5/22/22

STOCKS – ZM, TSLA, NVDA

MACRO – SPY, VIX

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• RTM: Waiting For Options Expiration To Pass [Daily Update]
• RTM: Zoom’s Stock May Be Poised To Rise Following Results [Short-Term Options Idea]
• RTM: Gamma-Mania [Daily Update]
• RTM: Tighten Until Something Breaks
• RTM: Stocks Rally In Front Of Powell [Mid-Day Update]
• RTM: Stocks Face A Big Drop Early This Week [Daily Update]
• RTM Tactical Update: The Recent Rally Doesn’t Have Too Much Fuel Left In The Tank
• RTM: Q&A Session Summary
• RTM: LIVE ZOOM Q&A SESSION IS THURSDAY, MAY 12 AT 1 PM ET

This week’s free YouTube video:

Stocks had a very volatile trading session on Friday, with the S&P 500 opening higher to start the day, then falling sharply mid-day, only to rally into the close. Believe it or not, The index rose by more than 1% to start, then plunged 3.3% from that point, only to rally 2.4% to finish the day up one bps. There is no doubt that options expiration played into the volatility.

This week will be volatile, too, with a modest amount of economic data, but more importantly the release of the Fed minutes. The Fed minutes for the most part have been a sell the news event, but this time may prove to be different, especially since it seems like Powell may have front the minutes when he gave an interview at a WSJ event.

The only difference this time, is that VIX is already elevated. It will take an even more significant VIX surge to get the market moving down again. The VIX even though it is 29.4 is at its highest level heading into an FOMC minute event. If the market were to rally sharply on Monday and Tuesday and the VIX moved back to the mid-20s, the odds for another post-minutes sell-off increase. But if the market stays down and the VIX remains around 30, it will take an even more hawkish reading of the minutes to get the VIX moving higher.

It will make the direction post FOMC minutes a moving target this week. That said, reserve balances held at the Fed continue to drop, and I think even if we get a rally, it is likely to be well contained and remains no higher than the 4050 region.

S&P 500 (SPY)

I had noted on Thursday there was a bear flag that started, and I think it still has a bit further to go before the reversal starts. I get the feeling that we are likely to see continued selling pressure to start the week, and ultimately, the FOMC minutes serve as a de-risking event, with maybe an Intraday low coming at some point in the low mid-3700s to start the week.

Zoom (ZM)

Zoom will report results on Monday afternoon, and there has been a decent amount of bullish options betting for the stock. The one bearish options trade I saw was more of a bet on a range than a plunging stock. The chart, I think, shows bullish signs. Despite the broader markets making new lows, this stock hasn’t made a new low since May 12, and the RSI is firmly moving higher, a bullish divergence. Could there be more bad news out of Zoom? Well, anything is possible. But I do think a move to $107 is possible. (Should be free to read – Zoom’s Stock May Surge Higher Following Quarterly Results)

 

Nvidia (NVDA)

Nvidia will report results this week too, and given AMD’s results, I’m not sure Nvidia will have a great outlook. I know many people think that AMD had a fantastic quarter and amazing guidance. But based on everything I have seen, the estimates that AMD beat did not include Xilinx, and the guidance that AMD gave that beat estimates, was also based on estimates that did not include Xilinx. So when I added the forecast for Xilinx with AMD’s, I found that the guidance AMD provided was basically in line with the two companies combined analysts’ estimates. So sure, Nvidia could beat and raise this quarter, it is possible, but the question is if it will be good enough always matters. The chart looks terrible, and it continues to track Cisco’s 2000 meltdown nicely. Actually, it tracks worse. Remember, for those of you that don’t know, in 2000, Cisco could do no wrong, and the sky was the limit. (Should be free to read- Nvidia’s Declines May Be Far From Over)

Tesla (TSLA)

Tesla has not reached oversold levels yet, and I think its declines are not over yet. My biggest concerns with the stock and the reason I sold my remaining balance on its last visit, around $1100 in early April, was due to that projected growth rate that the company has laid out. The more cars they deliver, the harder it becomes to achieve that 50% annualized growth rate, which made me worry that once that growth rate guidance falls or is anticipated to slow, the stock could get hit hard. The odds of this stock falling back to $550 are high, and there is even potential for it to back to that gap at $400 overtime. Before you start thinking, I have no idea what I am talking about; consider that I bought Tesla in August 2014 and held it for almost years. It Doesn’t mean my assessment will be right or wrong, but I certainly understand this company better than most.

That will be all for today; see you back here on Monday.

Mike

Charts used with the permission of Bloomberg Finance L.P.

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