So the TikTok saga does not turn out to be as ominous as I thought it would get to - the ban on app upload from tomorrow on Apple & other phones is only limited to the US, which means a Chinese using an Apple Iphone in China can still use TikTok (and by that also WeChat) so the implication for US tech companies is less, second, it seems China has endorsed the Oracle-Tik Tok deal as it is structured but subject to possible refinements for acceptance by the US administration.
But that only helped appease the US markets for the start, and by mid day sank to a recent low , the Nasdaq fell to 10,640 before recovering to close 1.07% down at 10,793 and more crucially the S&P500 finally broke below its 3330 support to close 1.12% down at 3319 after falling to 3292 on an intraday basis. The Dow was down 244 pts to close below 28k at 27,657. Tesla was up 4.42% while Apple fell 3.17% , Alphabet lower by 2.42% and Microsoft -1.24%.
Well, S&P500 closed slightly below 3320 so one could say the jury is out. Blame it on options expiry, we may be up from here, perhaps.
But how did PM perform? It was interesting to note that for the first half of the trading day, Gold actually surprise surprise decoupled from the general equity trade, Gold went higher to $1967 before succumbing to late selling pressure that took it down to $1958. And you know what I think this could be due to ? UK central bank (BoE) indicated its openness to negative interest rate policy (NIRP) - this is big news for Gold because with UK now poised to follow its EU neighbours into NIRP, it is only a matter of time one could speculate that the US would follow suit. AUD Gold closed higher at A$2675 compared to A$2668 at the close of ASX yesterday indicating a probable flat to stronger Monday next week for gold stocks.
I want to end my morning note with a few of my thoughts.
First, where the US indices go from here is pretty much down to where FAANGMT gets to in the weeks and months ahead - it doesnt take much to see that Apple has broken its upward trendline and look precarious to break down to the low $90s, possible for another 10% fall, Amazon is on the brink of its support now and similarly a possible 10% downward move , FB has already lost 16% from its peak and just $2 shy of its key support, hence the prognosis from an index perspective is more downside in the offing. Which means tech would remain under pressure in September as I had cautioned earlier on this thread.
Second, given the above short term prognosis above, i
t is important not to throw the baby with the bathwater out so to speak. Irrational exuberance may have led a number of high profiled darling tech stocks doing the incredible putting on 10 fold or more increases in matter of months, something unseen or unheard before. And you suddenly think this is all due to fundamentals? APT's rise from $9 to almost $100, BRN's rise from under 10c to almost $1, YOJ's rise from 2c to 25c ??? And I am even casting aside my doubts on their true fundamentals, their valuation is excessive period. But there are a number of tech and growth stocks that may have risen but yet remains within reasonable range of valuation, untapped potential and I have highlighted a number of them in this thread. If you have the right fundamentals ( two counts- strong growth & reasonable valuation) combined with strong market sentiment and demand for the stock, you will see a strong upward trajectory growth for the stock's share price - something we saw e.g earlier with MMM. APT/BRN/YOJ have strong stock sentiment (but waning) but from a valuation perspective, they are not compelling. Traders obviously prefer stocks with strong stock sentiment than ones with strong fundamentals but poor to average stock sentiment as they want to see their stocks go up everyday.
But as an investor and playing on the side of caution, it is more compelling I believe to buy stocks with great forward fundamentals , i.e good growth prospects AND not trading at nose bleeding but reasonable valuations, even if their stock sentiment is just average, because to those who wait patiently buying them when they are still cheap, their share price would eventually get stronger and stronger, and when it does, believe me, the traders would want a piece of it and driving stock sentiment from average to good. So bottomline, if one stays invested in the right fundamental stock with reasonable valuation, you can't go wrong in the longer term even if one were to suffer short term setbacks. Someone compares BRN to DEG (gold non-producer stock) to say you cannot judge BRN based on zero revenue as DEG also has zero revenues yet can also scale higher. There is a difference. BRN's AKIDA technology could well be great and transformational just as 4DS ReRAM memory technology is, but the key word is "Could" - in other words hero or zero and it is difficult to accord any probability to it (hero or zero) because it could be years before we truly know the outcome, because even if it is not going to be groundbreaking, its management would continue to leave holders believing the hope remains when it gets no traction, so more CR along the way. But the beauty of Gold - anyone on the cusp of producing it does not even have to worry there is no demand for their products, no test, no pilot trials zilch, everything produced is sold and sold at great prices as gold is only going to get higher from here. So that is the big difference.
