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Posted by Martin February 23, 2023
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02.22.2023 – WEDNESDAY MARKET OUTLOOK


Market Outlook
 

The markets were volatile after the FOMC meeting minutes. And that volatility will probably continue as investors are scared. They propelled worthless tech stocks up during the 2020 and 2021 frenzy and now they are scared to hold these stocks and dumping them en masse. And along with those, they dump good quality stocks like Google or Amazon. They say Google’s growth slowed down (to 10% growth compared to 41% growth last year), but that is normal cyclical behavior. Next year it can accelerate again ( and when this bearishness ends, I expect it to happen). But these people are foolish and sell, just because this or next quarter, the stock will be slower than usual. At least, they are providing me with a good opportunity to buy. In the meantime, we have to survive the market being dragged down.

 
Market Outlook
 

The market ended slightly below $4,000 today (it went up a bit after hours and finished above $4,000 as you can see in the above chart). There is no improvement. The sentiment is overly bearish and there is still a good chance that we will go lower and retest the 200-day MA.

 
Market Outlook
 

The Ichimoku charts are both bearish too. The daily chart shows what I expected to happen – closing the white space between the price and the cloud. The price is now approaching the cloud and should find support on it. If so, this will be a healthy pullback. If not, expect a bad outcome. The weekly chart is still full-blown bearish, struggling to move above the cloud.

 
Market Outlook
 

The forecast indicated a bullish outcome but it doesn’t take into account the FOMC and fickle investors. Inflation and economic data recently published indicated that they will have a negative impact on the FED’s pivot and markets and that is exactly what we saw today. Despite the FED’s “higher and longer” rhetoric, the markets held relatively well (we could drop way deeper than just a measly -0.14%). But this can change quickly. The markets trade efficiently and when looking at the chart below, the volume profile is creating a vacuum above the POC. At some point, the market would want that space filled. But given the weakness and bearish sentiment, I do not think this will be the case. We probably end lower tomorrow.

 
Market Outlook
 

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Posted by Martin February 22, 2023
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02.21.2023 – TUESDAY MARKET OUTLOOK


Market Outlook
 

We got hit in multiple directions today. First, the foray of economic data came in and they were so good that investors started, once again, freakin gout that this may force the FED to keep the rates higher for longer (good news is bad news). Then, we received reports from Walmart and Target. They were good, but the guidance was bad suggesting that the consumer may be pulling back with spending. Instead of cheering it, investors freaked even more that we are going into recession (bad news is bad news). And we are not done here. Tomorrow, we will get hit by FOMC, GDP, and PCE reports. That can be sparky out there…

 
Market Outlook
 

So, the market dropped 1.66% today. And it may go actually lower, all the way down to the 200-day MA. So far we have found support slightly above $4,000 support but if tomorrow we get more bad news (good news that is bad) we may slide below swiftly. Now the daily Ichimoku chart looks really weak and bad suggesting that there will be more selling momentum.

 
Market Outlook
 

The weekly Ichimoku now looks better. Not that it improved, but because it holds the trend. But that may change very soon and very quickly:

 
Market Outlook
 

As I suspected, the weakness was flashing everywhere and the bullish stance was unlikely. We ended in the red. And although tomorrow’s forecast is also bullish, I expect either a red day or flat. This can be significantly changed by tomorrow’s FOMC meeting. Therefore I do not expect anything from this market.

 
Market Outlook
 

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Posted by Martin February 22, 2023
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Technical view: PayPal Holdings, Inc. (PYPL)


Technical view
 

PayPal PYPL is still in stage #4. It was morphing into stage #1 but failed and resumed its downtrend. It is trading below its 2025 fair value providing an opportunity for 8% annualized growth at the current price. The price action speaks for a probability of a further decline so if you are interested in this stock (which in my opinion is still an innovative payment processor compared to others or traditional banks) any share buying needs to be done gradually at the current prices. I do not expect the stock to go lower as it is evidently bottoming. It may stay here for a long time. And if you buy now, be prepared for a slow movement up or even further decline.

