MidWeek Commentary

HI Market View Commentary 02-26-2024

HI Market View Commentary 02-26-2024

Let’s talk about technical indicators and charts!
– Shows us HERD MENTALITY
– FOMO (fear of missing out)
– Fear of losing money

We are interested in seeing where BIG MONEY has buy and sell
orders stacked up
– We want to know what the big institutions are looking at
and where they’re plotting the course
So what do the big boys look at?
– 50 Day Simple Moving Average
– 200 Day Simple Moving Average
– RSI – above 70: over bought and below 30: Over sold
– WM%R is similar to RSI but moves a little more extreme
– MACD – Momentum
– 5 Day Exponential Moving Average
– 20 Day Exponential Moving Average
– When the 5/20 EMA cross over each other it indicates a
technically bullish run or bearish run.

– Prices and moving averages tell us SUPPORT and
RESISTANCE levels
– Pivot Points – green lines showing short term support and
resistance levels

What is support and resistance?
– Where the big institutions are placing buy and sell orders
– If there are more buy orders than sell orders at a given
price, we see a “support level” holding and the stock/index
bouncing up
– If we sell orders stacked up at a certain price, they are
trying to book a profit there and this turns into a resistance
level

Trend indicators
– When we have 3 crossovers on RSI 50(midpoint), 5 and 20
EMA, and the MACD EMA’s crossing over, this tells us what
the trend is (bullish or bearish)
– Every bogus “education” or trading signals” sales garbage,
what they are likely doing is just giving you stock indicators
(buy/sell) they are just using these crossovers.

My analogy: Chart reading is like a blind man feeling a statue to
get an idea what it looks like.
– The past doesn’t guarantee the future by any means, but it
can tell us some probablities

https://www.briefing.com/the-big-picture
The Big Picture
Last Updated: 23-Feb-24 15:22 ET | Archive
Great results drive good earnings reporting period
March is right around the corner, which means spring will soon be in the air. It also
means the marathon fourth quarter earnings reporting period will soon be over.
In our preview in early January, we pointed out that this earnings season gets dragged
out because it also includes fiscal year-end reporting.
So, how has it gone? Things started slow — and a bit disappointing — but picked up
steam once the mega-cap stocks tossed their hat into the reporting ring.
Swing Factor
Tesla (TSLA) was the first of the mega-cap stocks to report results. It disappointed and
drew a rebuke from several corners that it should no longer be considered part of the
so-called Magnificent 7, mostly because its stock had suffered a material decline to
begin the year amid reports indicating EV demand growth had slowed at a time of
increasing competition.
Tesla reported after the close on January 24. When that week concluded, the blended
fourth quarter earnings growth rate (a combination of actual results and estimates for
companies that have yet to report) stood at -1.4% versus 1.5% at the end of the fourth
quarter, according to FactSet.
When the next week concluded on February 2, the blended earnings growth rate was
1.6%. The swing from -1.4% to 1.6% happened over the course of a week in
which Microsoft (MSFT), Alphabet (GOOG), Apple (AAPL), Amazon.com (AMZN), and Meta
Platforms (META) all reported their results and exceeded consensus earnings estimates.
A lot of other companies reported better-than-expected results in the same week, but it
was the Magnificent 5 that truly moved the earnings growth needle — a needle that
kept moving after their big week.
At the end of last week (February 16), the blended earnings growth rate had doubled to
3.2%, but it didn't stop or revert there. According to FactSet, it has bumped up to 3.8%
for the week ending February 23, which featured the blowout report from the
Magnificent 1, NVIDIA (NVDA).
We have now heard earnings results from 90% of the S&P 500, so it is safe to say that
the fourth quarter reporting period was better than expected, but not a blockbuster
reporting period in aggregate.
Good, not Great

It is typical for the final earnings growth rate to be two to three percentage points
above the estimated growth rate. When the fourth quarter ended, the estimated growth
rate was 1.5% and here we are now at 3.8%.
Accordingly, we'll give this reporting period in aggregate a 'B' — good, but not great.
The same holds true for revenues, which are up 4.2%, versus an estimate of 3.1% at
the end of the fourth quarter, a five-year average revenue growth rate of 6.9%, and a
10-year average growth rate of 5.0%, according to FactSet.
Some might say that a below-average result should warrant a grade like a C-, but we'll
allow for some grade inflation (no pun intended) given the more challenging revenue
growth comparisons. FactSet notes that the fourth quarter is the 13th consecutive
quarter of revenue growth for the S&P 500.

