10/31 Daily Market Note: Catalyst Prime Time with AMD, Apple Earnings, and November FOMC
10/31 Premium Strategy Note: Bounce Day #2. Can it last?
Note: Have faith. Always think from a standpoint of optimism. Otherwise, many opportunities may be missed. Will continue to do my best. Tremendous thus far. Those who are patient will slowly enrich themselves with my work. That is my promise.
Friends-
Advanced Micro Devices (AMD) now takes a larger role in markets as asset allocators have positioned AMD as the largest weighting within the SOXX Semiconductor ETF, the sector that typically preludes all major moves in the broader technology sector. This spot used to be taken up by Broadcom and Nvidia, but with AMD at the helm of the ETF, this suggests that their earnings performance will have market-moving implications for tomorrow’s session.
Analysts are looking for $5.69 billion in revenue and .68 cents per share for EPS. Given that EBITDA estimates have been cut severely for fiscal year 2023 in the past several weeks and the fact that its forward earnings multiple is 25X (a 6-month low), AMD has a chance to revitalize the narrative in this earnings print. The risk/reward here is at least balanced, with a slight modest skew to the upside. Downside should be contained around the 88-89 level (pre-Microsoft partnership event earlier in summer 2023) in a bear case, while upside could bring the company back to 105 or better.
Over in China, we witnessed manufacturing PMI (Purchasing Manufacturing Index) data coming out much softer than expected at 49.5, where a 50 reading represents contraction or expansion. Given that manufacturing contributes roughly about 27-28% of China’s GDP, the PMIs in China are a powerful indicator of the economy in the Mainland. As a result of this weak data point, foreign investors quickly sold down Hang Seng names and China ADRs in a knee-jerk reaction. Selling in China names (as well as U.S. names with high China Exposure) was widespread – across sectors such as Financials, Ecommerce, Clean Tech (EV), Travel, etc. This type of price action suggests that many foreign investors are very reactive to economic data points that come out, and for the time being, the Hang Seng and China ADRs will continue to have price action characterized by gap-ups and gap-downs driving most of the directional move based on incoming data.
In order to survive these large swings in China, I have discussed with our members a key tool I use to manage the immense volatility that China faces. It is this tool that allows me to at the very least breakeven (lose a little bit) or be profitable in China even when the sector faces an onslaught of repeated selling.