Finally, this relates to the last point I made about the best part of being a gold stock investor. You won't need to worry about whether there is demand for its products/services, you won't need to worry about COVID stifling demand for its products/services, you won't even have to worry about competition and narrowing margins resulting from intense competition . There are only two things to worry about in the gold trade. First, the long term gold price trajectory, and now with the Fed indicating that interest rates would stay zero until 2024 at least and the BoE opened to NIRP, plus signs of flaring inflation which the Fed is encouraging, all point to a conducive macro environment for Gold to continue to thrive and prosper in the years ahead.
The second is getting production out at cheapest possible cost, the more you produce the higher revenues you get. With oil prices at their lows, production costs will stay low with lower cost of labour as well.
But this final part relates to Gold juniors. Gold juniors are getting a re-rate now as we saw that happening over the past week. More and more people are waking up to the notion that gold juniors are going to do much much better from here. In the short run, they are not beholden to daily gold price movements because they have yet to get into production, for most not for another 1-2 years anyway. If you believe gold prices would be way higher than where they are now in 1-2 years time, then these gold juniors getting into production by then would be in the right place at the right time. But there is another key factor working in the gold juniors favour- their low valuation makes them strong candidates for bagger territory. A $20+m gold junior can transform itself many folds into multi-bagger territory by simply proving its resource/reserves in their tenements - e.g DEG was a 5c stock in Jan and now $1.55 31x fold increase and underpinned by right fundamentals (because the gold is there and lots) , CHN similar was a 20c stock in Jan and now $1.75. Getting a small piece of stake in a carefully chosen gold junior and holding them can be rewarding in the long run. And sometimes the market is slow to pick up seeing value in certain gold junior stocks - which I pointed out the case with WWI in my post yesterday.
So despite what the market indices do in the coming weeks and months, IMO it is pertinent to stay invested in
Measured proportions in the
Right Sector and in the
Right Fundamental Stock to prosper ahead. The Right Sectors by my count are 1) Precious Metals- Gold and Silver especially the juniors 2) The new economy stocks (technology driven enablers, and marketplace with strong value propositions in COVID and post-COVID environment) and 3) sectors that will strongly benefit from the EV (electric vehicle ) boom that is already happening. The Right Fundamentals relate to the company having a strong basis (e.g IP, reserves, service offering) combined with a decent valuation at the point of purchase.
Stocks Suffer Longest-Losing Streak In Over A Year As Dollar Dump Continuesby Zero Hedge
Fri, 09/18/2020 - 16:00
Stocks are down for the 3rd week in a row - yeah we know!!! - leaving levered-call-buying RH'ers facing something they likely haven't seen in their trading careers (this is the longest losing streak since August 2019)...
The Dow ended the week almost perfectly unchanged.
This leaves The Dow down over 3% YTD and the S&P 500 up just over 2% YTD...
Source: BloombergIs it
time for The Fed to start "getting back to work" on their balance sheet now that rates are impotent...
Source: Bloomberg
All that 'work' and "you get nothing"...The Nasdaq 100 is down over 12% from record highs (so much for BTFD)...
The S&P 500 and Nasdaq closed below their 40DMAs. Small Caps managed to bounce off the 50DMA (after breaking below) and The Dow bounced perfectly off it...
FANG Stocks plunged to their lowest since late July (down 17% from the highs)...
Source: BloombergVery choppy week in quant-factor land with Value and momentum swapping places day after day...
Source: BloombergNotably, Quad Witch sparked some shenanigans in the vol-stock complex today...
Source: BloombergAnd the Gamma pivoted around 270 Strike for Nasdaq QQQ...
Despite equity weakness, Treasury yields rose very modestly on the week...
Source: BloombergThe Dollar Index fell this week, after two weeks of gains...
Source: BloombergCryptos were largely higher on the week (Litecoin lower), led by Bitcoin
Source: BloombergBitcoin was, however, unable to hold on to $11k...
Source: BloombergOil dominated commodity-land with copper also higher and PMs marginally so...
Gold remains increasingly range bound...
And a big reversal in WTI (back above $41)...
Ags had a huge week as Corn, Soybeans soared on China chatter...
Source: BloombergFinally, 1930 called again...
Source: Bloomberg
