Who's Winning The Trade War In One Chart

Source

Trade war news started escalating in June. You want to know who's winning the trade war? Click the chart on the left. You'll see the US' S&P 500 ETF SPY (NYSEARCA:SPY) versus Hong Kong's Hang Seng Index (INDEXHANGSENG:HSI).

Many companies based in China trade on The Hang Seng Index.

Since June you can see the huge divergence between U.S. shares and Hong Kong listed shares.

Investors are worried about the outcome for their China-related investments much more than they are their U.S.-related investments.

China Showing A Weak Hand Already

In reaction to some trade concerns China has been letting their debt grow again which is something they were trying to control. Not wanting their economy to slow much they are allowing debt to build.

China has also been letting its currency slip of late. That's a sign of concern. Past drops of their currency have led to capital outflow from residents further pressuring their currency.

Lower currency may make exports cheaper but too big of a drop can cause regional currency destabilization and contagion risk.

These are some of the many reasons that the high-level charts on the two indices, U.S. and China have diverged. Investors are showing who they think has the strong hand and who has the weak hand.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

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All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Earnings Led Stock Market Breakout This Week?

Source

The stock market (NYSEARCA:SPY) is approaching a key level at 280. A close above it would be a breakout signaling the market can move higher.

So far the stock market has looked through trade concerns and Fed rate hikes and we're about to enter earnings season.

Now that we're moving into earnings season the fundamentals should matter more than the macro.

Earnings matter for stocks. Starting this week earnings reports and guidance are the stock market's next cue.

Bullish For Tech Stocks For Q2

We're bullish about tech stocks for Q2 and, maybe more importantly Q3 guidance.  If correct that may have been the reason for the stock market's strength despite negative "macro" news.

So far our work says that Q3 business has not been affected yet by trade concerns. If that shows through in strong guidance we should continue to higher highs for the stock market.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Stock Market: Will US-China Trade Talks Resume?

The stock market has been hit on negative trade news days but bounces with a lack of news. Any positive developments could break this market out.

Bloomberg reported that both US and China officials are considering returning to negotiations. A top trade official from China said, "when we have a trade problem we should talk about it."

China's economy is probably more at risk to a trade war, their stock market is likely more volatile and President Xi Jinping has more to lose having risen to power thanks to a strong economy.

While President Trump wants to balance trade he also has his sights set on big goals like fixing the problem of China taking technological intellectual property.

With approval ratings moving up President Trump's voter base probably gives him support to be aggressive. He won votes due in-part to his plans to win back American jobs from China. Trump feels empowered and probably knows China needs to negotiate.

Some advisors in China have recently said China needs to make some concessions. Our guess is something like that doesn't slip out said within China unless given approval.

The winds are changing potentially where Trump's momentum of voter support, tax wins, regulatory wins, and North Korea wins drives him to bring China to the table.

Any concessions and agreements would likely be a shock to markets taking us closer to new highs and beyond.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tech Stocks Earnings Season: Gartner Confirms Enterprise Can Drive Q2

Tech stocks start to report earnings next week. We've been saying tech's new driver is the "enterprise" which should support the coming earnings season (here here here). Gartner just confirmed that upgrade cycle is on.

Remember the days decades ago when we needed a new Microsoft Windows (NASDAQ:MSFT) version to drive the entire tech food chain? As we know companies like Micron (NASDAQ:MU) and Applied Materials (NASDAQ:AMAT) have said this latest tech cycle is bigger than the past because we're not solely dependent on a new Windows upgrade to drive tech. AI, data, cloud have all been drivers. But one segment was left out, enterprise.

Traditional companies known as "enterprise" had not been spending aggressively on tech for about a decade.

Overall there is a much larger wallet size at enterprise than the cloud/hyperscalers like Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG)(NASDAQ:GOOGL) and Facebook (NASDAQ:FB). And those cloud players are the ones that have been driving that tech spend so far. So adding this new leg of spending can be huge.

