My New Microsoft Target, Micron on the Move, Macro Stars Align
At a reader's request I plot out a plan -- and a new price target -- for Microsoft. Also, let's make sense of Thursday's market.
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You've made it. It's been a tough week. The week of Sept. 11 always is. The increased violence that has arisen across our great land in recent days and weeks has made it more so. Onward, we move. Proceed, we must. For at a minimum, we are all called to lead our households and contribute something positive to our communities. That is not beyond us. This is something we all can do.
Setting a sterling example of pious virtue for those who see us in a better light than maybe we deserve is imperative. For the blueprint of life passed from one generation to the next can be either a gift or a curse. That is our choice to make. Sacrifice on behalf of those we love is not going above and beyond. It is our very purpose. We shall decide to make sure that we provide that gift. Prayer? That's up to you. I recommend it to my children. I'd be lost without speaking to my maker every morning. Enough on this for now. Ready? Let's get to work.
The Macro
As I covered in my piece on Thursday, the macroeconomic chips aligned perfectly for financial markets on Thursday. The August consumer price index printed more or less in line with expectations a day after August producer price index hit the tape in a Tundra-like state of deep freeze. Additionally, the weekly report on initial jobless claims printed at a four-year high showing further deterioration on the demand side of U.S. domestic labor markets.
The set-up was perfect for a central bank that is going to have to pivot this coming Wednesday from an intentionally restrictive stance on monetary policy toward something far more dovish in posture. Fed Funds futures are now pricing in a 100% probability for a quarter-point rate cut next week and a rising possibility for a half-point rate cut.
Re-Confirmed!
What a day that was for U.S. markets on Thursday. Treasury debt securities remained hot commodities. By day's end, the U.S. Ten Year Note paid just 4.02%, which was down 3 basis points for the session and came a day after a very strong auctioning off of $39 billion worth of new Ten-Year paper. Demand for new sovereign U.S. debt has been solid all week, foreign demand strong in particular and that includes Thursday's sale of new Thirty-Year long bonds.
For the day, the S&P 500 gained 0.85% as the Nasdaq Composite added 0.72%. The majors were outperformed across the board by their mid-major peers. The Dow Transports ran 1.44%, as the small to mid-cap indexes all gained between 1.61% and 2.09%. Outside of the VIX, there was literally no red visible on the screen. A great day for the profit/loss.
All eleven S&P sector SPDR ETFs ended the day in the win column, led by the cyclicals. The Materials (XLB) placed first with a gain of 2.09%, followed by five other sector SPDRs that gained at least 1% for the regular session. Even Energy XLE, after ending the day in last place, sported a light shade of green.
Winners beat losers by a rough 9 to 2 at the NYSE and by almost 3 to 1 at the Nasdaq. Advancing volume took an 81.3% share of composite NYSE-listed trade on Thursday and a 78.9% share of composite Nasdaq-listed trade. Now, this is the best part.
After a week of fits and starts, and gains made at the headline level that were not supported by the broader market or not supported by volume, we got precisely what we like to see on Thursday. Aggregate trade was up 10.3% on day-over-day basis across Nasdaq-listed securities and up 3.3% across NYSE-listings. In fact, Thursday was the most heavily traded day across the membership of the S&P 500 since Aug. 5. Rock & Roll.
The Chart
Readers will recall the Day One Bullish reversal of trend on Aug. 22 followed by the mandatory pause on Aug. 23 and the day of upward trend confirmation on Aug. 24. We then had a down day for the index on Sept. 2 that seemingly ended that short trend by creating a new post-confirmation low. Except for one thing.
That day ended with positive aggregate trading volume. The downward move had no broad support. Thursday re-establishes the bullish trend with a broad rally on higher volume. Huzzah. Even if Friday presents as a pause, the trend is still reconfirmed. Can it all come down like a house of cards? The Fed steps to the plate next week, so what do you think? It will be quiet early next week. From Wednesday afternoon on, all "heck" will break loose, but we're in better shape technically than we thought we would be a few days ago. I'll take it.