 
Technical view weekly
 

The company shows growing revenue despite troubles and a recent decline. The revenue (6.72% annual average, and 14.55% 5-year average) was higher in 2022 than in 2021 so the selloff in 2022 seems to be an overreaction:

 
Technical view weekly
 

The free cash flow is steady with no growth but steady. We would prefer some growth in this metric. Even a small growth would be appreciated and it would provide some boost for the stock price movement. PYPL recently replaced their CEO, so let’s hope that move will be for the better and the company improves its finances which would translate to better stock valuation:

 
Technical view weekly
 

The company increased its cash substantially last year which could retire its entire debt. I think this is a very positive balance and something investors are not appreciating enough:

 
Technical view weekly
 

Technical view weekly
 

Fundamentally, the stock is trading above its fair value, but below its future fair value (see the red line in the chart above). At the current price, and if the earnings estimates remain at the current level, the stock may offer 9% growth in two years. And if it sparks a FOMO, it may be even better. I think the stock is a good long-term investment.

 
Technical view weekly
 

The stock is now BUY
 

This post was published in our newsletter to our subscribers on Saturday, February 18th, 2023. If you want to learn more about our stock technical analysis subscribe to our weekly newsletter.
 




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Posted by Martin February 21, 2023
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02.20.2023 – MONDAY MARKET OUTLOOK


Market Outlook
 

Today was President’s Day and the markets were closed. So the price action was muted. The markets were slightly down and indicative of no direction:

 
Market Outlook
 

The daily Ichimoku chart still continues to look weak, but we still hold the support at $4,000:

 
Market Outlook
 

The weekly Ichimoku looks worse. We need a more convincing move to the upside. This is a pathetic move.

 
Market Outlook
 

The forecast shows a bullish day tomorrow but investors are way too skittish about the FED so there is a good chance that we will end red tomorrow

 
Market Outlook
 

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Posted by Martin February 19, 2023
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META privacy abuse for $11.99 a month


META just announced that they will roll in a new feature “Meta Verified”, which will let users verify their accounts using a government ID and get a blue badge.

So, let me think about it.

META, known for horrible and unscrupulous privacy abuse, will now get their hands on my government-issued ID and I will even pay for it?
 
 




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Posted by Martin February 19, 2023
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Are Treasury Bills Really Risk-Free?


Recently, as the interest rates were growing, Treasuries started paying great interest. They reached 5% recently. And media are now telling us that this is a big threat to the stocks as Treasuries now offer a “virtually risk-free” earnings yield comparable to S&P 500. and if you can get 5% risk-free interest, why would you invest in risky stocks, right?

 
Risk-Free Yield
 

The way I see it, it is a misleading and utterly wrong argument you should avoid listening to. The bonds (no matter who is the issuer) are no longer risk-free! Even the Treasuries!

You do not have to look too far to see how risky the bonds are. Just look at the bear market of 2022. If you invested in bonds (using TLT, or directly), you lost money. On average, the bonds lost 16% in 2022. How is it risk-free?

The only way how you could make your bonds investment risk-free was if you held them until maturity. If you buy, let’s say a 3-year Treasuries, the only way to make them risk-free is to hold them the entire time. You buy them for $10,000 and if you hold till maturity, you get back $10,000 plus interest, which is currently 4.3%. If you wanted to cash out in 2022, before maturity, you risk that you would be selling for $8,400. Nice loss. That loss will not be compensated by interest at all.

And if you decide to hold until maturity, what can happen in the next 3 years with your bond? Nothing. Absolutely nothing. You put in $10,000 and three years later you get out $10,000. That is a horrible investment!

If you buy a high-quality dividend stock, for example, ABBV, MSFT, AAPL, JNJ, O, MCD, or many other dividend aristocrats, your risk is exactly the same as bonds but unlike bonds, you would make money on the capital appreciation, and received a nice dividend.