Gartner Confirms Our Thinking

Gartner just confirmed what we had been saying. They just reported PC sales grew by a not-so-big 1.2% in Q2. But that was the first time PC growth had been positive since 2012. What was the driver?

Here's what they said,

"PC shipment growth in the second quarter of 2018 was driven by demand in the business market, which was offset by declining shipments in the consumer segment."

Builds Conviction

The more confirmational data you have the more you can have conviction on your top ideas going into earnings season, especially those tech stocks that benefit from the enterprise and PC food chain.

Trade War

The offset risk to earnings season as we've been saying is the Q3 guide. Do trade war concerns spook business leaders into slowing purchases. So far our work says no. We still expect strong Q3 guides but we are still doing the work.

Conclusion

We still expect a strong earnings season. AI, data, cloud and now enterprise should help the tech stock food chain.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tech Stocks: What To Watch In Earnings Season And Trade Wars

Tech Stocks are about to start reporting earnings next week. Fundamental trends should have been strong for Q2 but the question remains will trade fears slow spending in Q3? Which way will guidance go for companies on their earnings calls? We think guidance keeps moving higher but that's very much in question and we're looking for clues.

President Trump followed through on upping the ante on tariffs with a new $200B of targeted goods. China has said it would respond which probably occurs when the US tariffs go into effect in the Fall.

Will Q3 Guidance Be Affected By Trade War Concerns?

In the meantime we're focused on reported earnings which start for, our focus, tech stocks next week. There will be a ton of conjecture if current trade friction slowed demand until we actually hear it in the earnings calls.

We're collecting clues ahead of those calls.

We've said we don't think that demand trends would have slowed much. If they did they are coming off super-strong Q2 levels. Even if the Q2 pace slows Q3 might still beat Street estimates. That will come out in guidance and that's really what should matter for the stock action on earnings.

Reporting next week in our universe that will shed some light on trade-war affected demand trends are IBM (NYSE:IBM) and Microsoft (NASDAQ:MSFT).

Netflix (NASDAQ:NFLX) reports Monday after the close but has less exposure to trade friction.

Can The New Secular Dynamic, Enterprise, Offset Trade Concerns?

We've been picking up that enterprise customers are starting to spend big for the first time in years. Up until maybe a couple of quarters ago, the majority of the spending growth was led by cloud/hyperscalers like Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) and Facebook (NASDAQ:FB).

More recently though enterprise customers, traditional companies, are starting to upgrade their tech. There had been a multi-year trend to roll-out usage in the public cloud. More recently though, specifically this year, traditional companies are starting to more aggressively build out their own internal technology infrastructure. It's an upgrade cycle.

We think that upgrade cycle can benefit many tech stocks this year.

So that's the Q2 story.

For now we think that trend should be strong enough to have spillover demand into Q3 offsetting any CEO concerns on trade. That's our guess for now, which could change as we collect data. That Q3 take by companies on their earnings calls will be key in how the stock prices react. That's what to watch next.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

TSMC Trade War Comments Hint Ahead Of Earnings Season

TSMC's founder's comments may have given us a real-time read into the trade war impacts on current business.

We have been bulled up on Q2 tech stock earnings. Since doing the work on our companies though trade war shots could have spooked Q3 company ordering decisions which would change the strong potential Q2 trend.

We don't think Q3 will be weak but we're listening for any early evidence of any companies talking about what they're seeing in Q3. Those Q3 changes can affect the stock prices and sentiment.

TSMC Has Helped Us In The Past

We've successfully used TSMC comments to give us conviction ahead of AMD (NASDAQ:AMD) and NVDIA's (NASDAQ:NDVA) quarters last quarter.

TSMC was just out implying that they see no change in business from the trade war.

Yes they are worried about the risks of the trade war but if you listen carefully to what they said, we'd guess they are not seeing any weakness just yet.