The first quarter should be the 14th consecutive quarter, too, with the blended growth
rate currently projected to be 3.6%. That is identical to the projected earnings growth
rate. Any growth is better than no growth when it comes to earnings, but it should be
noted that the projected growth rate was 5.6% at the time of our fourth quarter
earnings preview in early January.
That's called a downward revision, but it will be discounted (and has been discounted),
because the economic data have remained conducive for a positive earnings growth
environment. Moreover, it is understood that estimates tend to get marked down as the
quarter progresses, only to see companies hurdle the lowered bar by at least two or
three percentage points when the reporting is done (which would take you back at least
to 5.6% if things remained where they are today).
Earnings Power

Market participants are also aware that the Magnificent 6 aren't on track to report
modest earnings growth. Apple is the exception as analysts are projecting its earnings
per share to be flat year-over-year in the March quarter. The remaining five stocks are
all projected to deliver either double-digit year-over-year EPS growth or triple-digit
growth in the cases of Amazon.com and NVIDIA.
Collectively, the average year-over-year EPS growth rate for the Magnificent 6 is
117.7%! Take Apple out and it jumps to 141.2%! Take NVIDIA out and it is still a robust
60.8%.
The point being is that these stocks continue to find favor because of their tremendous
earnings power, and if they are in favor, the market-cap weighted S&P 500 won't fall
way out of favor unless something unexpectedly bad happens.
What It All Means
We're in the closing stretches of the fourth quarter earnings reporting period, which was
a test for the bull market in terms of the results that were reported and the guidance
that was provided.
The stock market passed the test with a good grade, having been fortunate enough to
see that the earnings results and guidance from most of the Magnificent Bunch
remained great.
That was key for a market that has a concentration in those names, and it is harbinger
of the opportunity and risk that awaits with each earnings reporting period.
–Patrick J. O'Hare, Briefing.com

Earnings dates:
BIDU 2/28
COST 3/07
KO 2/13 BMO
MU 3/30 est
Where will our markets end this week?
Lower
DJIA – Bullish

SPX –Bullish

COMP – Bullish

Where Will the SPX end Feb 2024?
02-26-2024 +1.0%
02-20-2024 +1.0%
02-12-2024 +1.0%
02-05-2024 +1.0%
Earnings:
Mon: DPZ, DDS, ZM
Tues: AZO, M, NCLH, DDD, BYND, EBAY, FSLR, URBN, VZIO
Wed: BIDU, TJX, AMC, HPQ, CRM
Thur: BBWI, BBY, BUD, PZZA, SIX, ADSK

Fri:

Econ Reports:
Mon: New Home Sales
Tue Consumer Confidence
Wed: MBA, EIA Oil Inventories
Thur: Initial Claims, Continuing Claims, PCE Prices
Fri: ISM Manufacturing Index
How am I looking to trade?
Took off long puts and letting some things run
www.myhurleyinvestment.com = Blogsite
info@hurleyinvestments.com = Email
Questions???

https://www.cnbc.com/2024/02/21/why-capital-one-is-buying-
discover-in-the-biggest-merger-yet-of-
2024.html?__source=iosappshare%7Ccom.apple.UIKit.activity.
Mail
Here’s why Capital One is
buying Discover in the biggest
proposed merger of 2024
PUBLISHED WED, FEB 21 202410:42 AM ESTUPDATED WED, FEB 21 202412:02 PM EST
Hugh Son@HUGH_SON
KEY POINTS
 Capital One’s recently announced $35.3 billion acquisition of Discover Financial is a
bid to protect itself against a rising tide of fintech and regulatory threats.
 The deal, if approved, enables Capital One to leapfrog JPMorgan as the biggest
credit card company by loans, and solidifies its position as the third largest by
purchase volume.
 But it’s Discover’s payments network — the “rails” that shuffle digital dollars between
consumers and merchants, collecting tolls along the way — that is key to
understanding this deal.

Capital One’s recently announced $35.3 billion acquisition of Discover
Financial isn’t just about getting bigger — gaining “scale” in Wall Street-speak
— it’s a bid to protect itself against a rising tide of fintech and regulatory
threats.
It’s a chess move by one of the savviest long-term thinkers in American
finance, Capital One CEO Richard Fairbank. As a co-founder of a top 10 U.S.
bank by assets, his tenure is a rarity in a banking world dominated by
institutions like JPMorgan Chase that trace their origins to shortly after the
signing of the Declaration of Independence.
Fairbank, who became a billionaire by building Capital One into a credit card
giant since its 1994 IPO, is betting that buying rival card company Discover
will better position the company for global payments’ murky future. The
industry is a dynamic web where players of all stripes — from traditional
banks to fintech players and tech giants — are all seeking to stake out a
corner in a market worth trillions of dollars by eating into incumbents’ share
amid the rapid growth of e-commerce and digital payments.
“This deal gives the company a stronger hand to battle other banks, fintechs
and big tech companies,” said Sanjay Sakhrani, the veteran KBW retail
finance analyst. “The more that they can separate themselves from the pack,
the more they can future-proof themselves.”
The deal, if approved, enables Capital One to leapfrog JPMorgan as the
biggest credit card company by loans, and solidifies its position as the third
largest by purchase volume. It also adds heft to Capital One’s banking
operations with $109 billion in total deposits from Discover’s digital bank and
helps the combined entity shave $1.5 billion in expenses by 2027.
‘Holy Grail’
But it’s Discover’s payments network — the “rails” that shuffle digital dollars
between consumers and merchants, collecting tolls along the way — that
Fairbank repeatedly praised Tuesday when analysts queried him on the
strategic merits of the deal. There are only four major card networks:
giants Visa and Mastercard, then American Express and finally the smallest of
the group, Discover.
“That network is a very, very rare asset,” Fairbank said. “We have always had
a belief that the Holy Grail is to be able to be an issuer with one’s own network
so that one can deal directly with merchants.”

