Geopolitics, macroeconomics, fundamentals, and technical analysis have to be considered when making an investment. You could have the best company in the world, which could even be Apple based on its market cap, and still lose if you time your entry poorly. Buying a company like Apple when everyone else is fearful in the market is obviously a great idea. I personally have found it very hard to follow that advice, one because I try not to catch a falling knife and two, I’d rather buy the tide that lifts all boats, or at least buy the index when the companies are collectively doing better. Currently, there is a glimmer of hope but we’re clearly not out of the woods yet.
Index Analysis
The Nasdaq monthly price action from the peak high from November 2021 to the February 2022 trough saw a 22% correction lower. The 20-period EMA highlights that dynamic support was resting around 13,000 but the significance of a close below the September 2021 low is that technically we could be in a bear market. Now it is just a correction and we have seen corrections unwind. The most recent correction of any significance was in late 2018 where we can see 4 consecutive down months and since then the corrections have lasted a couple of months max. For this super trend to continue to the upside we need the bounce to start happening around now. And for that to occur we need the likes of Apple, Microsoft, and Amazon to start printing better numbers. We also need the wider market to find a firm footing which is proving difficult under the current geopolitical and economic backdrop.
In two weeks, the Fed are very likely to raise their rates by 25bps, whilst reducing their asset purchases and preparing the way to reduce their balance sheet.
It doesn’t really matter which yield curve you look at with regards to the US monetary system, but I like the Eurodollar curve. The beginning of March which is witnessed to increased fighting within Ukraine after the Russian invasion during February has reduced the Central Banks Hawkishness. Central Banks including the Bank of Canada will keep raising rates to try and combat persistent inflation, but the Eurodollar market still thinks that there is a massive uncertainty ahead for the markets after these initial rate hikes by the Fed.
Next week, on March 8, Apple will host its annual spring product launch event. This one may be codenamed "Peek Performance", we had a tweet from Greg Joswiak and a link to a YouTube stream invitation. The company is expected to announce multiple new products this year, including a low-cost 5G iPhone, the iPad Air 2 and a high-end Mac Mini.
The iPhone device is expected to be the first update to the iPhone SE model (SE3) in two years, featuring a better camera and a faster processor. With customers looking for powerful devices with better connectivity, Apple has focused on iPhones with 5G capabilities. Its latest model iPhone 13 has custom 5G antennas and radio components for better speeds.
Apple was able to post record sales thanks to the popularity of its iPhones, despite supply chain issues that crippled other industries and companies. Though they don’t get a hit every time. AirTags, was criticized for putting user privacy at risk due to unwanted tracking. Typically, Apple holds three events every year to announce new products, which begin in spring and end just before the holiday shopping season.
On a daily chart, savvy investors picked up a bargain or two when the price action in the Apple stock bounced off the daily 200 EMA. It could be that those speculators take some profits at these current levels as we see price action now running into the dynamic resistance of the 20 & 50-period EMAs.
Everybody knows about Microsoft, as PCs were predominately using Windows, Office 365 offered the omnipresent office productivity suite, and Azure is now the second most used cloud infrastructure after Amazon Web Services (AWS). The tech giant has dominated for decades within its niche. Now through the introduction of Surface devices and Xbox consoles, Microsoft is also gradually becoming a world leader in the video game publishing industry through big gaming developer acquisitions. In January 2022 they bought Activision Blizzard before that they had acquired ZeniMax Media, Double Fine Productions, Obsidian Entertainment and inXile Entertainment, plus many others.
Microsoft's CEO, Satya Nadella expanded Microsoft's cloud ecosystem, transformed Windows and Office into cloud services, and launched mobile apps for iOS and Android. Microsoft the tech is no longer tied to one OS or device. Microsoft's business models shifted because of those changes but eventually ushered in an era of "mobile-first, cloud-first" growth. According to analysts, Microsoft's revenue and earnings will keep growing in fiscal year 2022 (which ends in June).
The MSFT chart shows the price action did not close below the swing low from around late September 2021. It dipped below a couple of times, but buyers were there. It could now be that the price action is now coming out of the descending channel and ready to break much higher. Price will probably compress under the daily 50-period EMA for a moment and a close nearer 320 would see the resistance zones largely cleared, which would encourage more momentum-based traders to join in. My main concern is that the recent dips below the 280 level could be holding some resting Sell Stops which could be targeted first.
Amazon is looking to disrupt the gaming industry too as it launched its Luna streaming game service to the public in the United States, aiming to expand its multifaceted empire into the booming gaming market. Luna provides players with direct access to games without requiring a console, a feature derived from cloud gaming technology, which is seen as the direction gaming will head in the future. The AWS cloud service is the biggest cloud infrastructure so well placed to move gaming forward along these lines. Luna was exclusive to Prime members as Amazon fine-tuned the service, which takes on Microsoft, Sony, as well as Google Stadia. Luna+ subscriptions cost $6 monthly, with that rate set to rise to $10 at the start of April.
The last 3 months has seen the price action in Amazon, Microsoft and Apple largely correlate with all 3 companies currently ticking higher.
When the likes of Apple, Microsoft, Amazon, Google, Tesla and Facebook do well they can drag the rest of the Nasdaq higher. Assuming the big tech giants keep beating market expectations with revenue growth we can look forward to higher highs in the Nasdaq one day. But before I can get bullish on the index, we need to see a clear shift in momentum to the upside, which would be signified by a close above the 14675.21 swing high level. Even then there is the rest of the 14400 to 15200 price action to work through and a close above February’s high would give the bulls something to really cheer about. Until then we must be mindful of what is happening in the wider economy and that the 14400 could maintain its powers of resistance with price falling from there looking for another swing low.
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