Alphabet Inc. (NASDAQ:GOOG) trading at valuations nearly as rich as they have ever traded
The outlook for US technology stocks is more nuanced. Apple and Microsoft’s near trillion-dollar valuations rest on “aggressive, not implausible, assumptions”. Others, such as Amazon, “might or might not currently qualify as bubble stocks; we could make the case either way”. However, like Tesla, stocks such as Netflix, Twitter and Chinese giant Tencent “all arguably qualify as being in bubble territory” and some may even qualify as a “zombie” company that needs new capital just to pay the interest on its debt. Most of the Fanmags – Facebook, Amazon, Netflix, Microsoft, Apple, and Google – are “trading at valuations nearly as rich as they have ever traded”.
Bubble-level expectations demand near-perfect execution, says Arnott, and recent corrections – the Fanmags fell into bear market territory in the last quarter of 2018 and lost almost 15 per cent of their value in May, when the S&P 500 slipped 6 per cent – illustrate just how sensitive a stock is when it is “priced to near perfection”. Tech declines in May should be viewed “not as the end of the story, but as another warning as to what can and likely will happen”. That warning seems prescient; tech stocks plunged again this month following another eruption of market turmoil.
Arnott’s thesis is that it’s not enough to steer clear of tech stocks. Indices such as the S&P 500 or the Russell 1000 are weighted by market capitalisation; the more valuable the company, the bigger it impacts the indices. The Fanmags now account for more than 14 per cent of the Russell 1000, almost double their 2014 weighting, so index investors are too exposed to overvalued tech stocks.
“As bubble technology stocks have come to dominate the world’s list of largest companies”, he cautions, “cap-weighted indices are making de facto bets that these growth-oriented companies can increase their valuations in the face of a slowing economy”. Sceptics would say Arnott is not an impartial observer when it comes to market-cap weighted indices; Research Affiliates has pioneered alternative indices weighed not by market capitalisation but by fundamental measures such as dividends, volatility and valuation.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
The projected upper bound is: 1,266.09.
The projected lower bound is: 1,136.10.
The projected closing price is: 1,201.10.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 25 white candles and 25 black candles.
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend. There have been 6 rising windows in the last 50 candles–this makes the current rising window even more bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 45.7199. This is not an overbought or oversold reading. The last signal was a buy 8 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 56.07. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 14 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 56. This is not a topping or bottoming area. The last signal was a sell 13 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 9 period(s) ago.
Rex Takasugi – TD Profile
ALPHABET INC C closed up 20.850 at 1,198.450. Volume was 21% below average (neutral) and Bollinger Bands were 1% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 1,181.63 1,141.96 1,124.13
Volatility: 31 35 35
Volume: 1,339,391 1,454,962 1,592,003
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
ALPHABET INC C gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
ALPHABET INC C is currently 6.6% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of GOOG.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on GOOG.O and have had this outlook for the last 41 periods.
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