The Week Ahead in Stocks – Apr 09

Last week’s two way volatility in stocks was symptomatic of 2018 so far and still similar to the blowout year of 1987: challenging.

Indeed, the entire month of March was also challenging and unusual for leading stocks. This is unusual because each of our leading stocks had a bearish catalyst all of its own, acting out against a broader market downturn.

First off came the steel and aluminium tariffs, causing Boeing (BA) to finally come back down to earth. This was quickly followed by the Facebook (FB) data leak, which spilled over into Google (GOOGL). Amazon (AMZN) had been holding up well, but then President Trump went after its tax status once again, and it fell in turn, closely followed by Netflix (NFLX) by correlation more than anything else. And completely unrelated news, Tesla (TSLA) had its credit rating downgraded by Moody’s. Oh, and Nvidia (NVDA) also had its fair share of bad news with fresh tariff proposals by both the US and China weighing on it, and not helped by crypto-currency woes. (NVDA chips are the backbone of mining).

Basically everything that could go wrong, went wrong.

Suddenly Big Tech does not seem such a safe bet any longer, and sentiment is very different. Is the tide finally turning Not if history is any guide. Tech has been weaker than the broader market during previous periods, especially around the 2016 elections, and this period acts as a decent guide as to how this situation may be temporary.

The Tech concerns around the time of the election in 2016 – especially those of Amazon – are similar to those today. Trump has had Amazon in his sights for a long time.

Trade wars were an immediate concern as Trump was elected. Apple currently looks much like it did in 2016, and we have been tracking this fractal for many months now.

Some of the catalysts in 2018 may be new, but the way the market is behaving is not. The Nasdaq Tech 100 (NDX, QQQ) continues to follow the 2013-2014 template well.

So far at least, this time is not different!
Good luck and good trading this week.


Andrew McElroy
Chief Stocks Analyst