Stocks Stagger With Apple & China Data in Spotlight

by Vlad Karpel | 01/03/2019, 23:19

The Dow Jones Industrial Average plummeted nearly 600 points in early Thursday trading, following a slashed revenue forecast from Apple and continued weak outlooks on Chinese economic vitality. Apple shares dropped more than 9% in morning trading hours. The S&P 500 and Nasdaq Composite also dropped more than 2% as investors hesitate on committing to a 2019 bull market with the 2^ndlargerst world economy showing contractions. Apple CEO Tim Cook indicated the reduced quarterly revenue forecast (the first in 15 years) was connected to Chinese economic slowdown. Another compounding issue is the drawn-out trade/tariff negotiations between Washington and Beijing, which investors may see as another threat to U.S. corporate growth. An ISM manufacturing report for December showed an index reading drop to 54.1 from 59.3 in the preceding month- while expecations were at 57.9. This had a compounding effect on today’s index declines and increased bearish momentum.

After a record rally last week, the markets have set new lows at $230-233 for the SPY. The current range continues to trade between $233 and $253, with key support at $240 in the short term. SPY Seasonal Chart is shown below for reference:

Not all news was negative today-the ADP private sector jobs data for December showed an estimate of 217,00 additional new jobs- which is above expectations of 180,000. The Labor Department, however, showed an estimate of 231,000 unemployment benefits applications in the last week of 2018, above expectations of 218,000 according to analysts polled by MarketWatch.

In mergers and acquisitions news- Bristol-Myers Squibb Co. (BMY) has annoucned a cash-and-stock acquisition of Celgene Corp. (CELG) valued at $74 billion. Bristol-Myers Squibb is down 13% and Celgene is up 25% at the time of publication.

Airlines stocks are also in focus today as Delta Air Lines Inc. (DAL)see shares trading down 8.48% at the time of publication, after the company accounced lower-than-expected revenue for December. This news had a tertiary effect on its peer group at the time of publication, including American Airlines Group Inc. (AAL)- (down 7.48%), Southwest Airlines Co. (LUV)- (down 3.10%) and United Continental Holdings Inc (UAL)- (down 5.39%).

Using the “^GSPC” symbol to analyze the S&P 500, our 10-day prediction window shows overall negative signals. Today’s vector figure of +0.04% moves to -0.36% in three trading sessions. The predicted lows and highs for tomorrow are 2,424.72 and 2,527.76, respectively. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

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Highlight of a Recent Winning Trade

On January 2nd, our ActiveTrader service produced a bearish recommendation for CMS Energy Corp. (CMS). ActiveTrader is included in all paid Tradespoon membership plans and is designed for day trading.

Trade Breakdown

CMS opened in its forecasted Strategy B Entry 1 price range (49.65, ± 0.26) and passed through its Target price (49.15)within the first hour of trading on 01/02/18. The Stop Loss price was set at $50.15.

Friday Morning Featured Stock

Our featured stock for Friday is the Barclays iPath S&P 500 VIX ETF. VXX is showing a confident vector trend in our Stock Forecast Toolbox’s 10-day forecast. This ETF is assigned a Model Grade of (B) indicating it ranks in the top 25th percentile for accuracy for near-term predicted support and resistance, relative to our entire data universe.

*Please note: Our featured stock is part of your free subscription service. It is not included in any paid Tradespoon subscription service. Vlad Karpel only trades his own personal money in paid subscription services. If you are a paid subscriber, please review your Premium Member Picks, ActiveTrader or ActiveInvestor recommendations. If you are interested in receiving Vlad’s personal picks, please click here.

The ETF is trading at $46.74 at the time of publication, up 2.73% from the open with a +2.30% vector Range Trend for its 10-day outlook.

Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Note: The Vector column calculates the change of the Forecasted Average Price for next trading session relative to the average of actual prices for the last trading session. The column shows expected average price movement “Up or Down”, in percent. Trend traders should trade along the predicted direction of the Vector. The higher the value of the Vector the higher its momentum.

Oil

Oil prices are continuing to grapple with two forces- a fresh OPEC production cut agreement in December and worries of a demand drop due to incensed fears of a global slowdown spurred by weak Chinese economic data. Staggering U.S. stock market strength and record output by both Russia and the U.S. in the latter half of 2018 also puts pressure on prices. OPEC commentary, as it typically goes, appears to outweigh concerns overall and crude prices reversed losses Thursday but continue to fluctuate during ongoing stock volatility.

West Texas Intermediate for February delivery (CLG9) climbed 1.9% early Thursday and is priced at $46.11 per barrel, down 0.17 % at the time of publication. Looking at USO, a crude oil tracker, our 10-day prediction model shows all positive signals. The fund is trading at $9.76 at the time of publication, down 0.91% from the open. Vector figures show +1.03% today, which turns +0.67% in three trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Gold

Safe-haven buying is pushing gold prices towaard a 6-month high today during continued volatility in stocks and anxieties around Chinese economic data- with new concerns spiked by Apple’s declining numbers. As equities continue to see jiterry movement, gold moves toward that $1,300.00 resistance level, gaining more than 0.6% in early Thrusday trading after closing 0.2% higher the session before.

The price for February gold (GCG9) is up 0.62% at $1,291.90 at the time of publication. Using SPDR GOLD TRUST (GLD) as a tracker in our Stock Forecast Tool, the 10-day prediction window shows strong positive signals. The gold proxy is trading at $121.89, up 0.46% at the time of publication. Vector signals show +0.05% for today which move to 1.79% in three trading sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Treasuries

Treasury yields are dropping lower today following tepid U.S. manufacturing data, the China/U.S trade/tariff dispute and weak manufacturing data abroad. The yield on the 10-year Treasury note is down 1.34% at 2.59% at the time of publication. The yield on the 30-year Treasury note is down 0.87% at 2.93% at the time of publication.

Using the iShares 20+ Year Treasury Bond ETF (TLT) as a proxy for long-dated bond prices in our Stock Forecast Tool, we see mixed signals in our 10-day prediction window. Today’s vector of +0.46% moves to -0.13% in three sessions. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.

Volatility

The CBOE Volatility Index (^VIX) is up 6.85% at $24.81 at the time of publication, and our 10-day prediction window shows overall positive signals. The predicted low and highs for tomorrow are $24.77 and $31.02, respectively. Today’s vector of -0.52% moves to +8.19% tomorrow. Prediction data is uploaded after market close at 6 p.m., CST. Today’s data is based on market signals from the previous trading session.