The strangest of the rallies, Wonder Woman 1984, Retail, Apple’s Inflection Point

On the surface, everything looked good enough. The second day of the seven-day period of “Santa Claus” would seem to be hot.

The president had reluctantly signed into law the $ 2.3 trillion spending bill that included $ 1.4 trillion to keep the government running until the end of fiscal year 2021 and $ 900 billion of dollars in Covid aid funds. Futures markets had set the stage for a strong overnight session, well ahead of Monday’s opening bell. It is clear that by the end of the day, Dow Industrials, S&P 500 and Nasdaq Composite would reach record levels, once again. However, the longer the day lasted, the more deteriorated both what the rally had established and the internal functions of the equity market.

I recently wrote to you that sometimes things can get a little annoying this week. They can. Sometimes, despite making every effort to get all the ducks to be tracked, they just don’t line up.

The US dollar appears to be weaker against most of its reserve currency values ​​(but not the yen) this morning (Tuesday). Same as at this time on Monday morning (it’s about 4am ET when I write this). Just one thing. Basically, the dollar rose sharply after Monday’s opening and then went strong again. Gold and crude moved against the dollar in each move, while bitcoin maintained its interesting position at high levels. As for equities, I told you that our indexes with larger capitals were set at all set records, but that had to be one of the least marked rallies, to be brutally honest.

Unimpressive composition

The headlines read well. Still, the breadth and composition would bother the inquisitive mind. A look at the industry’s performance charts indicates to investors that while things look good now, maybe, maybe we should skate upside down.

I don’t even care to see communication services (when they are led by the internet), the consumer discretionary sector, and information technologies. The technology sector has become our friend again this year. Still, this is misleading. Looking within the technology sector itself, we see that the Dow Jones US Computer Hardware Index rose 3.4%, basically because Apple (AAPL) rose 3.6%. In fact, all of FAANG was strong.

The truth is that Monday brought technology to the hardware. The technology sector’s SPDR ETF (XLK) traded up 1.1% on the day, although the Dow Jones US Software and Philadelphia Semiconductor indices contracted for the session (both rounded to -0.2%). ). Basically. information technologies came together without a large share of a large number of technology stocks.

Also, see industry performance tables. Numbers 9, 10 and 11 (out of 11) could have surprised investors amid a concentration based on the expansion of deficit spending aimed at improving the situation of small businesses and households. These sectors at the bottom of the table were cyclically oriented and work best when an economy is expanding. The industrial, materials and energy sectors stumbled on Monday.

To put an exclamation point to this statement, not only Dow Transports (part of the industrial sector) closed flat on the same day (as delivery and trucking services counteracted the force on airlines and railways) , but in the REIT and public services, all of a defensive nature, they outperformed the three most growth-oriented sectors mentioned above.

Of course it’s a fun way to get together.

There is more

The breadth, to be blunt, was horrible Monday for a day when the three capitalization indexes that the media likes to talk about all published earnings around 0.75%. Market observers need to understand that traders made profits in small or mid-cap stocks. Makes sense. The Russell 2000 currently has a winning eight-week streak. The New York Jets haven’t done so since 1986. To put it in perspective, the team’s starting quarterback was Ken O’Brien. This was O’Brien’s 26-year season. He is now 60 years old.

Even more interesting, while our three capitalization rates increased football in the final zone on Monday at 4 p.m., the truth is that the winners barely beat the winners on both the New York Stock Exchange and the Nasdaq. Market Site. The decline in volume surpassed the volume advanced at 11 on Wall Street (yes, even with record indexes), and it wasn’t even that close. However, trading volume was very light on the NYSE. In fact, the aggregate trading volume of the constituent members of the S&P 500 fell 26% below its 50-day simple moving average. In other words, there have been more numbness than selling these more cyclical type names.

Not so, however, in Times Square. For the names listed on the Nasdaq, the advance in volume increased the decline in volume by more than 3 to 2, while trading volume returned to aggregate levels at normal levels. In fact, for the constituent corporations of the Nasdaq Composite, the total trading volume landed 13% above what would be their own 50-day SMA. These traders did not sleep, as they had limited their interest and this interest, though broader than a couple of shares, focused directly on FAANG.

Ah, remember I mentioned that discretionaries had a good day? There is a story there.

Wonder Woman and retail

A $ 2.3 trillion federal stimulus / spending bill may be passed by the law, in hopes of raising helicopter money on the table that would likely add another 400,000 to 500,000 million. dollars the size of the package? investor decision making on Monday? Yes, it is the short answer.

