Thursday, 28 July 2016

F - car crash stock

Whilst the broader market saw yet another day of micro chop, there was severe weakness in Ford Motors (F), which settled -8.2% @ $12.71. Q2 earnings were a clear miss, and Mr Market is now concerned about increasing problems for the remainder of the year.

F, daily

F, monthly


I'm one of the first who will whine about grossly over-valued stocks, but despite today's earnings, I simply can't remotely tout Ford as anything other than grossly under-valued.

Even with the earnings miss, Ford is generating around $2 EPS a year... that works out to roughly a PE of just 6.


Just reflect on that for a moment..  and then consider the following (trailing) PEs...

AMZN: 309
FB: 76
NFLX: 286

Even AAPL is 12

The mainstream cheerleaders are spooked

From a pure price perspective, next support is around $12, 10, and then $8.

I do not expect any price action <$10.

Typically, after a major earnings miss, a stock will trundle lower for some days, and take a few weeks to cement an initial floor.

So... even if the sp'2250/2300s by October, Ford could still be lurking in the 13/12 zone.

Not on the fence

My argument is that (at the very least) Ford should be valued at least equal to the market average.

Ford is arguably trading around a third of what it should be. Yours truly would seek Ford to at least double.. if not triple the current valuation to the 25-35 zone.. which is a monstrous increase since the Nov'2008 low of $0.85. The yield is around 4.5%... around 3x the US 10yr bond!

As I often say lately, or perhaps you'd prefer a negative yield bond from Japan, or the EU?

Wednesday, 27 July 2016

AAPL - earnings better than feared

Q2 earnings for Apple (AAPL) were a little better than many had feared, and it has resulted in a rather powerful rebound, settling +6.5% @ $102.99, the best close since late April. Any price action >105 should confirm the 120s by late 2016/early 2017... with eventual new historic highs (>131).

AAPL, daily

AAPL, monthly


Just consider that AAPL saw Q2 EPS of $1.42, on rev' of $42.4bn

That is roughly $6 a year... and on a stock price of $100, that makes for a PE in the 16s.

Unquestionably, AAPL is a superior company relative to the main market, and thus 'should' be trading considerably above the average market valuation.

Technically, the break back above the $100 threshold today was very important... along with a close above the 200dma (102s).

Next resistance is declining trend, currently in the $105s.

With a new historic high >sp'2134, AAPL looks set to follow in 2017

Tuesday, 26 July 2016

FCX - significant daily reversal

Freeport McMoran (FCX) posted lousy earnings for Q2, even failing to meet the lowered targets set by the mainstream analysts. Naturally, FCX opened lower by around -6% (intra low $11.25), but then swung strongly higher, settling +2.4% at $12.68. The $14 threshold remains key.

FCX, daily

FCX, monthly


Suffice to add, lousy earnings, as the miners struggle with commodity prices remaining very low - relative to just a few years ago.

However, after a combination of short-covering and some 'bullish chasers', FCX managed a very notable net daily gain.

First upside target is a daily break/hold of the $14 threshold. If that is achieved, then the door will open to $20 by year end.

Monday, 25 July 2016

AAPL - pre-earnings cooling

Apple (AAPL) - which has earnings at the Tuesday close, settled lower for a third consecutive day, -1.3% @ $97.33. The downgrade by BGC sure didn't help, and AAPL is at another critical junction. There is clear resistance at the giant psy' level of $100, and AAPL needs to jump straight over to negate the renewed bearish chatter.

AAPL, daily

AAPL, monthly


story, see: BGS downgrade

So, not a great start to the last week of July for the tech behemoth that is AAPL.

Overall market mood isn't great, as many recognise that the stock has largely failed to participate in the broad market rally since the Jan/Feb' low.

Best guess: A break back above the $100 threshold, and onward to quickly test the 200dma in the $103s. 

It is notable that declining trend will be $105 in early August. The bigger monthly MACD cycle remains on the very low end and is offering vastly higher levels - to new historic highs in 2017.

**Earnings due Tuesday afternoon (probably at 4.30pm EST)

Friday, 22 July 2016

TVIX, UVXY - a fourth week lower

With equities breaking new historic highs, the VIX continued to break new multi-year lows. The 2x lev' bullish VIX instruments of TVIX and UVXY saw net weekly declines of -10.5% and -8.8% respectively. Mid term outlook into Aug/Sept', is for further equity upside and a subdued VIX, which will merely equate to further decay for TVIX/UVXY.

TVIX, daily

UVXY, daily


First, an update on the VIX, which saw a net weekly decline of -5.1%.

As for TVIX/UVXY, a fourth week of (not surprising) declines, as equities broke new highs, and the VIX was unable to manage a daily close in the low teens.

If equities continue to broadly climb across August and into September - as seems highly probable, then TVIX/UVXY are going to broadly decay by another 20-30%

*for me, the VIX-long trade is dead until at least mid/late September.