Morning Comment: Mircon's earnings report (Wed) could shake up an otherwise quiet week.

We’re heading into what should be a quiet week for the stock market ahead of the long July 4th weekend. However, the next three trading days are the last three of the quarter (and the last three of the fiscal year for some institutions). Therefore, we could/should still see some activity through the middle of this week. However, since Thursday and Friday will be coming just before a long weekend…and before earnings season begins…there’s a good chance that many/most investors will turn this weekend into a 4- or 5-day weekend. Therefore, unless we get some sort of big surprise this week, the vast majority of the action will be behind us by Wednesday.

Actually, this past Friday was not a particularly exciting day either. Yes, we did see a huge jump in volume, but that came at the very end of the day, and it was totally due to the “Russell Rebalance” programs on the close. (The composite volume jumped over 140% between 3:30 and 4:00 on Friday.) Therefore, we cannot draw any conclusions from Friday’s action……...We did see a pretty strong rise in the yield on the 10yr Treasury note…up to 1.54% that day...but it has settled back down this morning (trading at 1.51%).

Most of the major overseas markets are little changed this morning…and the domestic futures market is basically flat as well. The only asset class that is seeing any kind of significant move this morning is the cryptocurrency market. The $1,500 bounce in Bitcoin…on top of a similar bounce in Sunday’s trading…has Bitcoin back up in the middle of the $30k-$40k range it has been in since mid-May. Therefore, the bounce is “positive”…but since it has only taken Bitcoin back into the middle of its range…it’s not necessarily “bullish.” In other words, the crypto bulls have got to be relieved that Bitcoin did not drop below the bottom end of its range, but the rally has not been enough to give them any signals that it will breakout to the upside any time soon……..Of course, we could get some “new-news” that will shake things up at any time this week, but right now, it looks like it’s going to be a snoozer.

HAVING SAID ALL THIS, there is ONE thing that MIGHT shake things up later this week. Mircon (MU) reports this week, and it might have a meaningful impact on more than just this individual stock.

So what are we talking about? Well, the SMH semiconductor ETF (which is the one we follow because it is the most liquid ETF for the chip stocks) moved higher last week…and it is now close to testing the top line of an “ascending triangle” pattern. Therefore, if the SMH can break above that $257 level in any meaningful way, it’s going to be quite bullish for the group. Since the semis have been a great leadership group for the market, any breakout should be bullish for stocks in general.

We have actually been concerned about this group recently. Several key stocks have underperformed (like TSM and MU)…and some others (like NVDA) are becoming quite overbought on a technical basis. Therefore, we have been concerned that the group could roll-over before long. Nothing has changed for these key chip stocks, so we still have some considerable concerns. However, if (repeat, IF) the SMH can break above this “ascending triangle” pattern in any significant way, we’re going to have to become much more bullish on this all-important group.

This is where MU comes-in. They report earnings after the close on Wednesday. If this earnings report is something that helps the stock reverse its recent period of underperformance, it’s something that could be a catalyst for the kind of breakout we just described for the entire group. That would obviously be quite bullish. If, however, their earnings report is something that accelerates it recent underperformance, it would likely take some serious air out of the sails of the group. That would obviously be bearish.

In other words, even though we think that this could be a boring week…especially at the end of the week…the earnings report out of MU could actually make it a lot more interesting than we’re thinking right now…………Then again, maybe the earnings report for MU will be a benign one and we’ll all go back to sleep. As we all know, ANYTHING is possible. So who knows what might happen? Heck the Red Sox have swept the Yankees TWICE this year!!! When was the last time THAT happened??????

Matthew J. Maley

Chief Market Strategist

Miller Tabak + Co., LLC

Founder, The Maley Report

275 Grove St. Suite 2-400

Newton, MA 02466


Although the information contained in this report (not including disclosures contained herein) has been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. This report is for informational purposes only and under no circumstances is it to be construed as an offer to sell, or a solicitation to buy, any security. Any recommendation contained in this report may not be appropriate for all investors. Trading options is not suitable for all investors and may involve risk of loss. Additional information is available upon request or by contacting us at Miller Tabak + Co., LLC, 200 Park Ave. Suite 1700, New York, NY 10166.

Posted to The Maley Report on Jun 28, 2021 — 9:06 AM
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