TSMC founder Morris Chang said, "Currently, businesses are not yet actors in this reality show but they could be added into the casting anytime."

That means to us, in Mr. Chang's view business has not slowed because of the trade war yet.

He went on to say, "TSMC is still doing well but we need to be on alert."

That implies to us they are not seeing orders pulled yet in Q3.

Conclusion

Earnings begin to report next week. We want to listen carefully if there's been any trade war induced slowdown in the tech supply chain.

We've said previously that we think the accelerated pace of revenue growth in Q2 could soften any Q3 blow given the trends coming into this trade war were so strong.

On the one hand we're early and would guess not much trade-war induced slowdown happened. On the other hand we want our ears on the train tracks listening for any change. That can help bias our positioning going into key earnings reports.

Mr. Chang's "on alert" sounds right.

Hitting Tech Stock Earnings Home Runs

We spoke to the top tech companies over the last few months to identify what tech stocks have home run earnings potential. Earnings are what drives stocks, especially tech stocks. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Stock Market's Next Move: Breakout?

Source

The stock market's had some volatility this year. But we might be just about through the rough part.

The chart to the left is the S&P 500 ETF SPY (NYSEARCA:SPY) and shows that since the low February 9th we've made higher lows. That's a bullish sign.

We're also only 1% away now from refilling the entire gap before the drop on February 2nd. In trader terms that's called the market's done a lot of work.

The market looks like it wants to go higher.

The Next Move

As we shrink those swings making higher lows approaching the flat line we drew in the chart the dips could get smaller and smaller. You see from the trend we have a good shot at going topside of that horizontal resistance line at about 280. That's a small move away for this market.

A close above it and investors would quickly swivel looking to more all-time highs once again.

The Stock Market's Done A Lot Of Work

Besides building back recovering all those losses made in early February the stock market has looked through more rate hikes and plenty of trade concerns.  That's a lot of negative news to rebound from.

Looking through all that negativity shows you how bullish this market really can be.

What's Driving This Strength

In a word, earnings are driving the stock market's underlying strength. Earnings were strong in Q1. S&P 500 Companies in Q1 had the fastest earnings growth since 2010 at 25% and the most upside surprises since at least 2008. The tech sector led those upside surprises.

For Q2 the earnings growth rate expectation, according to FactSet has crept up to 20% for the S&P 500.

Tech Stocks Leaders In Earnings Growth

Expectations for tech stocks are moving up for Q2 from 21% growth to now 25% growth. When analysts numbers move up it's usually a bullish sign.

We've said we're very bullish for tech stock earnings for Q2.

We want to listen to see if trade concerns might affect guidance for Q3 at all. Initially we think that the revenue acceleration from 2017 to Q1 to Q2 could offset any weakness making Q3 still show strong.

Conclusion

The market has shown incredible resilience and has the potential to break out. Earnings season just may be that catalyst.

Hitting Tech Stock Earnings Home Runs

Above we talked about our top down view. If you'd like to know about our bottoms-up work we have a free trial. We spoke to the top 60-70 tech companies over the last few months to identify what tech stocks have home run earnings stories. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

START FREE TRIAL

Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Stock Market: Could Trade War News Turn?

The stock market (NYSEARCA:SPY) has bounced back from the last two weeks of trade concerns. That's pretty impressive strength against negative catalysts.

We see three bright spots that could get this news to turn more positive.

1. Trade War Summer Vacation?

We wrote Friday morning premarket that there's a chance the negative trade war news could take a summer vacation.

While President Trump has threatened to raise the tariff ante if China responds, The Wall Street Journal reported that new tariffs have some hurdles and "won't be ready to put into effect until the late fall."

Since China said they'd only respond to Trump actions, the next actions may not be for another few months. So we may have some quiet news time on tariffs which could be bullish for the stock market.

