see it give back some Monday through Wednesday and have a very strong Thursday and Friday. Wednesday afternoon will probably be the best time to buy Call Options.
• Alphabet (GOOGL) got sold off by the end of the day and completed it's 4th day in a row of downward performance. So far this year, Alphabet would have one week where it changes direction from being down to moving up on Tuesday and have a big Wednesday through the end of the week. The opposite is true as it reverses direction from the upside on Tuesday as it did this past Tuesday and dropped from there. The movement from the prior week was from 1065 to 1162. Half of that would put it at 1013 as a floor to look for it to rebound to new highs and that should happen Tuesday morning. 
• This week Twitter graduated and is now listed on the S&P 500 and has gone up all week. Who knows what is going to happen next week with Twitter, but there is a lot of news happening:
• President Trump meeting about trade this weekend.
• On Tuesday is the summit with North Korea.
• On Tuesday there will be a court ruling on AT&T purchase of Time Warner.
• The Federal Reserve Board is meeting on Wednesday and we will have an announcement at 2pm on inflation and if the Fed Funds rates will be raised. Given the strong start to June, I would expect the rate to be raised and interest rates to start going up on Monday.

Apple Rally While Other Bore

• FANG is alive and well with Apple having an above expected earnings report yesterday and shares continued to climb all day. Amazon, Google and Netflix were down more than up today. I thought Apple was a screaming buy at $162 last week, but that is where I bought before when they dropped to $152 and then went up to $180. They are on pace to hit $180 before falling again. 
• The Fed's announced that they were not raising interest rates and the market had a huge spike up at 2pm before falling for the rest of the day. I believe the Federal Reserve Board won't raise rates more than one more time this year because it has not helped lending and has actually tightened everyone's money despite great positive movement in the labor market. English: I don't know. lol
• Tesla reported a lower than expected loss after the market close today. Tesla ran up in the afternoon to $306, but fell from 2pm to market close. They were trading up 10 after reporting earnings. The Model 3 production was improved in the first quarter. I would not be surprised to see nice upward movement on Thurday.
• Spotify announced a loss after the market close. SPOT ran up most of the day before falling after reporting earnings. Square was another disappointment in their earnings call this afternoon. I think people will stop calling the a crypto currency play.
• Home Depot and Best Buy were strong again today. I think these 2 companies are huge positive signals for the direction of the market for the rest of the year.

Golden Apple

• Stocks didn't move much Monday. McDonald's (MCD) reported a great first quarter. Tuesday was started by Merk and Pfizer reporting earnings. Pfizer was disappointing and the market went lower on Tuesday. 
• Turn around Tuesday was lead by tech. Google hit it's low for the day around 10am and everything else was around 11am. The charge was lead by Apple in anticipation of their earnings report after the market close. Fifty percent of Apple's revenue came from services which is giving them a pass on their unit sales. Apple is spending $100 billion to buy back stock and increasing it's dividend by 16%. The shares popped in the after hours trading. These were expected. I would expect today's gains are given back tomorrow plus some. Apple past $175 after hours which could be a signal for them to go higher in the short term as we have found Apple has shown resistance at $174/share.
• Snap had a disappointing earnings report and was down after hours and would expect it to go down further tomorrow and the next coming days.
• Sell in May and go away was the old story because most stocks are up in the first few months of the year. This year the market hit a high on January 26 and has not revisited it so there is more room to the upside.
• Wednesday the Federal Reserve Board will meet and possibly raise the Fed Funds Rate. It is expected to happen, but not tomorrow. If that rate goes up, the market may hurt from it. It doesn't make sense to raise interest rates as higher rates means less loans that people want to apply for mortgages, auto loans, new construction,... 
• The tax reform appears to have freed up cash for most companies, but have not increased wages. Instead companies are using it to buy more stock back to raise the stock price for the investors rather than the middle class. The combination of higher rates and tax reform are what is keeping the market in a trading range that it might not break out until the end of the year or sooner with updated legislation.
• Mark Zuckerberg of Facebook made a great speech at a developers conference today where he discussed how you can clean your browsing history in Facebook along with further focus on increasing the personal connection with friends and family.