Sell in May and Go Away? (April 29-May 3)
April 29-May 3, 2024 by Adit Dayal for RIPPYGLOBAL.
Happy weekend everyone and welcome back to the Rippy Global weekly outlook. The markets rose this week, with the S&P up 2.65% after some great earnings from tech, with more to come later this week.
Let’s take a look at what next week has in store for us!
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The rise in markets this week is largely due to some great earnings, with all the big names we mentioned last week (Tesla, Microsoft, Google) all popping after their report. Last quarter, META stated they would be offering a dividend to shareholders, which the market loved, and now Google has finally reported that they’re joining the dividend club, offering 20 cents per share. Obviously, as most things happen, this means the market is seeing what’s next, and the rumor on the street is that Amazon may be next. This is interesting because their AI expenditures have been worrying the market, so to see a company who’s going back into a growth stage with AI offer a dividend is pretty unique. This is what dropped Meta after their earnings, the amount of Capex on AI that really isn’t seeing any return. Both their meta verse and AI adventures really aren’t on target with competitors. Once this spending translates to revenue is when we’ll see the next paradigm shift and large run in these names- such as how increased AI interest is helping Google’s search business.
The sentiment is reaching the public for a commodity that has slowly been outperforming this year, but not getting it’s credit and that’s copper. Purchasing in manufacturing heavy countries are all signaling increased demand for the metal and above expectation readings on inflation has surged the price of gold and other metals. Marketwatch states there is a huge shift in demand and changes going on in China that are driving copper prices higher with a boom in demand for green infrastructure, something coper is vital for. EV’s are also growing in the country and usage of copper is around 3x more in EV’s than regular cars. Lastly, Zuckerberg recently talked about how much energy AI uses to be powered and guess what’s needed for that infrastructure - copper! Overall, I think this commodity should have solid year with there being enough fundamentals driving the price for copper as well as its beneficiaries (companies like FCX).
The Fed has been pretty adamant that the economy is getting better and we are moving closer to our target goals, but recently the data has not been able to back that up. This week’s Fed meeting and their tone on these issues is going to be huge and the market is going to be reading signs from what they’re saying. The GDP growth was a massive surprise this week, growing at only 1.6% vs. the expected 2.3%. Retail growth has also slowed and traders hopes for a rate cut this year have completely just withered away as more data comes out. I still believe that another hike or just pause is the most likely scenario from the Fed as we are drifting away from our target goals in view of inflation, in which things like wages have been really sticky.
Lastly, there’s an interesting catalyst coming up for Google, which I previously discussed was in licensing talks with Apple to help power their AI features. A recently released article states they’re now talking with OpenAI which could be a negative catalyst for Google. Nonetheless, my view is that they have their own in house AI systems they’ve secretly been working on as they acquire a bunch of cool start-ups away from the limelight. WWDC this June should be a huge day for the company as we can see what they’re working on and if there’s still a growth story left in this name.
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#1) Earnings week is getting strong with Apple, AMD, McDonalds, and more reporting.
#2) On Tuesday, the pricing of small caps will be used to decide how the rebalance the small cap index.
#3) On Wednesday, the Fed will issue their statement on monetary policy at 2:00PM EST and Fed Chair Jerome Powell will speak 30 minutes later.
#4) On Thursday, AAPL will host their earnings, which tends to move a lot of names in the technology sector, as well as the whole market.
#5) On Friday, the April employment report will be released with the employment rate expected to remain at 3.8% (stagflation?).
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S&P 500
The S&P 500 ($SPX index) is finally bouncing after what was slow, but continuous selling these last few days. Strong earnings are picking steam back up, but that momentum needs to continue into this week as well, or the selling will return even stronger.
My key breaks are $512.96 for bulls and $504 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
Tesla had (albeit priced-in) really bad earning with a 9% revenue drop and a huge 55% decrease in net income this last week. Elon announced some cool new features, including a robotaxi, but he’s been promising that for years, so let’s see if we actually get it. Stock is about to break out over the 50DMA but I’d be weary - think this has more room down before bottoming in later this Summer.
AAPL
Apple is just chopping around before earnings, not much to say other than we need to wait for what Thursday brings. Innovation means growth, otherwise this can pull back more to $160.
HOOD
HOOD might be the best chart in the entire market right now, in a clean bull flag there and sentiment is great for it as well. Holding the 50DMA nicely too.
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Insider Activity
BHVN saw a bunch of buying, but my favorite play is provably CTRI which is in a tight flag, good sector, and $1.5M of insider buying.
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Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (www.twitter.com/realaditdayal)