From the time of Capital One’s founding in the late 1980s, Fairbank said, he
envisioned creating a global digital payments tech company by owning the
payment rails and dealing directly with merchants. In the decades since,
Capital One has been ahead of stodgier banks, gaining a reputation in tech
circles for being forward-thinking and for its early adoption of cloud computing
and agile software development.
But its growth has relied on Visa and Mastercard, which accounted for the
vast majority of payment volumes last year, processing nearly $10 trillion in
the U.S. between them.
Capital One intends to boost the Discover network, which carried $550 billion
in transactions last year, by quickly switching all of its debit volume there, as
well as a growing share of its credit card flows over time.
By 2027, the bank expects to add at least $175 billion in payments and 25
million of its cardholders onto the Discover network.
Owning the toll road
The true potential of the Discover deal, though, is what it allows Capital One
to do in the future if it owns the toll road, according to analysts.
By creating an end-to-end ecosystem that is more of a closed loop between
shoppers and merchants, it could fend off competition from rapidly mutating
fintech players like Block and PayPal, as well as buy now, pay later firms
like Affirm and Klarna, who have made inroads with both businesses and
consumers.
Capital One aims to deepen relationships with merchants by showing them
how to boost sales, helping them prevent fraud and providing data insights,
Fairbank said Tuesday, all of which makes them harder to dislodge. It can use
some of the network fees to create new loyalty plans, like debit rewards
programs, or underwrite merchant incentives or experiences, according to
analysts.
“Owning a network allows us to deal more directly with merchants rather than
a network intermediary,” Fairbank told analysts. “We create more value for
merchants, small businesses and consumers and capture the additional
economics from vertical integration.”

It’s a capability that technology or fintech companies probably covet. The
Discover network alone would be worth up to $6 billion if sold
to Alphabet, Apple or Fiserv, Sakhrani wrote Tuesday in a research note.
Will regulators approve?
The Capital One-Discover combination could fortify the company against
another potential threat — from Washington.
Proposed legislation from Sen. Dick Durbin, D-Ill., aims to cap the fees
charged by Visa and Mastercard, potentially blowing up the economics of
credit card rewards programs. If that proposal becomes law, the competitive
position of Discover’s network, which is exempt from the limitations, suddenly
improves, according to Brian Graham, co-founder of advisory firm  Klaros
Group.  That mirrors what an earlier law known as the Durbin amendment did
for debit cards.
“There are a bunch of things aimed, in one way or another, at the card
networks and that ecosystem,” Graham said. “Those pressures might be one
of the things that creates an opportunity for Capital One in the future if they
have control over this network.”
The biggest question for Capital One, its customers and investors is whether
the merger will ultimately be approved by regulators. While Fairbank said he
expects the deal to be closed in late 2024 or early 2025, industry experts said
it was impossible to know whether it will be blocked by regulators, like a string
of high-profile takeovers among banks, airlines and tech companies.
On Tuesday, Democratic Sen. Elizabeth Warren of Massachusetts urged
regulators to swiftly block the deal, calling it “dangerous.” Sen. Sherrod
Brown, D-Ohio, chairman of the Senate Banking Committee, said he would be
watching the deal to “ensure that this merger doesn’t enrich shareholders and
executives at the expense of consumers and small businesses.”
The Discover deal’s survival may hinge on whether it’s seen as boosting an
also-ran payments network, or allowing an already-dominant card lender to
level up in size — another reason Fairbank may have played up the
importance of the network.
“Which thing you are more concerned about will define whether you think this
is a good deal or a bad deal from a public policy point of view,” Graham said.

https://www.cnbc.com/video/2024/02/23/if-the-fed-doesnt-cut-in-the-spring-it-
will-pressure-stocks-says-fundstrats-tom-lee.html?&recirc=
Russia is preparing a new
summer offensive against
Ukraine, Zelenskyy says;
China slams sanctions threat
Holly Ellyatt
This was CNBC’s live blog tracking developments on the war in Ukraine.
Russia is preparing a new offensive against Ukraine that could begin in early
summer, Ukrainian President Volodymyr Zelenskyy said Sunday.
Ukraine denied it is at the weakest point in the war since Russia almost
captured Kyiv nearly two years, telling NBC that this is the most difficult time in
terms of unity.
“I don’t think that now it’s the weakest moment,” Zelenskyy told NBC Sunday,
a day after the second anniversary of Russia’s invasion of Ukraine.
“The weakest, or rather, [the most] shocking moment was on February 24, two
years ago. Now is the hardest moment for our unity. If we all split, both
externally with the partners, and God forbid, internally, then it would be the
weakest moment. It hasn’t happened yet,” Zelenskyy said during a news
conference in Kyiv Sunday. He said 31,000 Ukrainian soldiers have been
killed since Russia’s invasion two years ago.

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