Watching the “market” melt up and bonds barely budge in the face of all-time highs in the monthly and annual PPI print… 
More grist for the Fed’s “transitory” inflation scenario.
Inflation is no longer dominated solely by soaring oil/gas prices. In other words, not transitory.
Will the party end? Not as long as the Fed can control volatility and interest rates – which are, for now at least, ignoring reality. Tomorrow’s another day…
continued for members… (more…)
Note: CPI came in right on target: +0.6% unadjusted over the last 12 months. The MoM figure also rose 0.6% – driven, as expected, by the 12.3% increase in gasoline prices.
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The last time I wrote a post including all the FAANG stocks was in November 2018 [see: FAANGs – Now or Never.] Several of them FB, AAPL, AMZN, NFLX and GOOGL were in trouble from a technical standpoint. GOOGL, for instance, had just completed a death cross and the stock had broken down from a 10-year old rising wedge.
The S&P 500 itself was also in a bind, having dropped through its 200-DMA and struggling to remain above its 2.24 Fibonacci extension at 2703. As it turned out, it couldn’t. It shed another 14% (20% from the Sep 2018 highs) before being rescued by the Plunge Protection Team. Most of the FAANGs had similar troubles.
GOOGL, at 1071.05 at the time, dropped 24% from its July 2018 highs and tested its March 2018 lows and completed a huge H&S Pattern targeting 707 before magically finding its footing.
It has since piled on another 500 points, with two downturns along the way turning the rising wedge into a rising channel [it just needed a global pandemic and a horrible recession to help it along] which is once again offering overhead resistance. 
What about the rest of the FAANGs? Any other warning signs that we should be watching? Glad you asked.
continued for members… (more…)
First, a confession. In 2004 I sat next to a guy at a Sundance Film Fesitval screening who was very excited about his company that would someday be able to play movies on your computer or even your cell phone. “Why won’t this guy shut up?” I asked myself as I scanned the theater for an empty chair.
The “guy,” of course, was Reed Hastings. At the time, they were barely profitable, having just posted their first net profit ever (a whopping $7 million in 2003.) The stock was hovering around $5/share.
I couldn’t, for the life of me, figure out how they’d ever compete against Blockbuster — which had turned down an offer to acquire the company for $50 million a few years earlier.
The 2004 annual report cover, to the left, illustrated the problem. Why wait for a movie to arrive in the mail when you could run down to the local Blockbuster and grab a copy (along with some tasty Goobers) right now?
Reed was obviously on to something and soon figured out online delivery — though he still hasn’t cracked the eGoober challenge. A $10,000 investment in the common at that time would be worth around $1 million now. Live and learn, right?
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The stock is under pressure this morning as subscriber growth fell short of Street expectations and the company’s guidance. But, I’ll leave that to my fundamental brethren to suss out. My concern is that the stock will test critical support.
Last year we took a look at the chart and noted that at 400.48, it looked particularly vulnerable. From Netflix: Watch It! on July 16, 2018:
A quick glance at NFLX’s daily chart shows it has significant downside potential. The most obvious downside target is the 100-DMA at 338.73. But, the 200-DMA is approaching the white channel midline and should cross it at around 298-300 on or about August 6. It makes for a nice downside target if the SMA100 doesn’t hold. Should the SMA200 and channel midline fail, the bottom of the white channel is currently around 200 and (obviously) rising.
The stock soon tested then failed at the 100-DMA, but bounced just before reaching the midline and popped out of the falling white channel. It thus postponed the midline/200-DMA test until October 11 where it bounced yet again before plunging through to the channel bottom which, by then, was up to 230.
There are a lot of things that could happen to the stock, which has traded as low as 313 in after-hours. But, the critical level to watch is 295-300 where it would drop through the 200-DMA and test the channel bottom as well as backtest the broadening wedge (aka megaphone pattern.)
Anything lower would be very problematic for a stock which has been locked in the same rising channel for 6 1/2 years.
