HOW TO MAKE MONEY IN STOCKS - AAIILA.org · final scare ended 14 months of sometimes punishing...
Transcript of HOW TO MAKE MONEY IN STOCKS - AAIILA.org · final scare ended 14 months of sometimes punishing...
Stock Market Update: May 18, 2019
David Saito-Chung, deputy markets editor
IBD Weekly and Investors.com
Twitter: @IBD_DChung, @SaitoChung
Email: [email protected]
Monday, May 13:
A change in the current outlook Jan. 4 – “Market in confirmed uptrend”
May 7 – “Uptrend under pressure”
May 13 – “Market in correction”
Why? We saw a flurry of distribution days hit the Nasdaq and the S&P
500 starting on April 30. Institutions actively took profits amid
concern of no trade deal between U.S. and China. (Distribution
day: a 0.2% drop or more in the S&P 500 or Nasdaq composite in
higher volume vs. the prior session.)
Severe Selling In Some, Not All, Leaders
The Bad! (for now) • Apple (AAPL): Recent cup with handle breakout at 197.79 fails after a mild gain.
• Alibaba (BABA): 200-day moving average still sloping downward.
• Arista Networks (ANET), Intel (INTC), SS&C Tech (SSNC): All three crash
below the key 50-day moving average (see daily chart) on Q1 results
• The Good! (for now) • Atlassian (TEAM), ServiceNow (NOW), Veeva Systems (VEEV), Ulta Beauty
(ULTA), Paycom Software (PAYC), Lululemon (LULU), Mastercard (MA): all still
in healthy uptrends.
• “Even Elephants Can Dance” -- Disney (DIS) joins the stock market leadership
on Disney+ news, hits all-time highs.
What’s Next For U.S. Stocks?
In the short run: A further pullback would not at all be
unusual. Why?
1) A 26% rebound by the S&P 500 since Dec. 24 low.
2) Will a raging trade war stunt economic growth, or cause a recession?
3) Is the U.S. at “peak employment?”
4) Crude oil: Recently hit $66/barrel, up 45% for the year! Could it crimp
consumer spending? Or help boost jobs in the energy sector?
5) Banking sector is lagging.
6) Are UBER, LYFT the new Pets.com and TheGlobe.com? (SNAP still
66% below its all-time high of 29.44)
7) Rumblings of a potential U.S. war with Iran
What’s Next?
In the long run: Still on course for a secular bull market.
1) low interest rates
2) no “earnings recession” yet; S&P 500 earnings yield of 6% tops 10-
year Treasury yield of 2.42% (as of 5/15/19)
3) dollar strong, inflation gauges still low
4) U.S. innovation ongoing, entrepreneurship unbridled
5) High-quality IPOs (COUP, KL, PUMP, ZM, ZS break out or near
new highs)
6) The market still rewards growth: IBD 50 shows a 17.4% CAGR
(4/11/03 to 3/29/19) vs 9.9% CAGR for the S&P 500.
7) Margin debt falling, points to underlying skepticism in the market
(margin loans down 11% YOY in March 2019)
Excerpts
Mike Webster, senior vice president and portfolio manager for O'Neil Capital
Management, believes the stock market is in the midst a major bull market that’s less
than three years old. Webster contends the new bull trend began in July 2016 in the
wake of the Brexit vote, which tanked the Nasdaq as much as 6.4% over two days. That
final scare ended 14 months of sometimes punishing sideways action, punctuated by
two painful intermediate corrections.
"People thought the market was ready to implode like in the financial crisis," Webster
said. "But the Brexit rebound confirmed that a new phase had begun, which was similar
to June 1949 when the Dow began a 16-year major bull market."
"I don't expect it to be a straight line up. There will most likely be at least one more
normal bear market as well as several intermediate corrections along the way, so it is
critical to interpret what the market is doing every day.“
SPECIAL OFFERS FOR AAII
IBD Digital 2 MONTHS FOR
20 $
Leaderboard 2 WEEK TRIAL
FREE
IBD Digital offer: investors.com/AAIIDigital
Leaderboard offer: investors.com/AAIILDB
Stock Market Update: May 18, 2019
David Saito-Chung, deputy markets editor
IBD Weekly and Investors.com
Twitter: @IBD_Dchung, @SaitoChung
Email: [email protected]