foxex: Somebody's Watching You...

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Thursday's Headlines

1. U.S. Markets Stall and Facebook Faces Many Problems

Markets Close

Dow
25,709.94 +0.03%

S&P
2,808.48 -0.09%

Nasdaq
7,630.91 -0.16%

VIX
13.5 +0.67%

INV Anxiety Index
96.77 Low

US 10-Yr Yield
2.63 +0.73%

Markets Stall

U.S. Markets went a whole lot of nowhere today with the major indexes ending the day basically flat. All the action is overseas right now - in Europe with Brexit and in China with the 'on again, off again' trade talks. Our friend, JC Parets, did a deep dive into the health of the S&P 500 in our daily chart, below. What he discovered is intriguing.

Brexit Delay Vote

That March 29th Brexit deadline may not be such a hard deadline after all. British MPs voted 412-202 for Prime Minister Theresa May to ask the EU for at least a three month extension. First, Parliament must approve her new exit plan after they soundly rejected it on Monday. If they don't, May will be forced to ask for more than a three month extension, pushing Brexit, and all the uncertainty around it, off indefinitely.

Facebook Faces Trouble on Two Fronts

22 hours... That's how long a partial outage of Facebook lasted which impacted users all over the world. It began for some on Wednesday afternoon and Instagram and Whatsapp, part of the Facebook family, suffered intermittent outages as well. While the outage was rumored to be the result of a distributed denial-of-service (DDos) attack — a type of hack in which attackers flood a company's network — Facebook said (via Twitter) that it was not the case. Here's a series of Facebook's tweets throughout the outage.

Facebook relying on Twitter to communicate with its users... how meta!

The outage came at a very unfortunate time for Facebook as the New York Times dropped an exclusive story indicating that Federal prosecutors are investigating the company about data deals Facebook struck with some of the world's largest technology companies. Per the NYT:

"...A grand jury in New York has subpoenaed records from at least two prominent makers of smartphones and other devices, according to two people who were familiar with the requests and who insisted on anonymity to discuss confidential legal matters. Both companies had entered into partnerships with Facebook, gaining broad access to the personal information of hundreds of millions of its users."

Why it Matters

Facebook has spent the past two years defending itself in the wake of the Cambridge Analytica scandal which alleges that it allowed the posting of fake news on its platform that may have influenced the U.S. presidential election, among others. Founder and CEO Mark Zuckerberg recently issued a long letter about Facebook's newfound dedication to protecting user privacy. The NYT story details Facebook's data deals from two years ago. Federal prosecutors have assembled a grand jury to investigate the matter, but have not commented on what they are looking at or whether it is a criminal or civil investigation. The NYT outlined what the 'sharing deals' looked like:

"The sharing deals empowered Microsoft's Bing search engine to map out the friends of virtually all Facebook users without their explicit consent, and allowed Amazon to obtain users' names and contact information through their friends. Apple was able to hide from Facebook users all indicators that its devices were even asking for data."

Meanwhile, the FTC (Federal Trade Commission) is looking into whether Facebook defied a 2011 agreement it made with the regulator to not share user data. The FTC is reportedly considering slapping a multi-billion dollar fine on the social network in what could be the biggest penalty in history.

Did I mention that Facebook's Chief Technology Officer Chris Cox quit today? He did, as did one of the top executives from Whatsapp, also owned by Facebook.

Tough times in Menlo Park, California.

Chart of the Day: The S&P 500 is a Hot Mess

Our Chart of the Day today comes from JC Parets, founder and President of allstarcharts.com, an Investopedia contributor and friend of the site. We are big JC fans and recommend his blog and his course on the Investopedia Academy.

Sometimes stocks go up, sometimes they go down and sometimes they go sideways for a while. It will take you less than 5 minutes of market history research to understand this very simple fact. Of those 3, I would argue we are in the 'sideways for a while' category in U.S. stocks, particularly the S&P 500.

A lot of smart people I talk to are pointing to this resistance near 2810-2820 where overhead supply has overwhelmed demand since October. We have now failed there 4-5 times, depending on your count.

For me, it's a little more complicated than that:

1) Prices are near a flat 200-day moving average. This is a classic characteristic of a sideways range.

2) Even if prices are able to get above that, there is still more work to do from resistance based on the January & October 2018 highs, just around 100 points higher.

Listen, 100 points is a 100 points. Depending on your time horizon, that may be a lot. Speaking from a more intermediate-term perspective, I think we need to watch market breadth. Only 13 of the 57 US Sectors/Sub-Sectors we cover are positive since January 2018 and just 6 since September. This is a 'market of stocks', and not just a stock market. Meaning, as we see more stocks and sectors taking out the Jan & Sept/Oct highs, then we can expect the indexes themselves to follow. At this point, it's the opposite. We're expecting more of a struggle.

We have to invest in the market we're in, not in the one we want. That's just life.