U.S. stocks keep moving higher, with another green day on Monday. All three major indices again closed at all-time highs. But it’s how stocks are rising that seems a bit strange.
Most notably, this hardly seems like a a bull market full of “irrational exuberance,” or even ebullient optimism. Broad market indices keep drifting higher, but the S&P 500 still hasn’t had a one-day gain over 1% in over five weeks.
The stocks that are gaining, too, aren’t the kind of names that often rise at this point in a bull market. Cyclicals have done well, to be sure. But growth names have pulled back, recent initial public offerings have been mostly hammered, and many energy stocks are at or near 52-week lows. The long-awaited shift from growth to value seems to have arrived in some fashion, but that shift hardly has been consistent.
Tuesday’s big stock charts highlight three stocks along the continuum of the current market. They include the market’s biggest growth name, one of its cheaper large-cap stocks, and an intriguing play that’s somewhere in between. Together, they provide a cross-section of the trends currently at play for U.S. stocks. As such, they give some clues as to how the market has behaved in recent months and how it might behave going forward.
Amazon (NASDAQ:AMZN) has been notably excluded from the recent rally. Fellow tech mega-caps Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and Microsoft (NASDAQ:MSFT) all trade at or just off all-time highs. As the first of Monday’s big stock charts shows, that’s not the case for AMZN stock — and that chart suggests it actually could get worse in the near-term:
- AMZN stock is on a path to again testing support around $1,700. But there is an increasing chance that, this time, support will give way. Lower highs since Amazon stock again fell victim to the “trillion dollar curse” in July create a bearish declining triangle pattern. That pattern quite often leads to support finally breaking. A recent dip below 20-, 50-, and 200-day moving averages further suggests that declines will continue, even with a modest pop in trading Monday.
- A key reason for the divergence between AMZN and its Big Tech brethren likely is valuation. As noted, high-multiple growth stocks have mostly weakened across the board in recent months. At 64x forward earnings, AMZN stock certainly qualifies. Again, this seems like a strange market, one in which equities are rising but without any sense of a “risk-on” environment. As a result, investors have chosen safer plays like MSFT and AAPL over AMZN.
- There’s another fundamental factor at play, one that might bode well long-term but still suggests near-term pressure. The launch of one-day shipping is pressuring near-term earnings. It’s a key reason why I suggested caution toward Amazon stock ahead of last month’s earnings report, despite a bullish long-term outlook. With the chart bearish and that spending continuing well into 2020, near-term trading for AMZN could get worse before it gets better.
Fox Corporation (FOX) (FOXA)
Investors initially cheered the transformative $71 billion deal Fox Corporation (NASDAQ:FOX,NASDAQ:FOXA) executed with Walt Disney (NYSE:DIS). But as the second of Tuesday’s big stock charts shows, those same investors have mostly shrugged since the sale closed in March.
Of late, however, FOX stock has bounced from October lows, and technically and fundamentally there’s an intriguing case for further upside:
- FOX shares are on the cusp of a breakout, challenging the high end of the downtrend that has held for several months now. The 200-day moving average provides the next potential resistance level just above current prices; a move through the 200DMA would confirm a breakout.
- Amid the endless coverage of the likes of DIS, AT&T (NYSE:T), and Netflix (NASDAQ:NFLX), it’s possible FOX simply got lost in the shuffle. But with the streaming wars finally underway, investors may be looking beyond the big names for value — and FOX stock is an attractive pick.
- After all, the new, leaner Fox is now a play on live sports and live news. The balance sheet is in good shape, and the company announced a $2 billion share repurchase program in conjunction with fiscal Q1 earnings earlier this month. News and sports may well be the two categories largely immune from cord-cutting pressure, and at 13x trailing twelve-month adjusted earnings per share, FOX stock is cheap enough to rise if that’s the case. Low volume does suggest that the market hasn’t completely swung around, but the chart suggests that more investors could be ready to jump on board.
The third of our big stock charts, Whirlpool (NYSE:WHR), sits firmly on the value side of the market. WHR stock is one of the cheapest names in the S&P 500, at less than 9x forward earnings. The problem at the moment might be that’s one of the few positives WHR has going for it:
- Technically, there’s a clear case for more downside. WHR stock has established a bearish head-and-shoulders formation. Those formations usually end when the stock returns to the levels at which the rally began, which is another 5% decline to roughly $136.
- WHR stock also has broken out of a narrowing ascending wedge, another bearish pattern. The 200-day moving average is the last bastion of support; if WHR stock breaks through that level, it re-tests $136 and then potentially $129. Accelerating volume in recent sessions only adds to the chart’s bearish read.
- Again, WHR stock is cheap. A 3.35% dividend yield adds to the bull case as well. But this is a cyclical stock with a still-leveraged balance sheet. Tariffs are a near-term factor, though lower raw material costs have offset some of that impact. And revenue growth remains modest, if still positive. WHR stock probably should be cheap, even if bulls (and many analysts) believe it shouldn’t be quite this cheap.
- And so the near-term trading in WHR should be interesting. Again, this does seem like a market that’s aiming toward the less-risky side of the market. But the question for Whirlpool stock is whether investors see it at a lower-risk play. Valuation would suggest it is. Almost everything else, however, suggests otherwise.
As of this writing, Vince Martin has no positions in any securities mentioned.