The collision of global markets and social mood

Friday, October 28, 2016

Friday -- Amazon Whiff, Google Strength, Bond Weakness, Wave Count

S&P E-mini Futures:
Up after a rough night.

News:
Well, the two earnings reports that I thought would take the Nasdaq Composite to brave new heights didn't work out.

Amazon's messy quarter could signal the consumer is starting to buckle. Amazon even lowered sales guidance for Christmas, its busiest time of the year -- not good.

Google's quarter was stellar, yet under the hood cost-per-click fell yet again. This means that bidders are bidding less for adwords. Bidding less means less demand. Less demand usually means softness in the ad market, a bad leading indicator, except when your multi-million dollar ex-Morgan Stanley CEO calmly blames it on "the shift to mobile."

Marketwatch had a great Live Blog during the conference call. Their notes here (emphasis added):

Aggregate paid clicks rose 33% year-over-year, bigger than the 26.5% analysts surveyed by FactSet had been expecting. Aggregate cost-per-click fell 11%, far greater than the 4.8% decline analysts had been predicting. That likely signals a huge increase on mobile search, since those tend to cost less than clicks on desktop.

The CFO addressed mobile in her quote in the earnings statement, saying ‘mobile search and video’ are now powering Google’s core advertising business. (my comment: notice how she uses mobile as an excuse for CPC and yet pumps it up here?)

Still, Google advertising revenue increased to a healthy $19.8 billion from $16.7 billion.

Google’s board has approved a stock buyback of $7,019,340,976.83, larger than the $5B+ buyback earlier announced.

TAC -- traffic-acquisition-cost higher vs cost-per-click lower.

Interestingly, Marketwatch's live blogger Jeremey Owens had this to say about CFO Ruth Porat: "Earnings reports are supposed to be about numbers, not vague promises about the performance of one of the most important streaming-video offerings in the world."

And he also introduced her like this. "Google, which is facing questions about increased spending in the face of slipping prices for its ads, has turned to the big bank Morgan Stanley for its new chief financial officer."

Too soon to tell whether there's any smoke in the CPC declines. The company is still minting money. And 12 analysts now have $1,000 price targets on the stock.

My own take is this: the only time I click on an ad in mobile is by mistake. Not sure if it's a brand new land of plenty for advertisers.

None of this matters anyway when the bond markets are bleeding.

Of note this morning is Spain and Italy. These countries don't have much bond blood to lose.

FX:
CHF still flashing red and so far has given advance notice of European bond stress. USD hanging at recent highs and looks ready to vault -- an extra problem.

Treasuries:
Messy. 10s in particular. Reuters is calling it a "bloodbath" this morning. Overdone?

Energy:
WTI crude back under 50. NG fading from its rollover bounce.

Metals:
Modest rally across the board.

S&P Outlook:
Here is the latest wave count being considered. Caution is needed because it is possible that "b" of 2 may already be in (as well as the count being spectacularly wrong too, which can happen).


1991.68 is major. A break there would trigger HSBC's Murray Gunn's B-wave scenario below which could target below 1800 in a vicious C-waveHis Dow chart is shown here.



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