ARNC - producer of flammable products

With the market becoming aware that Arconic (ARNC) produced the cladding used on the burnt out Grenfell tower in London, the stock opened sharply lower (intra low $22.59), settling -4.1% at $24.28. Near term outlook is very bearish, with at least a re-test of this morning's low.


ARNC daily

ARNC, monthly

Summary

Frankly, considering the severity of the recent Grenfell tower fire, its almost a wonder that Arconic - now named as the company who produced the flammable product that covered the tower, didn't drop more today.

For yours truly in the north west of the London metropolis...

Looking to the south west, just two of the towers cladded in Arconic products, that have both failed emergency safety tests. Both towers - along with at least 58 others, will need to be stripped, and eventually re-clad. There are around 600 clad towers in England, and its possible >500 might be affected. Exactly who is going to pick up the tab for that (roughly $3 million a tower) is yet to be decided. Indeed, it will likely be argued within multiple courts, and such a decision might easily drag out for some years.

Ohh, and consider this... its not just a UK problem, its an issue across many countries.

Arconic announced today they will no longer sell its product for us in 'high rise' buildings.

see: http://www.bbc.co.uk/news/uk-40409981
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No doubt this story will eventually fade for Arconic, but its not one the UK - and especially London populace, will forget about for many years to come.
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The technicals...

Today's candle was a very strong hollow-red reversal type, managing to settle above the 200dma. Generally, those are indicative of a key floor. However, considering the seriousness of the product problem, and the fact the story will likely run for months to come, further weakness can be expected in the short and mid term.

The next big support is the psy' level of $20.00. The bigger monthly cycle is offering the 17/16s, which do seem a threat by the autumn, not least if the main market eventually experiences a basic retrace of 5%.

Unquestionably... bearish ARNC

GDX - a mixed week

It was a mixed week for the Gold miners, with the ETF of GDX, settling higher for a third consecutive day, +1.7% at $22.75, which made for a net weekly gain of a very significant 3.1%. Near term outlook leans bullish, but things only become clear with a break and hold >$24.00 or <$22.00.


GDX weekly

GDX daily

Summary

Suffice to add, it was a mixed week.

Its notable that GDX saw another fractional break of core rising trend - that stretches back to Jan'2016, but managed to claw back upward across Wed-Friday.

A major move is coming as price action is increasingly tight, with price structure that could be seen a bull flag from late February, or as a giant bear flag from the Dec'2016 low.

Best guess? Mid term, I still see an eventual break to the upside. Although frankly, anyone who regularly checks the CRB index should realise commodities have had a dire year so far.

INTC - having technical problems

Whilst the main market remains close to historic highs, Intel (INTC) has been notably weak, settling lower for a third consecutive day, -0.6% at $34.36. The mid term bullish trend from summer 2015 has been decisively broken. The last line in the sand for the bull maniacs are the $32s.


INTC, daily

INTC, monthly

Summary

First, just reflect on the fact that whilst the Nasdaq is trading very close to recent historic highs, the tech giant of Intel really is struggling. Seen on the bigger monthly chart we have a very clear break of trend that stretches back almost two years.


So... what now?

The break of rising trend is suggestive of further near term weakness to the $33/32s.

Things would turn extremely bearish with any price action in the $31s.

Best guess: The $32s become near/mid term support, with a whipsaw upward after earnings. Mid term target is a monthly close >$38.00 (before year end), which will then offer a challenge of the Aug'2000 historic high of $52.10 in late spring/summer 2018.

Yes, $52.20 is a long way up, but its a valid scenario, unless the main market breaks its mid term upward trend from early 2016.

AMD - mainstream bullish chatter

Whilst the main market settled moderately mixed, there was powerful strength in Advanced Micro Devices (AMD) which settled +10.6% at $13.98. Near term outlook offers a touch of cooling - not least if sp'2415/00, but broadly, the stock is set to break above the Feb'28th high of $15.55. From there, its a straight run to the psy level of $20.00.


AMD, daily

AMD, monthly

Summary

Q1 earnings were a marginal miss, although the outlook was still positive. The downgrade - by none other than the infamous squid of GS, helped to grind the stock down to (almost) hit the 200dma in the upper $9s.

Since the May 3rd low of $9.85, price action has been very choppy, but leaning upward. We have a series of higher highs and higher lows. On any basis... its bullish.

Near term outlook does threaten some cooling, but anything <$12.00 - where the 50dma is lurking, looks out of range.

Next earnings are due July 31st. If they come in just marginally 'better than expected', the stock will be well into the 16/17s.

*for the record, if there is one company I think AAPL might buy.. it'd be AMD.

CHK, RIG - ground lower with energy

Whilst the main market closed broadly weak, there was powerful downside within the energy sector. Chesapeake Energy (CHK) and Transocean (RIG) settled lower by -1.6% and -4.2% respectively. Near term outlook is bearish, as WTIC looks vulnerable to the $40/37 zone.


CHK daily

RIG, daily

Summary

Suffice to say, with WTIC having cooled from a May 25th high of $52.00 to the $42s, its no surprise to see the broader energy sector struggle.

The mid/small tier stocks like CHK and RIG are naturally seeing more powerful declines.

Short term, WTIC to $40/37 zone seems probable, which will no doubt knock another 5-10% off CHK and RIG.

Unlike early 2016 though, the long term survivability of CHK and RIG is not in any doubt.