2. Germany Flinched

While China was trying to cozy up with the EU, Germany appeared ready to drop mutual auto tariffs with the US. That would be a key sign that US trade pressure is working to improve trade relations. While the market's worried about the negative impacts, The US-Germany news would tell you trade could actually improve.

While North Korea's not a done deal President Trump did make headway there and it's possible he also makes headway with another huge topic, global trade.

3. Could China Flinch?

South China Morning Post quoted an advisor to the State Council of China as saying, "Discontent among developed countries at China's trade practices has been building for years.... China will have to make concessions."

Hearing that from a government advisor and a local media outlet sounded like a change in tone.

The article quoted another local China expert as saying Chinese President Jinping Xi's rise to power has benefited from a strong economy. "The legitimacy to rule of the Communist Party was built on economic performance," he said. "If an economic crisis happened because of the trade war, it would surely damage that legitimacy."

It's very possible that while the chances seem slim now, much like Germany, China could also flinch and give the US trade concessions. If it did this market would go nuts to the upside.

Conclusion

The stock market's been holding up on negative trade war news. The bad news may be about to pass and we could be in a period setting up a better news environment. If so, that would be bullish for the stock market.

Hitting Tech Stock Earnings Home Runs

Above we talked about our top down view. If you'd like to know about our bottoms-up work we have a free trial. We spoke to the top 60-70 tech companies over the last few months to identify what tech stocks have home run earnings stories. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

We're about to hit our prime time, earnings season.

START FREE TRIAL


Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless.

We have no holdings in the stocks mentioned unless otherwise noted.

Tesla Please Don't Tease The Shorts

Tesla's (NASDAQ:TSLA) stock dropped from a recent high of $373 to a recent low of $296. After announcing Q2 unit production and delivery results early this week the stock first jumped about 5-6% then dropped like a rock. What caused it and what's next?

Musk Hype Set Up "Sell The News"

On June 27th Tesla's CEO Elon Musk teased the shorts on Twitter by tweeting, "They have about three weeks before their short position explodes."

Any time you hype up a datapoint you invite a ton of short term traders to play the event. Those short term traders are going to sell either way but if they see the stock go down on the news they're going to sell even faster. Then you have a pile-on, selling begets selling.

Then when the stock started going down investors were looking for all types of negatives to pin to the weak stock action.

Our Advice For CEOs With High Short Interest: Who Cares!?

Who cares?! Really. If you have a lot of shorts on your stock, who cares!?  If you do a good job with your business those shorts are going to be the best thing for the stock helping it jump to the stratosphere.

If the company doesn't do as well all those shorts give buying pressure as they take profits which helps support the shares as other long-holders exit.

Shorts are not a bad thing. They are a very good thing to support downward pressure.

Really when we have stocks that we want to Buy we love seeing a big short interest. That just means if we're right, the stock is going to propel higher that much faster.

We had a case recently where Trade Desk (NASDAQ:TTD) had a huge short interest but we loved the fundamentals. Thanks to the shorts that stock shot up 40%+ the day after earnings and it's still going.

So Mr. Musk, we love you, but really, who cares about the shorts. Do a great job and the rest takes care of itself. Ignore the shorts.

In this case, teasing the shorts ahead of a datapoint worked out against you. There's no need. Just deliver.

Datapoints Are Nice But Earnings Are What Matters!

We've been in this business a while.  I'm not a big fan of trading datapoints. They are not nearly as important as earnings.  Getting a datapoint of their Model 3 progress was good but their comments on earnings were so much more important.

This was music to my ears. In their delivery and production release they said, "We also reaffirm our guidance for positive GAAP net income and cash flow in Q3 and Q4."

Positive earnings? The Street's at a loss for the next few quarters.

If Musk didn't hype his stock ahead of this datapoint this stock could have been much higher after its release.

And did anybody do the math what a profit in the back half of this year would mean for EPS for 2019? We get $14 in EPS for 2019 in our model.  The Street's expecting $2.71 for 2019. Hedge funds and large investors have to know that a profit in the back half should mean big things for this stock.

