Facebook Drops the Ball

Posted on Thursday, July 26th, 2018

Face book dropped the ball. The market was shaping up to be firmly in the hands of the bulls as a break out rally looked to be on. Bitcoin was rallying hard and the S&P 500 was hot on its heels. Face book’s earnings may have changed all of that. We now have two of the FANG’s that look to be in control of the bears. Netflix and now Face book have done serious damage to their charts in recent days and we think that may continue for some time. If two of the more widely owned momentum stocks are in trouble how will the market react? Better stay on your toes. Late summer days can be very illiquid and can move very quickly.  As a reminder this is what we had to say last week.

We have been saying for weeks that we are not comfortable with the narrowing of stock market returns. We are getting that 1999 feeling again as investors pour into high tech stocks and leave value stocks for dead. Howard Marks, the legendary leader of Oaktree Capital, was again out warning on FANG stocks this week. He warned that ETF’s and momentum investing are increasing the risks for the FANG stocks. (Those stocks are Facebook, Amazon, Netflix and Google.) We may have seen a shot across the bow this week as Netflix (and now FB) disappointed with its growth figures and investors jumped out of the stock. Keep an eye on Netflix. If leadership in the market begins to wane it could pressure other assets as liquidity is king.

2800 on the S&P 500 is near term support and then 2725. Let’s see if the bulls can hold on in the light of a weak Face book and a weak Netflix. We thought we would give a quick bonus blog before we bolt for Rome. Maybe it’s just me but I always feel like markets have big down days while I am away from the desk. Hope I am wrong this time. The Federal Reserve should be draining over the next few business days and that may produce a headwind.

I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd  Blankfein

To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill

 

Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.