Should We Be Worried About the Shares of American Express?
Cracks in the chart and insider selling raises some real warning flags for AXP
The earnings calendar is light today…and we have not economic data…so it should be a quiet one today. (Of course, every time we say that the market is going to be quiet on a given day, we always seem to see a big move…so who knows.)
The chart on American Express (AXP) is looking quite dicey…and one insider just made a very big sale. So, we’re raising a yellow warning flag on this name…which will become a red flag very quickly if the stock declines much further.
It was a bit of a disappointing day for the bulls yesterday, but a nice rebound in the last hour of trading kept it from becoming something that raised any material concerns for investors……After a very strong opening, the stock market rolled over in a significant way after the first half hour of trading. The decline began with the news that Fed Governor Waller has moved to the top of President Trump’s list for his choice for the next Fed Chairperson. (Kevin Warsh is considered more dovish.)…..Then there was news from the NY Fed that inflation expectations for the next 1 year and next 5 years have risen in a material way…..We’d also note that the jobless claims numbers from before the opening created further concerns about the employment picture. So, when these other developments took place, it took the air out of the early-morning advance.
All this news caused the S&P 500 to decline more than 1% from its morning highs…and the NDX dropped almost 1.5%. However, as we just mentioned, both were able to rebound somewhat over the last 60-90 minutes. This left the SPX with only a mild decline…and the NDX closed the day in positive territory. Therefore, it was not a bad day at all. It’s just that things started out in such a strong way…that it looked like we were going to see a significant rally yesterday. So, the fact that it rolled over was still a little bit disappointing.
However, the futures are pointing towards yet another positive opening this morning. Besides, even though the NDX closed well below its opening lows yesterday, it still ended the day at another all-time high…and the SPX still remains within 1% of its own record high! Thus, any disappointment that the bulls might have felt after the close yesterday could not have been very painful at all. So, they are still firmly in charge of the stock market right now.
The earnings calendar is light today…and we don’t have any economic data reports. So, it could be a quiet one…given that it’s a Friday in August. (Of course, every time we say that the market is going to be quiet on a given day, we always seem to see a big move…so who knows.)
However, next week is chock full of data…especially on the inflation front…as well as with news on the consumer. We get CPI on Tuesday and PPI on Wednesday in terms of inflation news. As for the consumer, we get both retail sales and the University of Michigan Consumer Confidence number on Friday. Given that “bad news is bad news” has been the reaction lately to the economic data, these reports should be quite important next week. If they’re negative, it won’t be good at all. However, if they’re positive, it could/should be something that helps the market push even higher into record territory.
Switching gears, we noticed that the Chief Legal Officer for American Express (AXP) sold a big chunk of her holdings in the company recently. In fact, she sold over $23 million worth of AXP stock…which represents about 90% of her position!.......Okay, we readily admit that we have no idea why Ms. Seeger sold those shares. Also, just because she is the Chief Legal Officer does not mean that AXP is on the cusp of some sort of legal problems. (In fact, that would be the last thing she likely do if there were some legal issues.)…….So, there could be a lot of benign reasons why she made this move. However, when somebody sells 90% of their holdings, the reason cannot be that they think the stock is going higher.
The reason we highlight this news is because AXP is looking a bit dicey on its weekly chart. It failed to break meaningfully above its Q1 highs last month. Instead, it has rolled over and has dropped 10%...which raises the possibility of an important “double top.” It has also broken well below its trend-line from April…and it now on the cusp of a negative MACD cross on that weekly chart. The last four negative weekly MACD crosses have been followed by declines of 19%, 20%, 10% and 32% over the past three years. Therefore, if (repeat, IF) it does indeed see a meaningfully negative cross once again over the next week or two, it will raise a big red flag on the stock…as it will confirm an important change in its intermediate-term trend.
Again, there could be a very good reason why this insider sold their shares in AXP…which have nothing to do with concerns about the prospects for the stock. However, when an important insider sells 90% of their shares in any company, it’s something that causes us to take notice. Given the technical condition of AXP right now, all of this raises a yellow flag in our minds. Therefore, if the negative weekly MACD cross becomes a more compelling one soon, that yellow flag will become a red one rather quickly.
