Stock Market Outlook 04.23.3018

Stock Market Outlook 04.23.2018

Our weekly checkup/outlook is meant to give me a macro-view of the market. We tend to mostly ignore news and politics when it comes to effects on the market as most is generally empty prognostication.

Instead, we look to a few reliable sources to get a read on the state of the market. A weekly outlook gives us some relief from day-to-day fluctuations, while still allowing for relative short term opportunities and trends.

Index Technical Indicator & Recent Performance Summary
  • Not much change from last week overall. Overall, we’ve seen a decline in volatility
  • This week, I’ve added changes over 5 different time periods.
  • Notably, CQQQ  (China tech) is down over 8% over the last month, while HACK (cybersecurity) is up over 5%.

 

weekly stock market technial indicators 04.23.2018

Data via TradingView.com (Click here to get 30% off a Pro subscription.)
Scores based on below. More weight given to 30D ratings than 1D ratings.
-2 = strong sell
-1 = sell
0 = neutral
1 = buy
2 = strong buy

Gannon’s Risk Insight

Old Prof sees improvements in market conditions all around:

The gain for the week was about 0.5%, and the trading range was only about 2%.

Short-term trading conditions improved significantly this week.

The long-term fundamentals and outlook are little changed. The long-term technical health is back to strongly bullish.

He also makes a note about the importance of understanding sources of information:

Since most people pay little attention to the background of those claiming authority, they might not notice that economists specializing in the business cycle are reaching a different conclusion from most others. These observers, new to the topic and eager to make a mark, use reasoning like the following:

The age of the business cycle – known to be irrelevant.
Guessing when an indicator like the yield curve will change – the “forecasting the forecast” error.
Speculating about the impact of proposed policies – even though we don’t know whether they will be adopted or what the effects might be.

StockTrader Take

StockTrader believes market conditions remain similar to last week.

Short term: Essentially the same spots we were as last week on these 2 charts.

Long term: Still very positive for the “buy and never sell” crowd.

Technical Update

Brief summary from Hacked’s weekly technical update (subscription required):

  • Short-term bullish momentum is expected to subside after all indices broke below their respective short-term supports (white trendlines, which carried prices higher since the April lows).
  • Potential breaks of the intermediate-term supports for both S&P 500 and NASDAQ will carry significant bearish implications.

 

Other articles of notes

Netflix: The Future of Entertainment or House of Cards? by Aswath Damodaran: 

At the end of 2017, Netflix had more subscribers outside the US than in the US, and it is bringing its free spending ways and its views on content development to other parts of the world, perhaps bringing Bollywood and Hollywood closer, at least in terms of shared problems.

In summary, Netflix has built a business model of spending immense amounts on content, using that content to attract new subscribers, and then using those new subscribers as its pathway to market value. It is clear that investors have bought into the model, but the model is also one that burns through cash at alarming rates, with no smooth or near term escape hatch.

The value per share of $172.82 that I estimate for Netflix is well below the stock price of $275, as of April 14, 2018. My value reflects the story that I am telling about Netflix, as a company that is able to grow at double digit rates for the next decade, with high value added with new users, while bringing its content costs under control

Zillow, Aggregation, and Integration by Ben Thompson

the best outcome for Zillow was to be an aggregator but not an integrator: the company was completely removed from the purchase process.

More broadly — and this really gets at why Zillow is different — Aggregators that change industries (including Aggregator-like Amazon and Apple that deal with physical goods) integrate the customer relationship with however it is their industry generates revenue; Zillow, on the other hand, was completely divorced from the home selling-and-buying process.

 …
I can, though, see where Zillow is coming from: no one thinks the North American real estate market is the way it is because that is somehow optimal or good for consumers; the only folks that benefit from the status quo are real estate agents that continue to collect 6% of the purchase price even as their responsibilities, particularly in the case of the buying agent, run in the opposite direction of their incentives
Here, though, Zillow’s status as an almost-Aggregator looms large: we now have years’ worth of evidence that realtors will do what it takes to ensure their listings appear on Zillow, because Zillow controls end users. It very well may be the case that realtors will find themselves with no choice but to continue giving Zillow the money the company needs to disrupt their industry.
Our Take

Most of the recent tradewars talk has subsided and the markets seem to be faring better with volatility subsiding.

We’re bullishly optimistic in both the short and long term. No new positions recently and would consider adding something if the right opportunity came along, with no concern for a general bearish market that could harm any stock.

 

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