Ishares MSCI USA Quality Factor ETF and Rising Large Players Volume

The Ishares MSCI USA Quality Factor ETF QUAL looks like an excellent setup with a pocket pivot signal and the Effective Volume showing large players volume rising.

The investment seeks to track the investment results of the MSCI USA Sector Neutral Quality Index composed of U.S. large- and mid-capitalization stocks with quality characteristics as identified through certain fundamental metrics.

The top 10 holdings in the Ishares MSCI USA Quality Factor ETF as of July 13, 2017, are:

Altria Group Inc = 7.29%
Johnson & Johnson = 5.03%
Microsoft Corp = 3.76%
Apple Inc = 3.48%
3M Co = 3.29%
Mastercard Inc = 2.53%
Starbucks Corp = 2.48%
Charles Schwab Corp = 2.36%
International Business Machines Corp = 2.36%
Exxon Mobil Corp = 2.28%

Ishares MSCI USA Quality Factor ETF Chart

QUAL has a good setup pattern. Large players volume is surging higher and the Twiggs Money Flow shows that QUAL is under accumulation.

Prices have been consolidating lately and the volatility has been reduced forming a momentum squeeze.

There is a resistance zone just above the current price starting at 75.32. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 74.83, a stop order could be placed below this zone.

GO HERE TO CHART LARGE PLAYERS AND THE TWIGGS MONEY FLOW LIKE THE CHART ABOVE… AWESOME TOOL

Analog Devices Stock Shows Large Players Accumulating

The Analog Devices stock chart shows that large players are accumulating shares as the price consolidates. Institutional ownership has increased by 13.64% over the last 3 months.

Back on June 19, 2017, Raymond James re-initiated coverage of Analog Devices with a “market perform” rating, citing some complications related to its March merger with Linear Technologies. Raymond James thinks the combination of Analog Devices with Linear Tech will result in an analog chip “powerhouse” down the road, but upcoming headwinds related to the company’s recent loss of Apple Inc. business poses a problem managing upward estimate revisions.

Analog Devices Stock

A bullish Pocket Pivot signal occurred on Friday, June 23, 2017 (blue dot on chart above). There is a huge positive divergence between the price and the Effective Volume which shows large players accumulating the stock. Do large players know something we don’t? The Twiggs Money Flow is still negative for Analog Devices stock and so you need to be cautions about taking an entry. There is a resistance zone just above the current price starting at 82.63. Right above this resistance zone may be a good entry point. There is a support zone below the current price at 81.07, a stop order could be placed below this zone.

GO HERE TO CHART LARGE PLAYERS AND THE TWIGGS MONEY FLOW LIKE THE CHART ABOVE… AWESOME TOOL

S&P 500 Measures Concentration of Wealth More than Economic Growth

Monopolies are sucking up everything in their vortex as the concentration of wealth continues. Examples of monopolies are Amazon, Google, Apple, and Facebook.

Amazon is destroying retail and it’s expanding into the food industry now. Amazon brings in automation technologies which will keep adding pressure on other low wage sectors. When Amazon announced the buyout of Whole Foods, we saw Amazon’s stock go up but everyone else in the grocery industry went down.

Amazon will layoff thousands of employees of Whole Foods and replace them with self-serve electronic cashiers. The move to layoff workers and automate has caused bubbles in higher education debt, automobile loans, consumer debt, and a new round of mortgage debt. Meanwhile, state and local governments remained strapped, and the ordinary services of everyday life are rapidly diminishing.

The trend of a few companies dominating everything at the expense of all others continues and it’s the driving force behind income inequality in the U.S.

As monopolies like Amazon continue to eliminate smaller businesses, wealth becomes more concentrated as it flows to corporate officers and shareholders.

The market cap of tech giants is already greater than the GDP of large U.S. cities. Google is bigger than Chicago and Amazon is bigger than Washington DC.

Facebook, Amazon, Apple, Microsoft and Google parent company Alphabet are the top five contributors to the S&P’s 500 gains this year. In other words, these monopolies are sucking investing dollars away from other companies thus the S&P 500 keeps rising even though the economy is slowing. In this scenario, the S&P 500 is more a gauge of the growing concentration of wealth than it is of the economy.

Overbought Oversold Indicator Explains Nasdaq Big Sell Off

The Nasdaq plunged on Friday for its biggest sell-off, relative to the Dow Jones Industrial Average, since 2008. All the big names like Apple, Alphabet Inc., Microsoft Corp., Amazon.com Inc. and Facebook saw billions of dollars shaved off their market-cap in the blink of an eye.

