January 4, 2020
Stocks: SPLK, MCD, ROKU, SQ, MCD
Macro: SPY, VIX
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SPLK
S&P 500 (SPY)
The S&P 500 finished the week in less overbought territory with an RSI of 66. It still will need to fall further to set up the S&P 500 for higher levels. Based on the current trends in the RSI, I’m looking for it to fall to around 60, that would ensure that the longer-term direction of the RSI remains higher, while giving the index a chance to cool off. It means that any declines in the index will likely not last much longer.
Meanwhile, the trend in the VIX continues to be lower, which also suggests that the longer-term trend for the S&P 500 at this point is still higher.
We can continue to watch the headlines about the pending doom and gloom, or we can focus on what the market is telling us, and at least in my viewpoint, the trends we have been watching remain constant, suggesting higher prices for stocks still lie ahead.
Last week I had thought Roku would surge higher, that was the wrong call. It does seem as if the general trend in Roku is lower, and the RSI confirms that view. However, there is an interesting pattern that appears to be forming called a falling wedge, and it could suggest that long-term the stock is setting up for a push higher, just not yet.
Splunk has been consolidating for some time in this $140 to $150 region. A bullish pattern known as a rising triangle has formed, and it suggests the stock works higher, with $160 next on the radar.
Earlier this week in the premium Reading The Markets room, I noted Square was likely to rise to around $70 and perhaps as high as $76 based on some very bullish options betting. You can read more here, where I also tell you the options that saw the activity. Square May Rise On Bullish Betting.
McDonald’s is starting to turn higher and could be looking to fill the gap from October 21 at $210. The RSI has also seen its momentum shift, turning more bullish.
Salesforce is still very close to a significant break out if it can clear $167.
Have a good Saturday, more tomorrow.