This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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STOCKS – INTU, NVDA, SQ
MACRO – SPY, QQQ, VIX
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S&P 500 (SPY)
The S&P 500 finished the week unchanged and has not indicated what it wants to do next. The index attempted to break higher during the week, clearing resistance at 4,580, but that looks like a failed breakout attempt after closing well below it by Friday. There is a chance the index completes the gap fill at 4,660, but if that doesn’t happen earlier in the week, I don’t like the odds of it happening.
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There is a good chance the S&P 500 will struggle to start the week. The FOMC minutes pose an unknown to the market and likely contain plenty of hawkish language around the potential balance sheet run-off. With the VIX under 20, it seems that traders do not have enough hedges in place and will likely be buying puts heading into that event, which should put downward pressure on stock markets. The VIX has been trending higher for months and is now sitting at the bottom of that trading channel.
The substantial wage gains in the job report and hotter than expected prices paid index in the ISM sent real yields soaring on Friday and caused the Treasury curve to invert. The higher yields rise, the harder it will become for the market to stay at current levels. The relationship between the QQQ and TIP ETF is powerful, and a wide gap has opened between the two recently. In this case, I think the QQQ needs to trade down to the TIP.
Sure enough, Nvidia fell back below support around $268, and that price now becomes resistance. The significant uptrend in the stock is broken, and the gamma squeeze is over. I think $231 is in the stock’s near future.
Keep an eye on Intuit; it looks like there is a bear flag that has formed, and a break below $419 sets up a significant drop to $325.
Block may have stalled out at $133, with the RSI clearly in a downtrend. It seems like the perfect place for the stock to stall out, resume the downtrend, and for the RSI to head to 30 while the shares fall back to $105.
That’s enough for this week. See you Monday.
Mott Capital Management, LLC is a registered investment adviser in the State of New York. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Please remember that past performance may not be indicative of future results.