Overbought Oversold Indicator Explains Nasdaq Big Sell Off

The smoothed RSI indicator shows just how overbought the Nasdaq has been for months now.

Everybody is wondering if Friday marks the beginning of a turn down on the Nasdaq. Looking at the chart, it’s too early to tell but everybody is going to be watching the Nasdaq on Monday.

The key level to watch is Friday’s low and bounce off the uptrend line at around 5657.

In addition to watching an overbought oversold indicator like the RSI, you need to watch out for breakout headfakes as the 10 minute chart of QQQ below shows.

I’m seeing a pattern of algos selling after a breakout which creates a headfake.

Small Cap Stocks Will Outperform In a Trump Administration

Small cap stocks are the place to be in a Trump Administration. Trump’s economic policies will negatively impact large multinational corporations like Apple. Small cap stocks are all about domestic companies.

Small cap stocks generate most of their profits inside the US, exactly where Trump’s economic agenda is targeting.

Since Election Day, small cap stocks on the Russell 2000 Index have surged 12.3%, far better than the 3.05% gain for the large-company S&P 500 stock index, and the 3.6% gain for the Nasdaq.

A massive amount of money is moving into small caps. The Russell 2000 has closed up for 14 days straight since Trump won the election.

What The Trump Win Means For Multinational Corporations

I predict that a Trump win means down for the economy at first, then upward as the US consumer strengthens from domestic job growth.

The down first move in the economy will come from inefficiencies caused by forcing multinational corporations to bring domestic production facilities back to the US or face steep tariffs.

Several traders have emailed me asking what stocks are good to short or go long in a Trump Administration.

Here is how a Trump win is likely to impact industries negatively.

IoT Industry

Tesla is the big driver of autonomous vehicles. Tesla is shipping all new Model 3 cars with the hardware for full autonomy. These autonomous cars are also electric cars. Tesla’s new Model 3, after tax credits, was priced for under $30,000. The Trump Administration is likely to be unfriendly towards companies like Tesla that benefited under the Democrats crony capitalism. The Trump Administration will likely offer few proposals for combating climate change. Trump will likely not pursue “green policies,” which means the discontinuation of “green” tax credits like the kind Tesla benefits from. Without these generous tax credits, Tesla automobiles will be more expensive which will slow purchases and slow the spread of the self-driving car.

Industrial IoT trends have been towards automation and replacing human workers with machines and robots. Trump has promised to renegotiate trade deals to bring manufacturing jobs back to the US. If IoT trends are taking away US jobs, it’s a pretty good bet that a Trump administration will advocate against industrial machines and robots that replace human labor.

Payments Industry

Trump has threatened to cut off remittance send from the US to Mexico until Mexico pays for a border wall. Trump is considering forcing Mexico to pay for the wall by invoking the US Patriot Act to cut off portions of the flow of money between the US and Mexico until Mexico makes a one-time $5 billion to $10 billion payment for the wall. Mexico is the largest receive destination for US remittances, cashing an estimated $25 billion in 2015. Western Union recently doubled the size of its retail network in the country, and MoneyGram unveiled a product in partnership with Walmart to make it easier and less expensive to send money from the US to Mexico. Cutting off the flow of money from the US to Mexico, even temporarily, would negatively impact Western Union and MoneyGram.

A Trump Administration will focus on bringing manufacturing back to America, specifically targeting firms like Ford and Apple to build products in the US rather than in Mexico or China. To implement a plan of bringing manufacturing back to the US, a Trump Administration will need to use tariffs and issue tougher manufacturing restrictions. This will likely cause a major decrease in international business spending as more businesses are either unable to make transactions due to restrictions or unwilling to pay the extra fees.

Technology Industry

Net neutrality is the concept that all data transmitted over the internet should be treated equally. Trump has not released official statements about the topic of net neutrality, but he has expressed distaste for President Obama’s approach. A Trump Administration could push to change the FCC’s net neutrality rules which would result in different price points for various data types and enable service providers to throttle data delivery.

In a Trump Administration, technology companies will likely be forced to change encryption policies to provide backdoor access to the US government. Trump supported the court order calling for Apple to facilitate access to an encrypted iPhone used by the San Bernardino shooter and asked consumers to boycott the company until it complied. Civil liberties groups are likely to take the Trump Administration to court. Requiring companies to provide backdoor access to the US government would violate consumers’ trust and likely lead to a decline in users of these companies’ products at first. Over time, though, consumers will likely not care.

Policy changes by a Trump Administration would harm tech companies that manufacture overseas, like IBM and Apple. Apple’s iPhone is likely going to become much more expensive for US consumers.

