Daily Rundown: May 5

CHRIS VERSACE: Good morning, AAP subscribers, and happy Friday, one-and-all. AAP team member Bob Lang joins me to share his perspective and insights as we close out a heavy week of news and earnings. Bob, it isn't often members hear us and see us in one video. Let's kick off today's rundown with your general view of the market now that we've heard from the Fed and seeing this month's Jobs Report. How are you feeling about the market?

BOB LANG: Well, strong jobs report, Chris, that you're going to be talking about a little bit later. But also with the Fed tightening, interest rates for a tenth time since March 17 of 2022 had they brought interest rates up to 5%. And I'll tell you, I've been saying it for quite a long time, as much as most people want to believe that the market is turning into a bull phase here, I've never really seen the bull market get started when the Fed is still so hawkish as they are. And they repeated their mantra this past week, saying higher for longer.

And certainly the data that we've seen this week and the past couple of weeks support that view that interest rates should stay up for a little while longer. Now, as it relates to the stock market, look, what we've been trapped in range for the past four months between 3,800 on the low side, which is where we started in 2023, and 4,200 on the upside, which we tried to break through last week and came down sharply earlier this week. So we'll have to see if one of those levels is penetrated here.

We did reach a pretty overbought reading last week as we closed out April for a positive month, Chris. But for right now, I think we're kind of in a no man's land. You could sell the top and buy the bottom when we want to reach those levels.

CHRIS VERSACE: Yeah, I think that's right, Bob. Like you said, we've been trapped in this trading range for quite a while. And candidly, all the data that we got this week from the PMI reports for manufacturing and services that showed inflation picking up to what we saw in this morning's April jobs report, not only were jobs stronger than expected, wages were stronger than expected, and the unemployment rate clearly ticking the wrong way. I don't think the Fed is going to like this report. But let's remember that the prospects for tighter credit is something that we need to navigate.

As we shared with members, that's the big wild card ahead for monetary policy. And I think that when we get the sleuths report on Monday, we'll start to have a better sense as to what that is looking like. But even there, we have to remember the headlines that we saw over the last several days about the banking industry. Odds are credit will be even tighter than what this report indicates.

OK, well, Bob while I have you, I want to take the opportunity to discuss some of the club's latest actions and give members a look at some of the conversations you and I have behind the scenes several times during the week. Now, we started the week off completing our exit of UPS, something we clearly telegraphed to members. But from your perspective, Bob, did we get the timing right on this trade?

BOB LANG: I think we did, Chris. We started exiting it last Friday. And we finished up selling the position on Monday, May 1st. So we were looking-- we were talking about some resistance levels that the stock was going to have on a rebound. And we thought the 200-day moving average roughly at about $180 was probably going to stymie the stock right there. And it certainly did.

When we unloaded part of the position on Friday the 28th and then the remainder of it above that 200-day moving average at about $182, the stock just started coming back down again. And I think it was a very savvy move to just go ahead and take it off the table at that resistance level. And of course, the 200-day moving average is an important level for big institutions.

There's an old phrase out there-- nothing good happens below the 200-day moving average. And so UPS continues to hover underneath that. We're glad we're out of the position now.

CHRIS VERSACE: Nothing good happens below the 200-day moving average, just like nothing good happens after midnight. OK, so Bob, after earnings from Ford, we ultimately cut our price target giving concerns over profits to be had in the coming quarters. Again, looking at the chart, was this the right call?

BOB LANG: Yeah, it certainly was. And frankly if you look back historically in this chart over the past six to 12 months, the stock is stuck in the range between $11 and $13. So I think it's really going nowhere. Until it breaks out above $13 or breaks down below $11, you know, you're stuck in this $2 range here. And frankly, while the dividend is strong, it's good to sit there and wait for it.

With the rest of the economy and the rest of the markets taking off without Ford, it's going to feel like you're behind by holding this name and just waiting for it. I don't know if there are initiatives with electronic vehicles that's going to go much further. A lot of other companies are chasing it as well, too.

Tesla has got a huge lead in the EV market as well. So I think this was a good move. And I think we can certainly put our capital to work in a better spot than Ford down the road.

CHRIS VERSACE: OK, great. And let's turn to a name that members have been asking quite a bit about. If you haven't guessed it, I'm of course referring to the shares of AMA Health Care. Last night the company reported better than expected March quarter results. But two things led us to close out the position earlier today using some of the proceeds to pick up additional shares of Lockheed Martin.

So what were those two things? One, an uptick in new product spending while revenue is expected to fall further in the current quarter. Roughly down double digits versus the quarter that we just completed, almost down 30% year-over-year. That combination tells me that there's added margin pressure ahead.

Second, the company is funding its buyback program with its credit facility. Something that will shrink the share count, but also boost its debt service cost. Candidly, I am not a fan given what I just said about revenue and margin prospects ahead. Now, we really want to see companies funding buybacks with cash on hand and cash flow, not levering up the balance sheet to do so.

Now, there's a lot more in that trade alert that was issued earlier this morning. But Bob, what's your take on the chart of AMN.

BOB LANG: Well, we saw some resistance at around the $93 to $95 level. And I see right now that the stock is trading just under that $93 level right now. So I think unless it gets some follow through, I think the stock is going to struggle here. And I think a little short covering goes a short way, not a long way.

I mean, if there's some continuation buying, that's a different story. But I think the beating that the stock had taken over the past few months is certainly deserved. And I think you've spoken about it a lot. I think one of the reasons why is because management has not really been forthcoming with guidance over the years. And I think that the prospects here for AMN with this tight labor market the way it is right now is going to create some problems for AMN down the road.

But as far as the charts concerned, I think it's up at resistance right now. And much like UPS exiting at a good point, we're doing the right thing there.

CHRIS VERSACE: OK, and of course, AMN isn't the only portfolio holding we're watching. Members, be sure to check out your Alerts for my take on Apple and much more. Now, Bob, this was fun, and thank you so much for joining me. Members, JD and I'll be back on Monday to get ready for the week ahead. Until then, have a fantastic weekend.