Let’s take a look at the “risk-free investment” vs dividend stocks if you bought in 2021, in the midst of the highest market frenzy when everyone was bullish, even your plumber. Here is what would have happened to your $10,000 investment if you bought TLT vs. various dividend-paying stocks in October 2021:

 

ABBV vs “risk-free” bonds

 

If you bought ABBV, your average annualized return would be:

With dividends reinvestments:
ABBV 32.37%
TLT -20.83%

Without dividends reinvestments:
ABBV 31.80%
TLT -20.57%

 
ABBV vs Risk-Free Yield
 

MSFT vs “risk-free” bonds

 

If you bought MSFT, your average annualized return would be:

With dividends reinvestments:
MSFT -6.97%
TLT -20.83%

Without dividends reinvestments:
MSFT -6.91%
TLT -20.57%

 
MSFT vs Risk-Free Yield
 

AAPL vs “risk-free” bonds

 

If you bought AAPL, your average annualized return would be:

With dividends reinvestments:
AAPL 5.65%
TLT -20.83%

Without dividends reinvestments:
AAPL 5.66%
TLT -20.57%

 
AAPL vs Risk-Free Yield
 

JNJ vs “risk-free” bonds

 

If you bought JNJ, your average annualized return would be:

With dividends reinvestments:
JNJ 2.86%
TLT -20.83%

Without dividends reinvestments:
JNJ 2.94%
TLT -20.57%

 
JNJ vs Risk-Free Yield
 

O vs “risk-free” bonds

 

If you bought O, your average annualized return would be:

With dividends reinvestments:
O 7.07%
TLT -20.83%

Without dividends reinvestments:
O 7.00%
TLT -20.57%

 
O vs Risk-Free Yield
 

MCD vs “risk-free” bonds

 

If you bought MCD, your average annualized return would be:

With dividends reinvestments:
MCD 10.14%
TLT -20.83%

Without dividends reinvestments:
MCD 9.98%
TLT -20.57%

 
NCD vs Risk-Free Yield
 

You can play with various investments using this calculator and see how you would perform in this market.

 

Virtually “risk-free” bonds earnings yield is bullshit

 

Yes, that is the result of today’s market. The bonds may have been a safe haven in the ’30s, ’40s, ’50s, or maybe even in the ’60s, but it is no longer true. Today, they carry the exact same risk as stocks and the bear market of 2022 proved that bonds were riskier than stocks. The only way how you could get your principal back is if you held it until maturity. In a bear market, it would work, but in a bull market, your bonds would provide zero capital appreciation and the yield of 4% is mediocre at best.

Avoid listening to morons claiming otherwise.
 
 




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Posted by Martin February 17, 2023
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02.16.2023 – THURSDAY MARKET OUTLOOK


Market Outlook
 

So the PPI index came out hotter than expected so the market did what the forecasting said it would and I was wrong. So investors crapped their pants again on renewed fears and we sold off. But it was a rocky intraday. We sold off in the morning but then went on a recovery path. But then the FED officials started talking in the afternoon and the market tanked again.

 
Market Outlook
 

The daily Ichimoku chart continues to look weak, but we still hold the support at $4,000:

 
Market Outlook
 

The weekly Ichimoku looks worse. We need a more convincing move to the upside. This is a pathetic move.

 
Market Outlook
 

Today, we shrugged the inflation data and recovered losses. It indicated that investors were reluctant to sell, only weak hands were selling. Although this changed after a variety of FED officials started talking about “higher and longer”, we still have some strength in this bull market. Now it depends on who will win tomorrow. I bet on bulls and after some initial weakness we may see an up day.

 
Market Outlook
 

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Posted by Martin February 16, 2023
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02.15.2023 – WEDNESDAY MARKET OUTLOOK


Market Outlook
 

One would expect the market to crash after the CPI data and strong retail sales reports. But it wasn’t the case. In fact, after some weakness, the markets rallied and closed up over 0.4%. This indicates that bears have it wrong and that the market is likely going higher than lower from here. It may be a bumpy road, but it will be an upward road.