Apple and Google make more of their revenues overseas than within the US. Higher tariffs and protectionist policies could make it more expensive for tech companies to move and sell their products around the world. The broader use of trade tariffs would likely spur more countries to invest in domestic technology sectors within their own countries and to reduce their reliance on US technology providers, which would further hurt US tech multinational corporations.

Large mergers between service providers and digital content companies could face greater scrutiny. Trump said that the $85 billion AT&T and Time Warner merger would not be approved by a Trump administration because “it’s too much concentration of power in the hands of too few.” A Trump Administration could lead to a decrease in M&A activity.

The technology sector has been granting more H-1B immigration visas to highly skilled workers with STEM backgrounds.

A Trump Administration will likely include fees that will make it more expensive for companies to hire foreign workers through the H-1B visa program. If such fees are enacted, it would likely drive up wages for highly skilled IT talent even further across the technology sector.

E-Commerce

Protectionist policies and tariffs will increase the cost of goods. Trump wants to tax US companies that choose to manufacture goods overseas. Such a policy would harm retail companies that manufacture their goods overseas. Most retail companies will raise their prices to offset these tax penalties and the added cost of building manufacturing plants in the US.

E-commerce companies are pushing to deliver products to consumers as fast as possible. Think Amazon, and it’s Amazon Prime membership with free two-day delivery as well as its drones for remote area deliveries. This fast delivery involves automation within distribution centers. A Trump Administration will likely move to protect American workers from being displaced by machines thus forcing e-commerce companies to invest in traditional forms of labor over cheaper and faster new ones.

While a Trump Administration will be great for the US economy long term IMO, short term, I think we get a pullback in the economy while corporations adjust to higher costs and lower sales.

Beijing Says Apple iPhone Violates Its Patents LOL!

June 17, 2016: Reportedly Apple iPhones were found to have violated Chinese rival’s parent LOL. That’s rich folks. The king of patent rip-offs China, who allowed fake iPhones to be sold for years, is now accusing Apple of violating China patents. So much for big-cheese Tim Cook’s visit to China recently.

iPhone 6 and 6-plus models infringe on patent rights owned by Shenzhen Baili because of similarities to its 100c phone, the Beijing intellectual property office wrote in its decision.

Apple can appeal the ruling and could be allowed to continue selling its phones during the process.

Original source to Beijing intellectual property office filing (in Chinese): http://www.bjipo.gov.cn/zlzf/zfjggg/201605/P020160609372965002381.pdf

More Apple News

June 13, 2016: Apple Inc’s annual rate of iPhones sales said to decline for the first time in 2016. iPhone annual shipments to fall for first time since 2007 this year due to lukewarm demand for a new model with shipments seen between 210-220 million.

Reminder: At the beginning of the year, Nikkei reported that Apple could lower its production of iPhone 6 by more than expected in the Jan-Mar quarter. In mid-April, Nikkei reported Apple would sustain its lower rate of production in the April-June quarter. On May 11th, Nikkei reported that Taiwan tech suppliers expected significantly fewer orders from Apple in the second half of 2016.

May 22, 2016: Apple Inc rumored to have requested up to 78 million units of iPhone 7 production from suppliers according to the Taiwan press. This is the highest in 2 years.

Apple Inc Industry sources indicating that chip orders from Apple in Q2 have been disappointing on year over year basis according to a report in the DigiTimes. Report adding there is no sign of a substantial rise in chip orders in Q3 despite the expected launch of the new iPhone.

Apple CEO Cook has met with India PM Modi. The talks addressed cybersecurity and data encryption, along with Apple’s plans for possibilities of manufacturing in India. This was CEO Cook’s first trip to India.

May 16, 2016: Berkshire Hathaway discloses latest quarterly holdings; new stake in Apple of 9.8 million shares according to a new 13 F-HR filing. CNBC reports the Apple stake was not taken by Warren Buffet himself, but by one of his lieutenants.

May 12, 2016: Apple Inc to invest $1 billion in China’s Didi Chuxing (direct competitor of Uber). Didi Chuxing announced today important progress in its latest fundraising round. Among a group of prestigious Chinese and international institutions, Apple has invested USD$1 billion in DiDi, creating the single largest investment the Company has ever received. Through this investment, Apple becomes a strategic investor of DiDi, and joins Tencent, Alibaba and other key supporters to help further DiDi’s mission of building a data-driven rideshare platform to serve hundreds of millions of Chinese drivers and passengers. Building on its data mining and analysis capabilities, DiDi now completes over 11 million rides a day on its platform, serving close to 300 million users across over 400 Chinese cities with a diverse range of mobile technology-based transportation options. DiDi works with over 14 million Chinese car-owners and drivers, holding over 87% market share in private car-hailing and over 99% market share in taxi-hailing.

