Stocks and Securities
Stocks began to tumble Friday afternoon, most notably the tech sector which resulted in the tech-heavy Nasdaq drop more than 1.5% ending the week lower 1.1%. Dow and S&P 500 closed the week in the positive, up 1.6% and 0.6%, respectively. The small-cap Russell 2000 underperformed the most, closing the week down approximately 2%.
Investors looked to Amazon (AMZN) to restore some faith in FANNG stocks as we saw both Facebook (FB) and Netflix (NFLX) plunge after earnings. Of all FANNG stocks, Alphabet (GOOGL/GOOG) was the most impressive – more on that later.
U.S. stocks futures, most notably the NASDAQ (-114 or -1.16%), are lower this morning. The Dow and S&P 500 are both set to open lower as well, down -76 (-0.30%) and -18 (0.66%), as we embark on the second week of earnings.
On Monday, Alphabet (GOOGL) crushed earnings, with an EPS (adjusted) of $11.75 vs. $9.59 and revenue of $32.66B vs $32.17B expected. Some may suggest that Facebook (FB) ad services is growing faster than Alphabet (GOOGL), however, Alphabet (GOOGL) has a far more diversified user base.
About 86% ofAlphabet (GOOGL) comes from advertising. With services – such as Search, Gmail, Chrome, YouTube, Maps, Google Play Store and Android – means that Alphabet (GOOGL) has more billion-user services than Facebook (FB) – which only has Instagram, Messenger, WhatsApp and the main site. All of the above services list ads, yet, most of Alphabet (GOOGL) revenue still comes from the search engine. The revenue from YouTube should bot be ignored, as it could potentially reach $15B in revenue in 2018.
Where does Alphabet (GOOGL) true potential lie?
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So where do we look for the best opportunities?
If you recall our morning coffee report of two weeks ago, we went “all in” in the oil patch.
West Texas Intermediate crude (WTI) for September delivery on the New York Mercantile Exchange up 23 cents, or 0.33% or at $68.52 a barrel. September Brent crude flat at $74.29 a barrel.
We continue to remain bullish on our Oil outlook, as most economic data indicates a decline in overall inventories, thus higher oil prices are to be expected in the second half of 2018.
There are various reasons as our views continue to be bullish. The market continues to be at a deficit in light of recent slowdown in Chinese imports. additionally, as OPEC production will continue to remain modest despite pressure from oil consumers due to increasing deceleration of production from Iran and Venezuela. Further, world economies, such as India and China, still continue to grow and with them, their demand for oil. Lastly, the we do not expect to see prices to be negatively effected by the US China tariffs, other than the price of US crude, as it may need to find another buyer other than China.
Blockchain and Cryptocurrency
Bitcoin (BTC) and Ethereum (ETH) both had an interesting weekend. The price of Bitcoin (BTC) settled up only 0.03% to $8167, while Ethereum (ETH) down 0.51% trading at $462.20. Market capitalization decreased from $297 USD to $294B USD which is a 1% decrease in just 24 hours. This 24 hour volume of $13.7B is down more than $1B compared to yesterday. BTC dominance of 47.6% is up about 1% compared to Yesterday as well.
Read our recent post consisting of Technical Analysis for Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCC), Cardano (ADA), Stellar (XLM), Digibyte (DGB), NEO (NEO), EOS (EOS), and Nucleus.Vision (NCASH).
Big institutional investors and fund managers are starting to turn their attention to Bitcoin (BTC) as we are approaching the SEC decision date for the Cboe ETF application. Fund managers and large institutional investors alike are becoming more vocal towards their positive views of Bitcoin (BTC) and the blockchain space.
Bill Miller – billionaire hedge fund manager – can be added to the list of such individuals. In a recent interview with Bloomberg, he stated that he remains bullish on cryptocurrency Bitcoin (BTC). However, he, just like many others in his position, stated that he believes that most other currencies are worthless.
It appears that the United Kingdom (UK) Law Commission is also in the process of looking into using the blockchain technology and smart contracts in hopes to update their attempt to catch up to the changing technological landscape.
If successful, UK will become of the first countries that will legally recognize smart contracts. In March of this year, UK government launched a Cryptoassets Taskforce, constituting of her Majesty’s Treasury, the Bank of England and the Financial Conduct Authority.
Regarding the Bitcoin (BTC) ETF, on Thursday, it was reported that the SEC rejected the Winklevoss Bitcoin (BTC) ETF proposal. There are a few things to consider, the approval of an ETF could have several ramifications.
For one, it will lead to a price spike in Bitcoin (BTC), not just because of the excitement around the news. The ETF company will need to hold a certain amount of Bitcoin (BTC) under custody, thus, leading to removal of significant number of Bitcoin (BTC) from circulation.
Regardless of what the outcome may be in the future of Bitcoin (BTC) and crytoassets, the interest in Bitcoin (BTC) is becoming more certain. The ETF could help bring in institutional investors, however, it is not the only solution. The livelihood of Bitcoin (BTC) is not dependent on an ETF approval.
The recent slide in stocks and securities could prove to be beneficial for Bitcoin (BTC). Many refute this point, however, if you look at the recent correlation between the two you can see, that weakness in stocks correlates with strength in the Bitcoin (BTC) and cryptocurrencies.
Stocks on the Radar
If you have not have the chance to look at our new segment – ETF ALPHA – please take the time to do so. There we have highlighted potential trades from 16 different ETFs. There are some great ETFs to buy in this week’s post. If you are unsure about the benefits of trading ETFs then please read our post here.
We hate to brag but we nailed our ETFs plays for last week. We told our readers to buy BRZU (+8.19%), INDL (+8.73%) and YINN (+6.8%) and to stay away from LABU (-18.01%).
Below is our today’s list of cryptocurrency and stocks to buy or to invest in: