Is the internet now an evil force?
I have been following the progress of the major US internet stocks for years – and like many old timers, have been amazed by the ‘value’ the market has placed on them. The notorious FAANG Gang (Facebook, Apple, Amazon, Netflix, Google) has gone down in market lore as the leaders of the great tech bull market post 2009.
All of the above companies have utterly depended on the development of the internet for their phenomenal growth. To the vast majority, the internet has been an unalloyed social and economic good. That is the reason so many can run almost cost-free businesses from almost any coffee shop in the world that has good wi-fi.
But is this bullish view in danger of being overturned? If it is, it will mark the end of the great bull market.
I have also been following media coverage of the internet. For years, there was hardly a negative opinion of its influence. The virtually universal adoption of social media, in particular, has resulted in the most recent tech IPO – SNAP (the owner of Snapchat which is apparently the teenager’s medium of choice to send pictures of themselves to each other) – being valued at a staggering $3.4 billion.
This humongous value is for a company that has never made a profit and services free-loading teenagers as their majority user base. Hmm. I know what the buyers were thinking – they believed with untold millions of users, it could be ‘monetised’ a la Facebook. Maybe it can and maybe it can’t.
That is what I call off-the-scale bullish confidence. But ominously, since the first day, shares have lost about 20%. That rarely happened in the good old days – IPOs just took off into the wild blue yonder. So is SNAP a litmus test for the continued bullish sentiment towards tech and shares in general?
One straw in the wind is the recent government criticism of these tech leaders. The recent London terrorist attack has drawn a wave of anger towards Google and Whattsapp (the platform supposedly used by the terrorist). The messages on Whattsapp are encrypted and can only be de-coded by the company.
They are in a no-win position. If they resist, they will force the authorities to apply even greater pressure and even pass laws to open up their platforms and regulate more harshly. And if they comply, the big USP that they promote ‘free speech’ will go out of the window – and likely face a huge backlash from their users and many could abandon it.
Then there is the fix Google has got itself into placing party political ads next to ‘offensive’ terrorist material. Ouch! That little boo-boo too close to home may be all it takes to get the politicos working together to apply heavier regulations on internet companies in general. And what a perfect excuse to curb free speech in the name of combating terrorism! Of course, that is a bearish development.
With this sudden falling out of love with the internet, it is reflecting a more anxious mood out there – and shares will surely follow.
If/when the internet is seen as largely as an evil, the stock market will be massively lower than it is today.
Know your Alphabet?
Alphabet is the parent company pf Google and has been a massive leader in the tech bull market. But is it turning over? I believe it is – here is the daily chart
I have a lovely wedge pattern into the 880 high with the required five internal waves. There is a gradual momentum divergence forming since last August – and the lower wedge line was broken last week (arrow) at the 850 level.
We could see a pullback to kiss the wedge line and then a scalded cat bounce down, or the shares may continue downwards with no kissing. Unless we see a new high above 880 soon, the trend is now down – and it should drag most other tech shares with it.
My H&S forecast for euro appears on track
Last week, I wrote that if the EUR/USD could pop above the 1.08 resistance area, it would produce a bullish breakout of the neckline and confirm the H&S reversal pattern I had penciled in.
And that has now been accomplished. The dollar bulls are wondering what happened? Why is the euro in rally mode when the EZ is on the brink of breaking up with Brexit Article 50 being set alight this week?
Could it be that Mme le Pen will not come close to winning the French election? Is it possible the EZ is showing signs of stronger growth that had been feared? Or could it be that Draghi’s QE will not actually be extended beyond the summer cut-off date, as many believe?
You see, that is the problem with relying on trying to second-guess the possible matrix of possible economic scenarios to predict market moves.
But with bullish dollar sentiment still extreme, I can see the euro moving to the 1.10 area at least with 1.12 a possibility.