– Follow Up: Apple investment said to boost Didi fundraising to $3.0B – financial press

May 06, 2016: Apple CEO Tim Cook is planning a visit to China this month to meet with Senior Chinese government officials in Beijing. On April 26th Apple Q2 earnings had a -26% decline in Greater China (steepest drop among the five regions). Apple is expected to take its latest trademark dispute over the iPhone name to China’s Supreme Court. Currently Xintong is allowed to use iPhone mark on goods.

China is trying to copy popular products in the US by ripping off their trademarks and technology. This is why the story of China’s economic power is a joke. China is a copycat, a poser if you will and that means their economy is built on a deck of cards. Their communism form of government does not foster an environment that allows the people of China to be able to intellectually compete with people from the US. This is why I seldom, if ever, invest in China. China’s economy has gotten where it’s at today by intellectual property and technology theft. That, my friends, is a house of cards waiting to collapse.

CEO Tim Cook should tell China that if they don’t enforce international trademark and IP laws, Apple will no longer make iPhone parts in China which will put thousands of Chinese people out of work.

May 03, 2016: In an earnings conference call, Greenlight’s Einhorn says he continues to hold stake in Apple Inc. and sees great value in the Apple brand.

May 1, 2016: It’s a good time to take a position in Apple imo. With the earnings and revenue miss last week, the stock has overreacted to the downside.

Folks, Apple is a buy while there’s blood-in-the-streets play. Check out the recent carnage:

– Goldman Sachs removed Apple from its Conviction Buy list
– Carl Icahn dumped the stock
– Barclay’s cut its price target
– Morgan Stanley cut its price target
– Oppenheimer cuts Apple stock to a Perform rating, from Outperform
– Nomura cut its price target
– Drexel Hamilton cut its price target

What caused all this ruckus?

Last Tuesday, Aprill 26, 2016, Apple reported Q2 2016 EPS of $1.90 versus the $1.97 estimate. Revenue also missed coming in at $50.6 billion versus the $52.2 billion estimate. Apple also lowered its Q3 revenue guidance to $41 – $43 billion versus the previous guidance of $45.8 billion.

iPhone shipments came in at 51.2 million versus 61.2 million from the previous year. iPad shipments also fell, coming in at 10.3 million versus the 12.6 million from the previous year. Mac shipments fell to 4 million versus the 4.6 million from the previous year.

Not only do I think that traders overreacted to the earnings report, there are two catalysts in-play.

The first catalyst is Apple’s dividend payable on May 12, 2016 to shareholders of record as of the close of business on May 9, 2016. Why not capture that dividend if you can?

The second catalyst is the iPhone 7. Apple releases its new phone every year, in the second half of the year. Apple’s stock usually runs up in anticipation of the new release. We may have an opportunity to position early ahead of the seasonal new iPhone run up. There are also rumors that Apple will release more than one phone model this year which may help boost revenue.

Finally, as seen in the chart of Apple below, the stock is oversold and at horizontal support which could make for the last oversold RSI entry we will get before the seasonal iPhone 7 run-up. Just remember, don’t try and catch a falling knife. Look for a candle over candle entry.

Apple Inc. makes mobile communication and media devices, personal computers, and portable digital music players. The company also sells related software, services, accessories, networking solutions, and third-party digital content and applications.

It offers iPhone, a line of smartphones that comprise a phone, music player, and Internet device; iPad, a line of multi-purpose tablets; Mac, a line of desktop and portable personal computers; iPod, a line of portable digital music and media players, such as iPod touch, iPod nano, and iPod shuffle; and Apple Watches, personal electronic devices that combine watch technology with an iOS-based user interface.

The company also provides iTunes app and the iTunes Store; Mac App Store that allows customers to discover, download, and install Mac applications; iCloud, a cloud service; Apple Pay for making mobile payments; Apple TV, a portfolio of consumer and professional software applications; iOS and OS X operating systems software; iLife, a consumer-oriented digital lifestyle software application suite; iWork, an integrated productivity suite designed to help users create, present, and publish documents, presentations, and spreadsheets; and other application software, including Final Cut Pro, Logic Pro X, and its FileMaker Pro database software.

In addition, Apple offers various Apple-branded and third-party Mac-compatible and iOS-compatible accessories, including headphones, cases, displays, storage devices, and various other connectivity and computing products and supplies. The company sells and delivers digital content and applications through the iTunes Store, App Store, iBooks Store, and Mac App Store; and sells its products through its retail stores, online stores, and direct sales force, as well as through third-party cellular network carriers, wholesalers, retailers, and value-added resellers.