We're bullish.

Conclusion

There is absolutely no reason to tease the shorts and tell everybody what a datapoint is going to be before the print. It messes up how the reaction will be to good news. Musk and Tesla did a great job meeting their targets and we're bulls but he shot himself in the foot by hyping the stock ahead of a datapoint. Hopefully he and other CEOs learn from it. Just deliver.

Hitting Tech Stock Earnings Home Runs

We spoke to the top 60-70 tech companies over the last few months to identify what tech stocks have home run earnings stories. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL


Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless. We have no holdings in the stocks mentioned unless otherwise noted.

Stock Market's Next Move

The stock market has been on a roller-coaster ride the last two weeks but has shown some support. We still see a downtrend but we're going to let the market tell us what it wants to do next and we'll tell you what we're watching.

The S&P 500 ETF SPY (NYSEARCA:SPY) closed yesterday just below June 25th's open when we turned cautious. That's when trade war news intensified.  Since then China's vowed to strike second, not first.

Trade War Summer Vacation?

Looking at the sequence of potential events, striking second could give the market a break from trade concerns for a few months.

This is what The Wall Street Journal said,

"Mr. Trump's threat to levy tariffs on another $200 billion also won't be ready to put into effect until the late fall because the U.S. has to clear a number of procedural requirements."

That can act as good news especially since China said they will not strike first. If China has to wait for the fall for the next round of tariffs this trade war escalation could go on vaca.

So as China answers the current US tariffs, The US will not yet be able to implement the next round until the fall. That would mean that the tariff part of this story could take a break which could be good for markets.

S&P 500 SPY ETF Chart 

Source

We want to watch the stock market to see what it wants to do. For now we think we are still in a downtrend and so don't want to say the market is turning up until we see it actually turn up.  We also see big resistance overhead as we drew in the chart.

Fundamentally a great case can be made that stocks should go down based on the trade war but so far the stock market is holding up very well.

We don't want to think we can outsmart the market but rather want to try to understand where it's going.

Market Action: Putting It All Together

When looking at markets you want to integrate what the market's saying it wants to do with the news that it's fed. The fundamentals are one thing but how the market responds to those fundamentals is ultimately what matters. Fundamentals alone don't drive stock prices. Market participants reaction to those fundamentals drive stock prices.

For example, if shorts don't see the market go down they'd need to cover which can cause the market to go up on bad news. If it happens that would be a bullish sign of bad news-good action. That would be a case that despite bad news the market couldn't go down which could cause buying follow through.

For earnings events, the fundamentals are the over-riding driver to stock moves that day which is why we speak to so many tech companies to try and understand an individual company's most important driver, earnings.

But for markets there are so many influencing factors and investors positioning. We want to understand what the sum total of all of those decisions are saying by watching the trend and reaction to the news.

By watching what the trend is and how the market consumes all that fundamental data you start to see what the market wants to do.

When you get bad news like a trade war and the market doesn't want to go down, in essence it may be telling you it wants to go the other way, higher.

We're not there yet. We still see those downtrends and that overhead resistance. But we want to always respect markets and the next few days are critical to see what the market wants to do.

Hitting Tech Stock Earnings Home Runs

Above we talked about our top down view. If you'd like to know about our bottoms-up work we have a free trial. We spoke to the top 60-70 tech companies over the last few months to identify what tech stocks have home run earnings stories. Finding those few tech stocks that have realistic earnings trajectories way above the Street can give you conviction to see a stock through to big upside. Dip your toe in the water with a free trial.

START FREE TRIAL



Read Reviews

All investments have many risks and can lose principal in the short and long term. The information provided is for information purposes only and can be wrong. By reading this you agree, understand and accept that you take upon yourself all responsibility for all of your investment decisions and to do your own work and hold Elazar Advisors, LLC, and their related parties harmless. We have no holdings in the stocks mentioned unless otherwise noted.