Big Picture

Our overall Primary Trend Indicator remains Neutral.  We remain cautious on equities and financial markets due to uncertainties with Brexit and a slowing in global economic activity.  Our data shows a positive increase in technicals as equities are trying to breakout to new all time highs while interest rates are coming off historical lows.  Additionally, headline risks have been decreased with the first phase of a US/China trade deal agreed to in -principle.  Investors should remain cautious but also look for tradable opportunities.   

Changing Fundamentals

China Sept CPI Rose At The Fastest Y/Y Rate Since Oct 2013

German Government Maintains 2019 GDP Forecast At 0.5% - RTRS

-Lowers 2020 Forecast To 1.0% From 1.5%

Focus List

Bank earnings stock advice – Banks kicked off the Q3 earnings season with JP Morgan beating results while Goldman Sachs and Citigroup met or slightly missed.  All three names are trading lower in the pre-market as investors are concerned with Net Interest Margins (NIM).

Investors have a lot to chew on these days, especially when it comes to macro news flow.  Headline news risk is a daily reality with Brexit and US/China negotiations active.  During earnings seasons investors typically look for changes in trends, especially when looking at overall corporate profits.  Analysts expect S&P earnings to grow slightly from the previous 12 month comparison.  Investors should pay attention to top line growth, or the growth of earnings and revenues.  Over the last 10 years, many companies were able to complete large share buyback programs in which a company purchases its shares and retires them.  By doing so the company has less shares outstanding to calculate overall profitability and thus, profits seem larger.   In the past 12 months, companies have significantly reduced share buyback programs – we will now see earnings reports with a more pure reading on the health of the overall business.

Today we highlight two names with strong positive divergences versus the overall S&P500 index;

Tesla Inc $TSLA:

The stock continues to show signs of a base and wants to breakout above $270 which is an area of overhead resistance.   If broken, the stock can carry towards $320 in the short term.  Many fundamental positives are appearing, such as growth in its home battery power installation unit growing.  New orders for its vehicles are above average and the companies Gigafactory 3 in Shanghai is near complete.   This factory will be able to produce Tesla’s without much issues from tariffs.

Plug Power $PLUG:

The stock continues to outperform the overall stock market as the company is set to grow through to 2023.  Plug Power specializes in hydrogen fuel cell technologies with applications in various industrial formats, namely vehicles and manufacturing equipment.  Societal trends are changing and demand for clean power options is growing.  Many countries have designated multi billion dollar budgets towards clean energy climate initiatives.  Technical Analysis of price action shows the stock heading towards a test of resistance at $3 which if broken to the upside, sets up a larger move towards $5.