About The Fed...
The Department of Justice filed an emergency motion late Thursday with the U.S. Court of Appeals for the D.C. Circuit to issue a stay of (former?) Fed Gov. Lisa Cook's return to her position at the Board of Governors ahead of next week's Federal Open Market Committee policy meeting. That meeting is set to start on Tuesday and culminate with a decision on Wednesday afternoon.
On Tuesday, a federal judge at the district level temporarily granted Cook the right to continue in her position as the president's right to fire her for cause (mortgage fraud) makes its way through the courts. The administration had notified the district court involved on Wednesday that there would be an appeal.
More on the Fed...
It is being said that Treasury Sec. Scott Bessent has interviewed former Fed Gov. Lawrence Lindsey, former Fed Gov. Kevin Warsh and former St. Louis Fed Pres. James Bullard for the top job at the central bank. Current Fed Chair Jerome Powell's term as the alpha dog ends in May though his term as a governor does not end until 2028.
Bessent is waiting until after next week's FOMC meeting to interview current Fed officials. Fed Gov Christopher Waller is known to be a candidate and Fed Gov. Michelle Bowman is thought to be a candidate. It has been reported that the president is considering up to eleven individuals for the job including long-time Trump-ally Kevin Hassert who is currently serving as Director of the National Economic Council.
News
- Shares of Micron Technology MU have ended seven consecutive trading days in the green, were up 7.55% on Thursday and are up 31.79% since the low of the day on Sept. 2. Bottom line? The need for memory chips needed to build a nation-wide data center / AI infrastructure had been badly underestimated. There is a shortage of both DRAM and NAND chips and prices for those chips are rising. Micron is expected to beat-and-raise when it reports in two weeks. The momentum is also having a positive impact upon Western Digital WDC and Seagate Technology STX.
- NATO is preparing to coordinate a defensive military response to the seemingly intentional intrusion deep into Polish airspace by unmanned Russian military aircraft this week. The eastern flank of the alliance will be strengthened. The German Air Force will extend the deployment of its "Alert" squadron by another three months past the end of the year. In addition, the Netherlands, Czech Republic, France and the UK have all made commitments to send additional air defense equipment to Poland.
Reader Request: MSFT
I have received, by email, a request to discuss Microsoft MSFT as I have not covered the stock publicly in quite some time. On July 31, I placed a target price of $675 on the stock. I also mentioned at that time that I would add down to the stock's 50-day simple moving average and panic upon the failure of that 50-day SMA. I reduced my holdings when that 50-day line failed. Take a look:
The Raff Regression model in the chart above was drawn up for that July 3 article, which turned out to be a high point. My pivot at the time was the upper trendline of the model, which is now null and void. Instead, the stock broke through the lower trendline of the model and lost the 50-day SMA for good on Sept. 2. That's when I paired my exposure. I still have some Microsoft in inventory; however, the name is no longer a top 15 holding.
There is a real possibility that the shares could drop as far as the 200-day SMA, though with the Fed about to embark on easier monetary policy, I think it more likely that MSFT makes another attempt to retake the 50-day SMA. That is my new pivot and that line currently stands at $510. So, in answer to the request, this is my current thinking for MSFT:
Target Price: $586 (down from $675).
Pivot: 50-day SMA (currently $510).
Add: closer to the 200-day SMA.
Panic: Loss of 200-day SMA.
Economics
(All Times Eastern)
10:00 - U of M Consumer Sentiment (Sep-adv): Expecting 58.1, Last 58.2.
10:00 - U of M One-Year Inflation Expectations (Sep-adv): Expecting 4.6%, Last 4.8%.
10:00 - U of M Five-Year Inflation Expectations (Sep-adv): Expecting 3.5%, Last 3.5%.
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 537.
1:00 - Baker Hughes Oil Rig Count (Weekly): Last 414.
The Fed
(All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights
(Consensus EPS Expectations)
No significant quarterly earnings scheduled.
At the time of publication, Guilfoyle was long MU, MSFT equity.
