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Morning Commentary

They’re Still Doubting the President, Apple, and the Rally*

By Charles Payne, CEO & Principal Analyst
6/30/2017 9:20 AM
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*I pity the fools 

It was another difficult session for the market as strength in banks and in energy couldn’t offset the selling pressure yesterday. The session began higher, and it looked as if new records would be established across the board before it all went south. 

There are several theories on how it started; once the first domino fell, selling begets selling until U.S. Treasury Secretary Steve Mnuchin began speaking at the White House Press Conference.

Wall Street liked what he had to say:

Tax reform is a “pass/fall” exercise it must get done and he’s aiming for it to happen before the August recess.   He didn’t defend 15% only reassuring everyone it would be “great for the economy, great for Americans and put people back to work."

His comments sparked a 130 point Dow mini-rally. As it turns out,the Dow finished, down 167 points, but 90 points off the low of the day.  

In addition, the NASDAQ Composite Indexopened under weakness.

Ironically, Apple (AAPL) celebrated the tenth anniversary of the iPhone that sparked jitters.It’s the same type of rumors that haunt the stock market from time to time when it comes to the iPhone.

• A lack of supply

• Dip in demand

Yesterday’s rumor was that there wouldn’t be enough light-emitting diodes to cover demand, which is a high-class problem. It sent shares of Universal Display (OLED) down 4%, along with other key suppliers; Skyworks Solutions (SWKS), Broadcom Ltd (AVGO),and Cirrus Logic (CRUS).

I’ve been holding Apple in my retirement account for years. Thosestories never faze me as the company has sold a trillion dollars’ worth of iPhones, and it’s not going to stop anytime soon. 

In the meantime, much was made about all the big tech names dipping under their 50-day moving average. This is a big deal. If it persists for a week or so, it usually invites additional doubt, which becomes downside pressure. However, I prefer the exponential moving average (EMA), which paints more of a mixed picture:

EMA Holding:

• FB $149

• AMZN $963

EMA Violated:

• NFLX $154

• AAPL $147

• GOOGL $945 

Note: Netflix and Apple both violated their 50-day EMA on June 9th. 

Big Earnings News 

After the close, there were two very important earnings reports:

Micron (MU) crushed Wall Street consensus and offered guidance well above estimates; the stock initially popped and then drifted.

Nike (NKE) beat the Street by $0.10 on earnings. They had positive news with more details on it's relationship with Amazon. Ironically, talking heads immediately said that it was bad news for both companies. Somehow two of the world’s power brands hooking up is bad news, and the outlook would have been better without such an announcement?

This kind of nonsense is the reason why you want to be sure you are taking your cue from long-term investment advice instead of fast traders trying to guess the next 24-hours. 

Today’s Session

This should be a very low volume session as many have already taken off for an extended weekend. The market was indicating much higher an hour ago, but it seems listless coming into the opening bell.  Mid-morning swoons have become the pattern, so we aren’t going to force the issue.  But once again, fundamentals buttress our opinion this is garden variety consolidation with some sector rotation but no panic.

The stealth rebound in crude is one story that I would like to see continued next week, but the big question is when tech makes a stand.   Meanwhile, I hope materials and industrials continue to rally without Wall Street fanfare. 



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