Following up on last week, we shot up Monday and topped out Wednesday with the market rolling over a little bit Thursday and Friday. It could be the beginning of a double top, or just a little pullback to try again for the top. So if we get back to 3280 is in the next couple of days it was just a pullback, down towards 3000 means it's a double top and will probably break through to go see that 2750-2800 area.... That's not on the table right now though.
View attachment 16979
There are a lot of dynamics playing a role in where the market goes from here. You have an election, the coronavirus, a trade war with China, currency value, stimulus, and unemployment, and a bunch of other things I probably am forgetting... But this market is really all about 5 companies.
Apple, Amazon, Facebook, Google, and Microsoft. Those 5 companies represent more than 20% of the capitalization of the S&P 500 and an even greater share of the earnings. Microsoft reported last week and while it looked good on the surface, there was a key metric that pulled back... Earnings growth. The growth rate of their cloud business slowed and that's why it pulled back a bit. The other 4 report this week. They all have a PE ratio around 30ush except for Amazon who is over 140... So a 10-20% pullback in any of them would be justifiable anytime the market chooses. If this happens, the rest of the market is going with the big boys.
View attachment 16978
So it's all about these earnings right?
View attachment 16977
On Wednesday, the CEO's of Google, Facebook, Apple, and Amazon are testifying before the House Judiciary Committee regarding antitrust matters. When you get this big, there is a target on your back. When you get this big, it's obvious you have crushed the little guys along the way.
The argument is:
Facebook illegally controls speech.
Google illegally controls search.
Apple illegally controls apps.
Amazon illegally controls prices.
On the outside looking in, it's looking like some significant investigation will likely kick off on some, if not all of these fronts. The tone of the committee will be key, are they going to be pissed off because all of these companies have just hit record highs while Main street is going out of business... I am guessing you will get some of that.
I'm not saying that this is going to happen now, there is a lot of fiscal and monetary support going on. But in the fit com bubble there was an antitrust case against Microsoft. The peak of the bubble and the ruling against Microsoft were less than 10 days apart. From April of 2000 the market declined nearly 50% over the next 3 years.
That's what the downside risk of a market like this would more resemble in my opinion (not likely as long or far down though.) Unless the Coronavirus broke out everywhere really bad in the fall, I can't see another circuit breaker triggering 30% decline in a couple of weeks. But is a longer, slower breakdown on the table.. Sure.
So watch out Wednesday, nothing could poke a hole in the market like the potential of breaking up 4 of the 5 biggest earnings drivers of the market.
ETA. Before Quincy gets in here on Bitcoin, I am planning a whole other post later today or tomorrow on this dollar, taxes, interest rates, inflation and the associated risks of all the above.
View attachment 16979
There are a lot of dynamics playing a role in where the market goes from here. You have an election, the coronavirus, a trade war with China, currency value, stimulus, and unemployment, and a bunch of other things I probably am forgetting... But this market is really all about 5 companies.
Apple, Amazon, Facebook, Google, and Microsoft. Those 5 companies represent more than 20% of the capitalization of the S&P 500 and an even greater share of the earnings. Microsoft reported last week and while it looked good on the surface, there was a key metric that pulled back... Earnings growth. The growth rate of their cloud business slowed and that's why it pulled back a bit. The other 4 report this week. They all have a PE ratio around 30ush except for Amazon who is over 140... So a 10-20% pullback in any of them would be justifiable anytime the market chooses. If this happens, the rest of the market is going with the big boys.
View attachment 16978
So it's all about these earnings right?
View attachment 16977
On Wednesday, the CEO's of Google, Facebook, Apple, and Amazon are testifying before the House Judiciary Committee regarding antitrust matters. When you get this big, there is a target on your back. When you get this big, it's obvious you have crushed the little guys along the way.
The argument is:
Facebook illegally controls speech.
Google illegally controls search.
Apple illegally controls apps.
Amazon illegally controls prices.
On the outside looking in, it's looking like some significant investigation will likely kick off on some, if not all of these fronts. The tone of the committee will be key, are they going to be pissed off because all of these companies have just hit record highs while Main street is going out of business... I am guessing you will get some of that.
I'm not saying that this is going to happen now, there is a lot of fiscal and monetary support going on. But in the fit com bubble there was an antitrust case against Microsoft. The peak of the bubble and the ruling against Microsoft were less than 10 days apart. From April of 2000 the market declined nearly 50% over the next 3 years.
That's what the downside risk of a market like this would more resemble in my opinion (not likely as long or far down though.) Unless the Coronavirus broke out everywhere really bad in the fall, I can't see another circuit breaker triggering 30% decline in a couple of weeks. But is a longer, slower breakdown on the table.. Sure.
So watch out Wednesday, nothing could poke a hole in the market like the potential of breaking up 4 of the 5 biggest earnings drivers of the market.
ETA. Before Quincy gets in here on Bitcoin, I am planning a whole other post later today or tomorrow on this dollar, taxes, interest rates, inflation and the associated risks of all the above.
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