On the surface, everything seemed good enough. Day two of our seven-day “Santa Claus” period seems to be hot.
The president had reluctantly signed off on the $ 2.3 trillion bill, which included both $ 1.4 trillion, intended to keep the government afloat through the end of the 2021 fiscal year, and $ 900 billion in Covid emergency aid. The futures markets had set the stage for a strong overnight session, well ahead of Monday’s opening clock. Sure, by the end of the day, the Dow Industrials, S&P 500 and Nasdaq Composite would all reach record levels, once again. The longer the day lasted, the more and more both what had set up the rally, as well as the internal market for shares, deteriorated.
I wrote to you recently that sometimes things can get a little dicey this week. They can. Sometimes despite your best to get all the ends in a row, they do not line up.
The US dollar appears to be weaker against most of its reserve currencies (not the yen, though) this (Tuesday) morning. Same as at this point Monday morning (it̵
The headlines read well. However, breadth and composition would plague the curious mind. A look at the sector’s performance tables tells investors that even though it’s working well right now, maybe we should just skate up.
I do not mind seeing the sectors communication services (when run by the internet), consumer discretionary and information technology. The technology sector has been our friend again this year. This, however, deceives. When we look at the technology sector itself, we see that the Dow Jones US Computer Hardware Index increased 3.4%, basically because Apple (AAPL) collected 3.6%. In fact, the whole FAANG was strong.
The truth is that hardware had technology on Monday. Technology Sector Select SPDR ETF (XLK) ran 1.1% on the day, despite Dow Jones US Software and Philadelphia Semiconductor Indices both contracting for the session (both rounding at -0.2%). Basically. information technology gathered without much participation from a large number of technology warehouses.
Furthermore, take a look at the sector’s performance tables. Numbers 9, 10 and 11 (out of 11) may have surprised investors in the middle of a meeting based on expanding the deficit expenditure that should improve the situation for small businesses and households. These sectors at the bottom of the table were all cyclically oriented and perform best when an economy expands. The industrial, materials and energy sectors stumbled around on Monday.
To put an exclamation point on this statement, not only did Dow Transports (part of the industrial sector) close in on the day (as Delivery Services and Trucking counteracted strength in the airlines and rails), but REITs, Consumer Staples, and the tools, all defensive in nature, surpassed all three growth-oriented sectors mentioned above.
Sure it’s a fun way to gather.
There is more
The width, to be blunt, was awful Monday for a day where the three major cap indices as the media like to talk about all posted gains at or near 0.75%. Market watchers must understand that traders took profits in small to medium-sized stocks. Meaningful. Russell 2000 is currently on an eight-week winning streak. The New York Jets have not done so since 1986. To put it in perspective, the team’s starting quarterback was Ken O’Brien. It was the season of O’Brien 26 years. He’s 60 now.
Even more interesting, while our three major cap indices topped football in the final zone at 4pm ET on Monday, the truth is that winners barely edged winners on both the New York Stock Exchange and the Nasdaq Market Site. Falling volume beat advancing volume on 11 Wall Street (yes, even with the indices on records), and it was not even that close. However, trading volume was very light on the NYSE. In fact, the total trading volume of S&P 500 members fell 26% below its own moving average of 50 days. In other words, it was more snoozing than selling for these more cyclical type names.
Not so, up in Times Square though. For Nasdaq-listed names, the volume increased decreasing by more than 3 to 2, while the trading volume returned to normal levels overall. In fact, for Nasdaq Composite companies, trading volume totaled 13% above what would be its own 50-day SMA. These traders did not fall asleep, they had limited their interest, and that interest though broader than just a few shares was centered right on FAANG.
Oh, remember I mentioned that discretionary had a good day? It’s a story there.
Wonder Woman and Retail
Is it possible that a federal bill of $ 2.3 trillion consumption / stimulus was passed – with hopes of increased helicopter money still on the table that would probably add another $ 400 billion to $ 500 billion dollars to the size of the package – was not the driver for investor decision-making on Monday? Yes is the short answer.
