RoboStreet – October 31, 2019
China Turns Tail on Trade Deal…Again
Just as it seemed some genuine progress was about to be made in the long-running trade war with China, it was reported Wednesday that Chile scrapped plans to host next month’s Asia-Pacific Economic Cooperation trade summit where President Trump was expected to meet with Chinese counterpart Xi Jinping and announce “phase one” of a trade deal between the two countries.
Markets initially reacted in a muted manner under the assumption that “phase one” would happen, just at a different location around the middle of November. But then came yesterday’s report that China downplayed the prospects of a long-term trade deal with Trump, citing major comprehensive differences in addressing IP theft, access to financial markets and pushback on the number of farm products to be purchased.
The market did not take kindly to the latest trade narrative, even as the Fed cut short-term rates as expected and Apple Inc. (AAPL) delivered better-than-expected third-quarter results that took the stock to a new all-time high. However, while the reporting season has delivered better-than-forecast numbers as a whole, some high-profile misses by Alphabet (GOOGL), Amazon.com (AMZN), IBM Corp. (IBM), McDonald’s (MCD) and Texas Instruments (TXN) sends a message global growth is uneven.
Looking at the market’s technical, there is rising support for the S&P 500 at 2,960-2,980 where I would expect the market to attract strong buyer interest. The latest upside breakout for the S&P has been led by the financials and semiconductor sectors, with JPMorgan (JPM) being the standout in the financials and Intel (INTC) surging among several hot chip stocks.
The Tradespoon Seasonal Chart above shows shares of JPMorgan in a powerful uptrend where any market weakness should be used to get long the stock. What is so impressive about JPM is that not only is the company the largest U.S. bank, it grew revenues and earnings faster than its competitors – a truly impressive performance. The stock also occupies one of the two top holdings within the Financial Select Sector SPDR Fund (XLF), Berkshire Hathaway (BRKB) being the other. Together, these two stocks comprise 24.5% of the fund’s total assets.
The Seasonal Chart for Intel has the stock pegged in overbought territory over the near term following the big earnings-related spike. Here too, the stock is a high-quality buy, but at a lower level following some well-deserved consolidation. Seeing as how the trade deal is either going to be further watered down or even possibly delayed, the market is going to likely provide the pause that refreshes before trending higher.
One takeaway from this earnings season is that in light of all the finger-pointing to the trade war and how it would push the U.S. economy into a recession, that assumption was overblown. Yes, the earnings bar was set lower coming into the reporting season, but over 64% of companies posting results have reported a positive revenue surprise. A lot can be done to manufacture earnings, but there is no way to disguise top-line growth and is why the market is taking the view of a pickup in growth in Q4 and 2020.
The beauty of earnings season is that it separates the good from the bad and the ugly and exposes which stocks are tomorrow’s leaders. There are some very significant all-world breakouts in several key stocks that I’ve identified as having huge upside potential and are where I’ll be concentrating my efforts going forward.
To this end, it is incumbent upon investors to “get it right” when repositioning portfolios for the changing landscape where huge sector rotation is underway. My Tradespoon AI tools are just the solution to exact stock and ETF selection that guide subscribers in my RoboInvestor advisory service to participate in a portfolio that has a Winning Trades Percentage of 87.5%!
That’s a fantastic track record and one that is founded on using only blue-chip stocks and the leading ETFs. We banked solid profits in Microsoft (MSFT), Amazon.com (AMZN), Walmart Inc. (WMT), Target Corp. (TGT), Honeywell International (HON), Waste Management (WM) and PayPal Inc. (PYPL), just to name a few. Lately, I’ve added KLA Corp. (KLAC) and BlackRock (BLK) at highly attractive entry points that reflect the current fund flows into the financials and semis.
To get in on these trades and our other 13 positions in the RoboInvestor Model Portfolio, click on to the link and get signed up today. Just to be sure about how committed I am to winning in this service, I put my own money in every trade I recommend. Join RoboInvestor and start to make an immediate and positive difference in how your investment capital performs using the power of a highly-tailored and customized AI platform. It truly is the winning edge you deserve.
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