One note to those focused on the fundamentals. The observations I made last year still apply:
As an aside… I’ve been mystified as to the value ascribed to the company based on its ability to produce original content. What about the risk? Anyone who has worked in film or television can tell you that most productions don’t turn a profit.
I don’t want to get into production. There are passionate, talented filmmakers out there and I would pollute the craft.
Reed Hastings, Inc Magazine: Dec 1, 2005
Netflix has clearly hit some home runs with House of Cards, Stranger Things, etc. And, theoretically, producing content in-house can lower acquisition cost and diversify revenues.
But, extrapolating an unending string of popular and profitable productions is just plain silly. Some would say borrowing $1.8 billion to fund said productions is downright reckless.
Think New Line, which followed up the hugely successful Lord of the Rings trilogy with the expensive flop The Golden Compass. Investors would do well to remember that beta works in both directions.
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It’s been ages since we offered a discount on memberships. For the next several days, quarterly subscriptions – normally $399 – will be discounted to only $299 for the first quarter. That’s 3 months for less than the price of two on a monthly subscription.
Click here to join now.
Update for members… (more…)
A quick glance at NFLX’s daily chart shows it has significant additional downside potential.
The most obvious downside target is the 100-DMA at 338.73. But, the 200-DMA is approaching the white channel midline and should cross it at around 298-300 on or about August 6. It makes for a nice downside target if the SMA100 doesn’t hold.
Should the SMA200 and channel midline fail, the bottom of the white channel is currently around 200 and (obviously) rising.
As an aside… I’ve been mystified as to the value ascribed to the company based on its ability to produce original content. What about the risk? Anyone who has worked in film or television can tell you that most productions don’t turn a profit.
I don’t want to get into production. There are passionate, talented filmmakers out there and I would pollute the craft.
Reed Hastings, Inc Magazine: Dec 1, 2005
Netflix has clearly hit some home runs with House of Cards, Stranger Things, etc. And, theoretically, producing content in-house can lower acquisition cost and diversify revenues.
But, extrapolating an unending string of popular and profitable productions is just plain silly. Some would say borrowing $1.8 billion to fund said productions is downright reckless.
Think New Line, which followed up the hugely successful Lord of the Rings trilogy with the expensive flop The Golden Compass. Investors would do well to remember that beta works in both directions.
UPDATE: July 17
We’re off to a good start.
AAPL soars, market soars. AAPL plunges, market yawns. Sure, makes sense to me. One can only guess as to how much effort went into propping up the markets this morning in the wake of the earnings miss.
Have you ever heard so many laudatory comments about the stock everyone loved to hate only months ago: NFLX? Gotta love it.
Regardless, AAPL has gone exploring spelunking lower Fib levels and the rest of the market is up, which presumably means we’re presently on the right side of the market.
AAPL should firm at 450.85 this morning — the 1.618 of the Crab pattern dating back to Nov 16 at 505.75 (light blue.) Personally, I’m an enthusiastic buyer at these levels (with stops, of course.) I previously set the large white pattern Point X at 354 on Oct 4, 2011.
But, moving it to the June 20, 2011 310.50 level (just as legitimate, if not more) means AAPL just tagged the .618 retracement of the 310-705 move.
But, the biggest reason of all to be short-term bullish on AAPL is the purple channel — the bottom of which AAPL just tagged. The stock could certainly fall below it, but this sucker dates back to the year 2000. I have a hard time believing the channel will fall after what amounts to a minor estimate miss.
Does the company have problems? Sure. I worry about the obvious decline in customer service and a slowing product cycle. But, it also has the means, the manpower and the motivation to fix what’s ailing the stock price.
Stay tuned.
UPDATE: 1:15 PM
The markets have sold off from their highs, but seem to be finding RSI support. APPL is, doing the same. For those who find the bounce idea compelling, here’s another chance.
UPDATE: 1:50 PM
Watching to make sure the price channel and RSI channel both hold on SPX…
