Strangest Gatherings, Wonder Woman 1984, Retail, Apple’s Inflection Point

At first glance, everything seemed good enough. Day two of our seven-day “Santa Claus” period seems to be a hot one.

The president had reluctantly signed off on the roughly $ 2.3 trillion in spending, including $ 1.4 trillion, intended to keep the government going through fiscal year 2021, and $ 900 billion in Covid emergency relief funds . Futures markets had set the stage for a strong session overnight, well before Monday’s opening bubble. Of course, the Dow Industrials, S&P 500 and Nasdaq Composite would all hit record levels again by the end of the day. But the longer the day lasted, the more and more what triggered the rally as well as worsening internal stock markets.

I recently wrote to you that sometimes things can get a little unpredictable this week. They can. Sometimes, despite your best effort to get all the ducks lined up, they just don’t line up.

The US dollar appears to be weaker against most of its reserve currency peers (not the yen) this (Tuesday) morning. The same as at this time on Monday morning (it’s about 4 a.m.ET as I write this). Only one thing. In fact, the dollar rebounded sharply after opening on Monday, then sold hard again. Gold and crude oil moved the opposite of the dollar with every move, while bitcoin held its own at higher levels in an interesting way. As for stocks, I told you that our most focused largecaps indices have all set records, but this had to be one of the least impressive record rallies, to be honest.

Impressive composition

The headlines read well. But breadth and composition would disturb the curious mind. A look at the industry’s performance charts tells investors that while it seems good at the moment, we may need to skate with our heads up.

I don’t mind seeing the Communication Services (Internet-led), Consumer Discretionary and Information Technology sectors at the forefront. The tech sector has been our friend again this year. However, this is deceptive. Looking at the technology sector itself, we see that the Dow Jones US Computer Hardware Index was up 3.4%, mainly as Apple (AAPL) was up 3.6%. In fact, very FAANG was strong.

The truth is, the hardware was carrying technology on Monday. The Technology Sector Select SPDR ETF (XLK) was up 1.1% that day, despite the Dow Jones US Software and Philadelphia Semiconductor Indices both shrinking for the session (both rounded to -0.2%). Actually. information technology recovered without much participation from a large number of technology stocks.

In addition, view the industry performance tables. Numbers 9, 10 and 11 (out of 11) may have surprised investors during a rally based on the increase in deficit spending that was intended to improve the plight of small businesses and households. Those sectors at the bottom of the table have all been cyclical and do best when an economy is growing. The industry and services, basic materials and energy sectors all stumbled around on Monday.

To put an exclamation point on this statement, not only did the Dow Transports (part of the industrial sector) close on the day (as Delivery Services and Trucking opposed the strength in the airlines and the rails), but also the REITs, Consumer Staples, and the utilities, all of which were defensive in nature, all outperformed the three more growth-oriented sectors listed above.

It is certainly a fun way to collect.

There is more

Width, to be blunt, was a terrible Monday for a day when the three large-cap indices the media likes to talk about all posted gains of or near 0.75%. Market watchers need to understand that traders took profits in small- to mid-cap stocks. Sounds logical. The Russell 2000 currently has an eight-week winning streak. The New York Jets haven’t done that since 1986. To put that in perspective, that team’s starting quarterback was Ken O’Brien. That was O’Brien’s season at the age of 26. He is now 60.

Even more interestingly, while our three large-cap indices pushed end-zone football up Monday at 4 p.m. ET, the truth is that winners were just the winners on both the New York Stock Exchange and the Nasdaq Market Site. Falling volume hit increasing volume on 11 Wall Street (yes, even with the indices on records), and it really wasn’t even that close. However, trading volume was very low on the NYSE. In fact, the overall trading volume for members of the S&P 500 fell 26% below its own 50-day simple moving average. In other words, there was more slumber than selling for these more cyclical type names.

But not in Times Square. For Nasdaq-listed names, increasing volume closed declining volume by more than 3 to 2, while trading volume in total returned to normal levels. In fact, the total trading volume of Nasdaq Composite companies landed 13% above what would be its own 50-day SMA. These traders were not asleep, they had limited their interest, and that interest, while broader than just a few stocks, was entirely focused on FAANG.

Oh, remember I said the discretioners had a good day? There is a story there.

Wonder Woman and Retail

Is it possible that a $ 2.3 trillion federal spending / incentive bill has been passed into law – with the hope that there is even more helicopter money on the table that would likely add another $ 400 billion to $ 500 billion to the size of the package – wasn’t the motivation for investor decision-making on Monday? Yes is the short answer.

