pebblewriter

Tag: AAPL

  • A Look Ahead at 2024

    To quote the great Yogi Berra, “it’s tough to make predictions, especially about the future.”

    But, there are a number of important themes that should drive markets in 2024. The elephants in the forecasting room are the so-called Magnificent Seven (AAPL, GOOGL, MSFT, AMZN, META, TSLA and NVDA) which soared 105% in 2023 versus the S&P 500’s 24%.

    These seven stocks make up roughly 30% of the S&P 500, so even that index’s returns are suspect. Without the Mag 7, SPX gained only 9.94%. So, don’t chastise your investment manager if they returned only 10% last year by exercising prudent diversification.

    Will the rest of the market catch up to the Mag 7 or will the Mag 7 “catch down” to the rest of the market? Investors tempted to join the party and pile into the Mag 7 should remember that, in 2022, these same stocks plunged 40% compared to the rest of the market’s 12% losses.

    From a fundamental standpoint, their price to earnings multiples are historically quite high, meaning that any disappointments will be dealt with harshly. We saw this last week with AAPL.  While SPX fell as much as 2.2% from its highs, AAPL was off a whopping 9.7%.

    We’ll spend the next several days examining the equity charts for clues as to what to expect in the year ahead. We’ll also zero in on the currencies, commodities and interest rates which greatly influence equity values.

    As always, our goal is to get most them right most of the time, as we did in 2023 [see: The Year in Review – 2023.] Chart patterns and technical analysis are great tools for doing so. We’ll start with a very obvious chart pattern for SPX which should make all the difference between a stellar year or a slump. It ties in with another chart pattern dating back to the Great Depression.

    The most important chart pattern for SPX is the large Inverted H&S Pattern which completed on Dec 11.

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  • FOMC Decision: Nov 1, 2023

    Futures have bounced back from moderate overnight losses in advance of this afternoon’s FOMC decision.

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  • FOMC Decision Day: Sep 20, 2023

    Futures are up moderately in advance of this afternoon’s FOMC meeting.

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  • Charts I’m Watching: Aug 21, 2023

    Futures are up modestly in advance of the Jackson Hole symposium. continued for members… (more…)

  • Charts I’m Watching: Aug 8, 2023

    Futures are down sharply as yesterday’s currency moves and VIX smackdown are being unwound by Moody’s banking downgrades.  At least banks aren’t waking up to a 40% windfall profit tax such as Italy just imposed.

    This timely bit of truthiness certainly has the potential to get ES to our SMA50 target in the lead up to Thursday’s CPI print. As for XLF, the timing couldn’t be worse.

    Fear not, the Fed is already tapping the brakes.

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  • Update on Currencies: Aug 4, 2023

    Futures are up moderately on USD weakness.  The EURUSD has backtested its recently broken red TL and its SMA10, sending the DXY back below a TL it was threatening to break above.  This supports our thesis that the SMA200 is the most important target, but that the tag might wait until it reaches 1.087 or so.

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  • AAPL & AMZN on Deck

    Yesterday’s stronger than expected ADP data and the Fitch downgrade did a number on stocks, with several indicators officially turning bearish for the first time in months. But, AAPL and AMZN, which make up over 10% of the S&P 500, haven’t reported yet. So, it might be a little early for bears to get excited.

    We charted AMZN last week [see: Amazon – Can It Keep Delivering?] noting that it had reached important resistance and was overdue for a reversal. It tested important support at its 50-day moving average yesterday which, if broken, could easily usher in another 10%+ to the downside.

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  • Housing Continues to Disappoint

    Housing starts missed again this morning, underscoring the NAHB’s assessment that the housing industry is in a recession. Starts came in 100K below consensus and 9.5% below June’s report.

    Futures, still laser focused on OPEX, didn’t budge.

    The NAHB posted the 8th monthly decline in a row yesterday, reporting the lowest reading since May 2020.  This presents a thorny issue for the Fed.

    Higher interest rates are bringing down prices as we anticipated over a hear ago [see: Time to Sell Your Home?] But, inflation doesn’t reflect housing prices, it reflects a goofy calculation known as owner’s equivalent rent – which is supposedly what you could rent your home for if you were so inclined.

    Even this wackadoodle calculation shows that the latest spike is much higher and steeper than those which preceded the last two economic downturns/market crashes.

    But, of course, it’s nowhere near the average 14% increases actually experienced nationwide. According to Freddie Mac, this has left 62% of Americans unsure about their ability to pay their rent over the coming year. Nearly 20% of those whose rent increased said they are now “extremely likely” to miss a payment. Then there’s foreclosures, which are up 143% from last year.

    A cooling off of real estate prices would be desirable from the Fed’s standpoint as it might help mitigate high inflation. Yet, due to the COVID downturn, enough builders were more cautious that inventory remained below a 6-month supply until March 2022, when it began rising to June’s 9.3 month supply.

    As the chart below shows, this is the same level seen in the lead up to the Great Financial Crisis…

    Inventory topped out at 11.4 months in the midst of a 19% reset in prices. If the same percentage drop were to occur now, it would wipe out all gains since June 2021. Note that the median sales price has already dropped 12% so far.

    Think about that for a moment. If you purchased a median-priced home in June 2021 ($374,700) and watched it rise to the median price of $457,000 in April 2022, that $82,000 in additional equity might encourage you to purchase a new car, take a vacation, or at least eat out more often. If that bump in your net worth were to vanish, so might your interest in spending.

    When spending dries up, so do corporate sales and profits. As sales and profits drop, so does employment and stock prices. The resulting recession would thus be accompanied by a more severe market correction.

    What builders need and want – lower interest rates – is not at all likely at this time, at least according to past and current Fed presidents. They have begrudgingly accepted the fact that sensationally low interest rates are what generated this disastrous inflation in the first place.

    By raising rates just the right amount, the Fed hopes to tamp down inflation without causing a nasty recession. While technically not impossible, it’s never been done before. And, this Fed has proven itself fairly inept at reading the economic tea leaves.

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  • Charts I’m Watching: Aug 4, 2022

    Markets are flat following yesterday’s 1.5% move higher engineered by a stunning 12% VIX smackdown off Wednesday’s highs.

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  • Push Comes to Shove

    Thanks to the ongoing assault on VIX, the bear rally from mid-June is on the brink of becoming an actual breakout. Bolstered by some key earnings beats and surprisingly dovish commentary from Powell, fundamental buyers can’t be faulted for being bullish.

    Or…it could just be a masterful headfake designed to wash out the massive downside bets which had legitimately accumulated earlier in the year – in which case, a sharp downdraft is just ahead after this morning’s data dump.

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