Nobody On Wall Street Expected This (March 25-March 28)
March 25-March 28, 2024 by Adit Dayal for RIPPYGLOBAL.
Happy weekend everyone and welcome back to the Rippy Global weekly outlook. The stock market continued higher for the best week of 2024, up 2.29% with the most amount of US stocks at 52 week highs since early 2023.
Let’s take a look at what next week has in store for us!
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With the market running so hard and so fast, Wall Street is revising EOY targets and estimates for the S&P 500. When 2023 ended, I wrote that the median target for the SPX was 5000 and just three months into the year it seems we’ve more than destroyed that price. The new updated target is 5200 and we’re trading above that now. Goldman Sachs, one of my favorites, lists their PT at 5200 with an upside case of 5800. They liked what was shown at the Nvidia event and believes mega cap tech stocks will continue driving returns for the indexes over anything else this year, and I agree. That being said, most Wall Street price targets are pretty wrong and it begs the question: Could we see a reversal? I really like looking at historical data to give us an answer. Butters notes, using data from FactSet, that average EOY price targets tend to be overdone by the Street and the current bottom-up price target is near 5600 for the year. You can see the overestimation in the graph below from FactSet.
One name that you’ll probably hear a lot of this year is “Donald Trump”, and there was some big news last week that could provide a decent trading opportunity coming soon. In 2021, DWAC was a SPAC (blank-check company who’s only purpose is to acquire a privately held company and take it public) who was going to take Trump’s media company, Truth Social, public. The stock went form $10 to $200 overnight, but it has been plagued with legal issues. This Friday, the vote finally passed for the deSpac process to begin next week. Trump is on the hook for $464m worth from the courts before they begin seizing his property, and this deSpac will give him 60% of DWAC, vastly increasing his paper net worth. So will he sell on to retail? The issue for him is that he can’t for 60 days. That being said, I think he will us this platform to pump the stock before he can sell, but this is no long term play. In fact, the prospectus for the name says that “TMTG expects to incur operating losses for the foreseeable future” and the amount of risk at this valuation simply is not worth it in my opinion.
One surprising thing for the market this week was that the Department of Justice (DOJ) is coming at Apple for being a monopoly in not allowing other platforms to offer services for their devices. This case is very interesting to me because I don’t see how the DOJ wins this- it seems like a very basic principle of American companies that allow them to do what they want that the DOJ seems to be challenging. They went against MSFT back 20 years ago, and Apple just got hit by the EU with a huge fine and forced them to change their platforms there. In fact, I think the lawsuit is better suited at showing Apple’s strengths in the industry and why it will remain one of the biggest names in consumer tech.
Lastly, the Reddit IPO was a huge success with initial pricing at $32, and an opening at $58 there was huge demand for the name after what has been a slow IPO market. A few interesting names are coming to the market, Turo (the car sharing company), Reddit, Shein, and more. A hot IPO market shows signs of a healthy investor sentiment and is proof that there may still be more fuel in this rally.
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#1) Earnings week is much slower this week with the only notable report being GameStop (GME) which can bring volume to some of the meme names.
#2) On Monday, the Nevada gaming report comes out and can impact sports betting names which have been on a TEAR recently. There is some rumors of $RSI wanting to sell to $DKNG which can be very interesting and this sector still have more fuel to go.
#4) On Tuesday, the Nasdaq real short interest numbers will come out and give us an official look at the most shorted names. Adobe will also be hosting a conference (this is right after their stock tanked due to concerns of AI taking market share).
#5) On Thursday, Chinese EV companies could see volatility with Xiaomi will be launching the sale of their first EV’s there.
#6) On Friday, the markets will be closed, but PCE information will be released and Powell is speaking, so watch your swing positions over the long weekend.
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S&P 500
The S&P 500 ($SPX index) continues to trade up in this channel and the main idea here is simple: don’t fight the trend. Until we break below this trend I’m not looking to short- rather I’m looking for secular rotations. There will be a bull market in some sector as money keeps rotating while the indexes run. This is the same thing I have been posting for weeks because the thesis doesn’t change: don’t fight the trend. Money keeps moving around sectors and right now a rising tide lifts all boats.
My key breaks are $523.19 for bulls and $518.37 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
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INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
TSLA
I had mentioned when Tesla was trading at $206 that I was not bullish on a Tesla price reversal and that seems to be playing out with the EV mania really starting to hit the brakes here. Apple can’t find place for an EV, sales are slowing, and a likely Republican win in November are all not good catalysts for this space. As long as TSLA is trading under $206, I am bearish on the name and am only looking for a dip buy under $150.
AAPL
Apple is another name that missed out on the big-tech rally, and I don’t think they’ve got great things lined up for them in the future either,: it’s the same case as Tesla. With the DOJ probe hitting the news feed this week (discussed above how this could be different), their rumored partnership with GOOGL’s Gemini to power some of their AI functions (this is dangerous- makes me question if Apple lacks the proprietary AI tools to succeed), and slowing PC sales. One bull case is the developer conference with the new AI tools in June, but by then it may be so that the whole AI craze fizzles out. Bearish on the name looking for a breakdown under $170, bullish over $188. Repeat analyst downgrades as well.
WYNN
WYNN’s got a great chart and a nice flag setup with showing solid buyers right around the $100 psychological area. Interested in casino and gaming stocks with seeing the M&A activity heating up there. Rush Street Interactive may be looking to put themselves on sale to DraftKings and those names have been unstoppable. I think these casino and gaming stock are a good proxy to catch up on that sector even after all the other names have ripped.
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Insider Activity
No real, notable insider buys this week that could move a name, but ALAB is a recent semiconductor IPO (hot theme) that could move with huge buying from the Director, although he is already up 100% at the time of writing this.
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)