Market Brief – Thursday 11/01/18

Experts and analysts are looking to Apple’s after-hours earnings announcement to save the stock market. So far, the earnings from Facebook, Amazon, Netflix, and Google (the other four in the FAANG stocks) have been disappointing. One company can’t hold the stock market up on its own, but Apple’s large weighting in the major indices can help move stock prices higher.

Stocks moved higher after President Trump tweeted talks between China are “moving along nicely” after his brief meeting with President Xi. President Trump may be able to negotiate trade deals, but only Congress can approve them. Since China prefers to negotiate behind the scenes and there are multiple issues beyond trade, this meeting has little meaning. While President Trump’s tweet sent stock prices higher, the bond market didn’t buy it as Treasury yields fell.

The head of Normura’s Quant desk revealed that their CTA’s have increased their equity exposure over the past 48 hours. Even as their computers buy more stocks, the market didn’t retrace much of its recent losses. He also mentioned it appears that there is “forced buying” in the market as large investors have been caught on the wrong side of the recent market movements.

Markit’s Manufacturing PMI increased slightly as the ISM Manufacturing PMI decreased. Export orders are falling, and prices are increasing, indicating manufacturers were front-loading their production ahead of the tariffs. Treasury yields fell following this report.

Unlike yesterday which saw hard selling going into the market close, equity prices held their gains as stocks rallied above yesterday’s closing price. The price action over this past month looks like equities are making a wave pattern down. Elliott Wave Theory suggests that equity prices move in five successive waves. Should this be true, then the equity markets are headed much lower, as we are in wave two of five.

Physical gold and the gold miners moved higher today as the dollar fell. I’m watching the silver miners as I believe they are showing where the buyers and sellers are at, whereas the gold miners appear to be running on emotion. The silver miners are forming a bottom, which suggests today’s move in the gold miners may be quickly undone.

Agricultural commodities lurched higher as buyers overwhelmed the sellers. From a charting perspective, agricultural commodities are forming a nice head-and-shoulders bottom. The breakout line will be covered in Friday’s video, which if broken, should see prices quickly rise.

Apple beat expectations, however, their shares fell after-hours as the number of iPhone units sold were 46.9 million versus expectations of 48.4 million. Fewer units sold means lower demand going forward. The other risk Apple faces with higher priced phones is losing customers to other phone manufacturers. Since Apple generates a sizable amount of revenue from their application store, lower phone sales could lead to lower application revenues.

In the two minutes following Apple’s announcement, the computer algorithms dropped the stock by -5%. In two minutes.