You all know that “Wonder Woman 1984” is seen as a relative (for the pandemic era) success. The release of Warner Bros. brought in $ 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 those shares sold out Monday. That said, AT&T is also the parent company of streaming service HBO Max, and AT&T reported that half of all HBO Max subscribers watched this movie on Christmas Day. Well, that’s interesting. It’s also very good news for the Walt Disney Company (DIS), Amazon (AMZN) Prime, Apple (AAPL) TV +, Comcast’s Peacock unit (CMCSA). Interestingly, Netflix (NFLX) underperformed the rest of FAANG on Monday, as did the rest of the streaming universe, as this seriously jeopardizes that company’s long-term market share leadership. All of the above can yield new content without going to the bank, or debt markets if they don’t want to.

Now, a word on retail. According to data released by Mastercard (MA) SpendingPulse, total retail sales are up 3% year over year for the extended holiday season that began with Amazon Prime Day in mid-October. Overall growth for pedestrians has been driven by a blazing 49% rise in e-commerce, meaning that the physical retail industry is basically plunged into darkness. E-commerce came in just below 20% for general Christmas shopping. By comparison, e-commerce accounted for less than 9% of all retail spending for the calendar year 2017. Remember, this not only equates to lost sales for smaller retailers and retailers who aren’t doing very well in e-commerce, but also e-commerce . For the retailer, trade is a business with much lower margins than traditional retail. It’s much better for the business when shoppers come to them. Amazon can compensate for a lower margin through advertising.

Another reason for Amazon’s stock surge on Monday. This is also why Walmart (WMT), Target (TGT) and Costco (COST) did well. They can all subsidize that last mile to stay competitive. That nice little shop on Main Street? Not so. For them, that delivery on the last kilometer is priceless and they cannot sell advertising space.

Inflection point

As we have indicated here today, it was a good day for most of FAANG. Facebook (FB) rose 3.6% to recapture that stock’s 50-day SMA. Alphabet (GOOGL) added 2.3% for the day, to actually center the last sale just in the middle of a two-month trading range. Amazon took 3.5%, and is now getting interesting because the stock looked like a rocket bouncing off its 50-day line.

Now Apple is different, at least technically.

We can talk about the iPhone 12 superbike upgrade, all we want. That may or may not develop. We can talk about potentially life-saving wearables. We can talk about the ecosystem and the regular audience and that this will continue to evolve into a recurring revenue model. The fact is, these are all positives, and the stock is on a bend.

Remember this chart? This was the rising triangle we showed you, which makes us expect an imminent breakout. We are now seeing that outbreak, or at least some of it. Some may see a saucer here, which places the pivot point on the left side of the cup / saucer or at the $ 138 level. Some may think they see a “flat base,” but it just isn’t flat.

What if we move the top of the ascending triangle (we’re not sure yet if this is correct), to that USD 138 level now that the stock is approaching that point?

Much more impressive, if so. Do you know what I’m thinking? I think AAPL is going to $ 165. At least. That is my goal for now. On a panic point, I’m not selling AAPL anytime soon.

Must know

The House of Representatives backed President Trump’s demand to increase the individual stimulus payment agreed in the already signed law from $ 600 to $ 2,000, with a vote of 275 to 134, with 44 out of 275 Republicans’ votes in favor. came. The ball is now rolling into the Senate while an entire nation, or more specifically the state of Georgia, is watching. I really think Mitch McConnell will vote on it. Passage? I don’t know, but this puts the few remaining fiscal hawks in government in a very difficult position politically.

Regardless, the House voted even more overwhelmingly to override the president’s veto on the National Defense Authorization Act. This, too, is now up to the Senate. While 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 be against looking again at better social media regulation (both sides have one lost two presidential election and took a social media issue in response), this is not the place to do it. Additionally, as someone who served the flag, I often wondered why the hell I served on bases or walked streets named after people who took up arms against that same flag. Just sayin’.

Economy (All Times Eastern)

08:55 – Redbook (weekly): Last 6.5% and / y.

08:30 – Case-Shiller HPI (Oct): Expected 6.9% y / y, Latest 6.6% y / y.

4:30 pm – API oil stocks (weekly): Last + 2.7 million.

The Fed (All Times Eastern)

No public performances planned.

Highlights of today’s earnings (Consensus EPS expectations)

No significant quarterly results scheduled for release.

(Amazon, Alphabet, Apple, Facebook, Disney, Mastercard, Costco and Walmart are holdings in Jim Cramer’s Action Alerts PLUS member club. Want to be informed before Jim Cramer buys or sells these stock? Read more now.)