foxex: Mixed Signals

Chart Advisor | Focus on the Price

Thursday, October 24, 2019

1. Earnings Reports Show Mixed Reactions, but Investors are Mostly Bullish

2. Apple Shares May Be Forecasting Bullish Market Moves ahead

3. The Supplier to Semiconductor Companies

Market Moves

Twitter's (TWTR) earnings report was so unpleasant to the ears of investors that they sent the stock seventeen percent lower at the open. For those who might think of this development as a harbinger of doom for tech stocks, social media stocks, or even stocks in general, they would do well to check out the result of Tesla's (TSLA) earnings report which sent that stock seventeen percent higher. Clearly, investors are not pessimistic on all stocks, just those who don't live up to easy expectations (see chart below).

Goldman Sachs' analysts downgraded Twitter even while still maintaining they had confidence that company could still continue to grow. One wonders exactly how much confidence that amounts to. Meanwhile, the major market indexes again traded within a tight range. The S&P 500 (SPX), the Nasdaq 100 (NDX) and the Dow Jones Industrial Average (DJX) all continued their downtrend in average true range. This bullish signal sets the market up for a break into higher prices in general.

Apple Shares May Be Forecasting Bullish Market Moves

The idea that, within a group of stocks used to form a market index, one stock should outpace all the others is not particularly surprising. It happens all the time. But for a high-profile company like Apple (AAPL) to be doing better than all other companies that make up the top 15 holdings in Invesco's Nasdaq-100 tracking ETF (QQQ), seems unusual. The next nearest well-known growth company is Nvidia (NVDA) whose shares are twenty points behind AAPL for the year.

Considering the level of performance by AAPL, one pertinent question arises. Is AAPL driving the markets, or is the market driving AAPL. Apple's stock is represented within over 300 ETFs, more than any other single issue. Unless this is a strange market anomaly, it is likely to be a bullish indication as it seems to flow from the fact that investors want to invest. They just want to invest in a company likely to execute well. (Tweet that!)

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The Supplier to Semiconductor Companies

One stock analysts in the semiconductor space like to keep an eye on is Applied Materials (AMAT). Since it is a supplier to most, if not all, of the biggest semiconductor companies, it acts as a bellwether stock. The thinking goes that since semiconductor companies have to buy manufacturing equipment well in advance of a chip-manufacturing run, and they have to project demand for those chips, then increased sales at Applied Materials could signal that semiconductor companies think consumers will increase demand, which in turn implies that the economy is on the rise.

Applied Materials shot higher by nine percent today on a mild analysts upgrade. This on top of the fact that the stock is already up more than 80% for the year, and thirty percent higher than VanEck's vectors semiconductor-tracking ETF (SMH). Additionally, earnings are still a couple weeks away, so it is possible that there is still more good news to come for this company. From all indications this move seems to imply that the markets are healthy and investors want to invest.

The Bottom Line

Companies have published a wide variety of results as earnings have unfolded so far. Most investors have reacted positively to the news, except in a few standout cases like Twitter's shares. Apple's shares are climbing markedly higher, much higher than most other large companies in the Nasdaq 100. One stock doing even better is perennial bellwether Applied Materials.