You all know that “Wonder Woman 1984” is being seen as a relative success (for the pandemic era). The release of Warner Bros. it grossed $ 16.7 million at the box office, which would have been terrible nine months ago. AT&T (T) is the parent company of Warner Bros., and that stock sold out Monday. That said, AT&T is also the father of HBO Max broadcast service and AT&T reported that half of HBO Max subscribers saw this movie on Christmas Day. Well, that’s interesting. They are also very good news for Walt Disney Company (DIS), Amazon (AMZN) Prime, Apple (AAPL) TV +, Comcast’s Peacock Unit (CMCSA). Interestingly, Netflix (NFLX) outperformed the rest of FAANG and the rest of the streaming universe on Monday, as that future seriously jeopardizes that company’s market share leadership. All of the above can bring new content without going to the bank or debt markets in case you don’t opt ​​out.

Now, a word to detail. According to data released by Mastercard (MA) SpendingPulse, overall retail sales rose 3% year-over-year for the extended holiday season that began with Amazon Prime Day in mid-October. Global pedestrian growth was driven by a 49% increase in e-commerce, meaning that the retail trade of bricks and mortars was basically plunged into darkness. E-commerce fell just below 20% of global holiday buying. As a reference, e-commerce accounted for less than 9% of retail spending in the calendar year 2017. Remember, this is not just a loss of revenue for smaller retailers and non-e-retailers. very well, but also trade is for the retailer a much lower margin business than traditional retail would be. It is much better for business if buyers come to it. Amazon can compensate for a lower margin through advertising.

Another reason for the rise in shares of Amazon on Monday. That’s also why Walmart (WMT), Target (TGT) and Costco (COST) worked well. Everyone can subsidize that last mile to stay competitive. That nice shop on Main Street? Not so. For them, this last mile delivery is prohibitive and they cannot sell advertising space.

Turning point

As we said here today, it was a good day for most FAANG. Facebook (FB) soared 3.6% to recover the 50-day SMA from this stock. Alphabet (GOOGL) added 2.3% during the day, to really focus the last sale in the middle of a two-month trading interval. Amazon faced 3.5% and now it’s getting interesting, as stocks looked like a rocket bouncing off its 50-day line.

Now Apple is different, at least technically speaking.

We can talk about iPhone 12 update supercycles all we want. This may or may not develop. We can talk about potentially life-saving sports. We can talk about the ecosystem and the captive public and that this will continue to evolve into a recurring revenue model. The fact is that all these aspects are positive, and the stock is at a turning point.

Remember this chart? This was the ascending triangle we showed you and we were expecting an imminent break. Now we see this rupture, or at least a part of it. Some may see a plate here, which would place the pivot on the left side of the cup / plate or at the $ 138 level. Some might think they see a “flat base,” but it’s just not flat.

What if we move the top of the ascending triangle (we’re still not sure if that’s correct), up to that $ 138 level as stocks now approach that point?

Much more impressive, if that’s how it works. You know what I think? I think the AAPL goes up to $ 165. At least. For now, that’s my goal. As for a panic point, I don’t sell AAPL at any point.

You need to know that

The House of Representatives supported President Trump’s demand to increase the payment of individual incentives agreed to in the already signed law, from $ 600 to $ 2,000, with a vote of 275 to 134, with 44 of the 275 votes received. of the Republicans. The ball now enters the Senate with an entire nation, or more specifically, the state of Georgia, watching. I think Mitch McConnell will put it to a vote. Passage? I don’t know, but that does put the few fiscal hawks left in government in a politically terrible position.

Separately, the House voted even more overwhelmingly to overturn the president’s veto on the National Defense Authorization Act. This also now belongs to the Senate. Although I see the president’s point about section 230 of the Communications Decency Act, and I don’t know why anyone on either side of the aisle would object to taking another look at better regulation of social media (both parties have lost a presidential election in the past). two and have responded with social media in response), this is not the place to do it. Also, as someone who has served the flag, I often wondered why the hell I served at the bases or walked the streets bearing the name of people taking up arms against that same flag. Just saying ‘.

Economy (All Times Eastern)

08:55 – Red book (weekly): Last 6.5% i / i.

08:30 – Case-Shiller HPI (October): Expecting 6.9% i / i, Last 6.6% i / i.

16:30 – API Oil Inventories (weekly): Last + 2.7 M.

The Fed (All Times Eastern)

There are no scheduled public appearances.

Today’s highlights (EPS consensus expansions)

No significant quarterly earnings are expected for the launch.

(Amazon, Alphabet, Apple, Facebook, Disney, Mastercard, Costco, and Walmart are funds from the Jim Cramer Action Alerts PLUS member club. Do you want to receive alerts before Jim Cramer buys or sells these shares? Learn more now.)