 
Market Outlook
 

The daily Ichimoku trend is strong and today’s pause is a dip worth buying. And wait for the bears when they realize that they were wrong and start rushing in with FOMO. That will push this market even higher.

 
Market Outlook
 

The weekly Ichimoku is still weak but improving too. If this continues, we will see a full-blown bull market on both charts.

 
Market Outlook
 

Tomorrow we will get jobless claims data and the PPI index (Producer prices index) which may have some impact on the market. But since the market was able to shrug off strong labor data and mild inflation decrease data (which would be otherwise perceived as the end of the world) I would say that unless the jobless claims or PPI come back really, really bad, nothing will happen and the market will go higher than lower.
The forecast indicates a selloff tomorrow but I do not think this will happen. I expect an up day.

 
Market Outlook
 

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Posted by Martin February 15, 2023
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02.14.2023 – TUESDAY MARKET OUTLOOK


Market Outlook
 

We received a new CPI report today showing that inflation continues moderating and gliding lower although because of the media hysteria, it may have not looked like it. Yes, the pace slowed down significantly compared to the second half of 2022 but still, we are easing down a bit. The headline and core CPI rose 6.4% y/y and 56% respectively, down from 6.5% and 5.7% in December. The market reacted to the numbers with a rally followed by a selloff and zig-zag moves. In the end, it ended almost flat.

 
Market Outlook
 

If you look at the chart above carefully, you will see that the market is forming a flag pattern. That is a quite strong bullish continuation pattern, usually followed by many investors if they recognize it:

 
Market Outlook
 

Thus we can safely assume, that the trend will continue at some point in the future. How exactly long we stay in this pattern and when we break up is unknown. But we may expect it to happen. Unless the FED comes out with bad news and turns this all down to the abyss.
The Ichimoku chart shows a strong bullish pattern too:

 
Market Outlook
 

If we switch to the weekly Ichimoku we will see that the market is trying to improve too. There is still a lot of work to be done but the most important and enlightening price action is that the price is trying to get above the cloud. This would definitely confirm this new bull market.

 
Market Outlook
 

The market followed the forecasted pattern almost to the tee, today. We rallied, then pulled back, and rallied again to recover. The only difference was that at the end of the trading session, the market sold off again. Tomorrow, I expect the market possibly sell again but rally by the end of the day.

 
Market Outlook
 

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Posted by Martin February 15, 2023
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Technical view: Netflix, Inc. (NFLX)


Technical view
 

NFLX is in stage #2. Netflix continues moving higher despite naysayers who think the stock is doomed because of the subscription sharing limitations and them canceling their subscription. But investors do not see it as a problem, at least not now. I expect the stock to reach 200-day MA on a weekly chart at $410 a share, but this process may take some time, and we may even see a few pullbacks on the way up. There will be resistance at $360 a share. The stock seems to stall now and possibly seeing the much-needed pullback. That makes the stock a “hold” for now.

 
Technical view weekly
 

The company’s revenue is slowing down (during 2022 we saw a significant reversal from rapid revenue growth). That may be concerning if we see the continuation:

 
Technical view weekly
 

The free cash flow of Netflix is quite horrible. It is a zig-zag move and most of the time between 2014 and 2020 the company was burning cash.

 
Technical view weekly
 

Unfortunately, the company is burdened with large debt and not enough cash to cover it. If interest rates keep rising higher, this may be a problem.

 
Technical view weekly
 

The current price action makes the stock overvalued on a fundamental basis again. I think the new subscription plan will be positive for the company and will be reflected in future earnings (not this earnings quarter, but we may see an impact as soon as Q1 2023). But given the current valuation and financial conditions of the company, I think the stock is a hold now.

 
Technical view weekly
 

Technical view weekly
 

The stock is now HOLD
 

This post was published in our newsletter to our subscribers on Sunday, January 28th, 2023. If you want to learn more about our stock technical analysis subscribe to our weekly newsletter.
 




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