You all know that “Wonder Woman 1984” is seen as a relative (before the pandemic). The release of Warner Bros. took in $ 16.7 million at the box office, which would have been awful nine months ago. AT&T (T) is the parent company of Warner Bros., and the share sold on Monday. That said, AT&T is also the parent of the streaming service HBO Max, and AT&T reported that half of all HBO Max subscribers watched this movie on Christmas Day. It’s interesting. This is also very good news for Walt Disney Company (DIS), Amazon (AMZN) Prime, Apple (AAPL) TV +, the Peacock device for Comcast (CMCSA). Interestingly, Netflix (NFLX) underperformed the rest of FAANG, as well as the rest of the streaming universe on Monday, as this seriously puts the company’s lead in market share in the long run. All of the above can provide new content without going to the bank, or debt markets if they choose not to do so.
Well, a word about retail. According to data released by Mastercard (MA) SpendingPulse, total retail sales increased 3% year over year for the extended holiday season with Amazon Prime Day back in mid-October. The overall growth of the pedestrian was driven by a furious 49% increase in e-commerce, which means that brick and mortar retailers initially plunged into the dark. E-commerce fell just below the 20% mark for total holiday shopping. For reference, e-commerce accounted for less than 9% of all retail spending for the calendar year 2017. Remember that this not only results in lost revenue for smaller retailers and retailers who do not do e-commerce very well, but e-commerce is for the retailer a much lower margin business than traditional retail. It is much better for the business if customers come to them. Amazon can compensate for lower margins through advertising.
Another reason for the increase in shares in Amazon on Monday. This is also why Walmart (WMT), Target (TGT) and Costco (COST) did well. They can all subsidize the last mile to stay competitive. The cute shop on Main Street? Not so. For them, the delivery of cargo miles is expensive, and they can not sell advertising space.
As we have stated here today, it was a good day for most of FAANG. Facebook (FB) increased by 3.6% to resume the stock’s 50-day SMA. The alphabet (GOOGL) added 2.3% for the day, to really just center the latest sales in the middle of a two-month trading area. Amazon went up 3.5%, and is now getting interesting as the stock looked like a rocket bouncing back from its 50-day line.
Now Apple is different, at least technically.
We can talk about iPhone 12 upgrade bikes all we want. It may or may not develop. We can talk about potentially life-saving wearables. We can talk about the ecosystem and the captive audience, and that this will continue to develop into a recurring income model. The fact is that all of these are positive, and the stock is at an inflection point.
Do you remember this chart? This was the rising triangle that we showed you, which has us expecting an imminent breakout. We now see that eruption, or at least part of it. Someone can see a plate here, which will place the pivot pin on the left side of the cup / plate or at the $ 138 level. Some may think they see a “flat base”, but it is just not flat.
What if we move the top of the rising triangle (we are not sure this is correct yet), up to the $ 138 level when stocks are now approaching that point?
Much more impressive, if that’s how it’s played out. Do you know what I think? I think AAPL goes to $ 165. At least. For now, that’s my goal. When it comes to panic, I just do not sell AAPL at any time.
Need to know
The House of Representatives supported President Trump’s demand to increase the individual stimulus payout agreed in the already signed bill, from $ 600 to $ 2,000, by a vote of 275 to 134, with 44 of the 275 yes votes coming from Republicans. The ball is now rolling in the Senate with an entire nation, or more specifically the state of Georgia, watching. I think Mitch McConnell will put it to the vote. Passage? I do not know, but this puts the few remaining fiscal hawks in the government in a very difficult position politically.
Separately, the House voted even more overwhelmingly to override the president’s veto against the National Defense Authorization Act. This too will now be up to the Senate. While I see the president’s point about section 230 of the Decent Communication Act, and I do not know why anyone on either side of the aisle would oppose a new look at better regulation of social media (both sides have lost one presidential election in the last two years and have taken problems with social media in response), this is not the place to do it. In addition, as someone who has served the flag, I often wondered why the hell I served at bases or walked down the streets named after people who took up arms against the same flag. Just mention it ‘.
Economy (All Times Eastern)
08:55 – Redbook (Weekly): Last 6.5% y / y.
08:30 – Case-Shiller HPI (Oct): Expects 6.9% y / y, Latest 6.6% y / y.
16:30 – API oil storage (weekly): Last + 2.7M.
Fed (All Times Eastern)
No public appearances planned.
Today’s earnings highlights (Consensus EPS expectations)
No significant quarterly revenue planned for release.
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