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8/16/2019 9:50:33 AM Eastern Time

By Charles Payne, CEO & Principal Analyst

 Click here to download PDF version

Yesterday, the market continued to gyrate but in a much tighter range than prior sessions. There was a sigh of relief as the Dow and the S&P finished higher, but the NASDAQ slipped under the weight of lower guidance from Cisco (CSCO). Of course, the cloud of uncertainty continues to cast a dark and foreboding shadow, even as economic data curbed fears of a recession.

The rally was decidedly cautious:

  • Real Estate was the big winner (we have a core position in the sector, but we are looking to expand exposure in the model portfolio).
  • Consumer Staples (we have to brush our teeth).
  • Utilities (we have to pay our light bills).

S&P 500 Index



Communication Services (XLC)



Consumer Discretionary (XLY)



Consumer Staples (XLP)



Energy (XLE)



Financials (XLF)



Health Care (XLV)



Industrials (XLI)



Materials (XLB)



Real Estate (XLRE)



Technology (XLK)



Utilities (XLU)



The Market Breadth was not very convincing, however.


  • Advancer: 1,567
  • Decliners: 1,385
  • New 52-week highs: 143
  • New 52-week lows: 297
  • Up volume: 1.57 billion
  • Down volume: 2.54 billion


  • Advancers: 1,310
  • Decliners: 1,800
  • New 52-week highs: 68
  • New 52-week lows: 307
  • Up volume: 976 million
  • Down volume: 1.42 billion

Trade War

While on his way to a campaign event in New Hampshire, President Trump said China is making more positive overtures, including potential agricultural purchases. That would be great news. However, I must say, beneath the tweets and negative scuttlebutt, there were positives from China’s foreign ministry, including the revelation of constant communication between the two leaders.

Foreign Ministry Spokesperson Remarks on August 15, 2019

Q: On August 14, US President Trump said in his tweets that "Of course China wants to make a deal. Let them work humanely with Hong Kong first." He also suggested a possible meeting with the Chinese leader. I wonder what China’s comment is.

A: Hong Kong affairs are entirely China's internal affairs. As we noted, President Trump also said previously that "Hong Kong is a part of China. They'll have to deal with that themselves. They don't need advice." We hope the US side will keep its word.

China holds a consistent and clear position on China-US trade talks. We hope the US can work in concert with China to implement the two Presidents' consensus that was reached in Osaka, and to work out a mutually acceptable solution through equal-footed dialogue and consultation with mutual respect.

Regarding high-level communication, the Chinese and US Presidents have remained in contact with each other via meetings, phone calls and letters.


Communication Services

Consumer Discretionary

Consumer Staples












Real Estate










Obviously, the market is still tenuous but Nvidia (NVDA) could bring technology back today.

Today’s Session

Housing starts plunged to an annual rate of 1,191,000 or 4.0% , which missed Wall Street’s consensus of 1,240,000.  The headline is disheartening, but a closer look at the data, including permits, could signal a positive infection in single family homes.  There were increases in starts in North East, Midwest and West; only the South was lower.


  • Single family 876,000 +1.3%
  • Multiple 303,000 -17.2%

United States Housing Starts


The annual pace of 1,336,000 units was a sharp 8.4% increase, and well above consensus of 1,270,000.  The increase was driven by a 10.7% increase in South and +13.7% increase in West.

On the tariff front, JPMorgan is out with comments on tariffs and the potential impact on the S&P500*.

  • Trimming its 2020 earnings estimates for companies in the S&P 500 to $177 per share from $178 due to tariffs expected to take effect on September 1.
  • The bank's strategists estimate that new round of 10% tariffs will add $400 per household per year to the $600 cost they estimated for earlier tariffs.
  • That would wipe out a good part of the average $1,300 benefit per household from tax cuts, they wrote.
  • “The impact from reduced spending could be immediate for discretionary goods and services since tariffs are regressive,” the strategists wrote.
  • Companies to be affected by the Sept. 1 tariffs include Dow (NYSE:DOW), Caterpillar (NYSE:CAT), Harley-Davidson (NYSE:HOG), and Whirlpool (NYSE:WHR), the JPMorgan strategists said.
  • For the Dec. 15 round of tariffs, Nike (NYSE:NKE), Apple (NASDAQ:AAPL), and Mosaic (NYSE:MOS) are likely to affected, they said.
  • However, there's "a good chance" the tariffs will be reversed ahead of the 2020 presidential elections, they suggest.

*Source Seeking Alpha

Overall, this morning, the market is reacting to positive comments on trade talks from President Trump.  I suspect we could see a strong truce, if not a deal, before the election The market was okay with current tariffs, and the notion there wouldn’t be a resolution before that now infamous tweet roiled the market.  If we get back there, a lot of anxiety will be eased, and coupled with Fed rate cuts, the wind will get behind the stock market.

I suspect we could see a strong truce, if not a deal, before the election.   If we get back there, a lot of anxiety will be eased, and coupled with Fed rate cuts, the wind will get behind the stock market.


Long Idea: Edwards Lifesciences Corporation (EW) @ $218.00
Industry: Health Care; Appliances & Equipment
Click here to view the trading alerts that followed this recommendation

Trading Parameters
Status Closed
Entry Price$218.00
Entry Limitsee comments
Stop LossN/A

Options Trade Parameters
Status Closed
Type Call
Option Symbol EW200117C002
Entry Price $22.20
Strike Price $210.00
Expiration Date 1/17/2020
  Add to Position Tracker

BACKGROUND: Edwards Lifesciences Corporation provides products and technologies for structural heart disease and critical care monitoring in the United States and internationally. It offers transcatheter heart valve therapy products comprising transcatheter aortic valve replacement, and transcatheter mitral and tricuspid therapies for the nonsurgical replacement of heart valves. The company also provides surgical heart valve therapy products, such as pericardial valves for aortic and mitral surgical valve replacement; aortic heart valves; annuloplasty rings; and cardiac cannula devices, as well as various procedure-enabling platforms to advance minimally invasive surgery. In addition, it offers critical care products, such as hemodynamic monitoring systems to measure a patient's heart function in surgical and intensive care settings; pulmonary artery catheters; Oximetry Central Venous catheters, as well as clinical monitoring platforms that display a patient's physiological status; Acumen Hypotension Prediction Index, an advanced algorithm that indicates the likelihood of a patient developing hypotension; and disposable pressure monitoring devices and closed blood sampling systems to protect patients and clinicians from infection. The company distributes its products through direct sales force and independent distributors. Edwards Lifesciences Corporation was founded in 1999 and is headquartered in Irvine, California.

SKINNY: EW beat in Q2 on revenues and adjusted EPS and raised full-year guidance. The stock is in the cusp of a major breakout, and estimates are trending up. Our target is $255.

Key Fundamentals
PEG  3.42
Book Value  16.84
Institutional Holdings  0.0
Price/Sales  11.35
Average Daily Volume  1.28M
Shares Outstanding  208.11M
Market Value  44.76B
Insider Activity  59 Buys 40 Sales
52-week High  219.71
52-week Low  136.44
Annual Earnings Estimate  5.98

Analyst Coverage
 BofA/Merrill Reiterated  BUY
 Canaccord Genuity Reiterated  BUY

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