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STOCKS – PTON, SQ, FB
MACRO – QQQ, VIX, ARKK
- RTM: Job Sink Stocks, Will Volatility Melt? [Daily Update]
- RTM: Stocks Run On VIX Melt
- RTM: Rates And The Dollar Will Lead The Way For Stocks [Daily Update]
- RTM: Rates And Dollar Rocketing Higher [Daily Update]
- RTM: All Eyes On The Vix
Here is this week’s free YouTube video:
The week of June 6 will feature the CPI report on June 10. Estimates are for CPI to have risen by 0.7% m/m vs. 0.3% last month and rise 8.3% y/y vs. 8.3% last month. So there will be no material improvement in the inflation outlook for May. Core CPI is estimated to have risen by 0.5% m/m vs. 0.6% last month and 5.9% y/y vs. 6.2% last month, just a mild improvement.
Since January, the S&P 500 hasn’t had the most outstanding returns in the first 6 hours following the report. The Bloomberg market impact monitor shows that, on average, the index declines by nearly 56 bps following the report.
Additionally, the data show relatively easily that the days following the CPI have not been kind to the market either. With the S&P 500 posting declines in the days and weeks that follow. The second half of this week may prove more challenging than hoped by the bulls, at least based on the statistical data.
NASDAQ 100 (QQQ)
Additionally, this week the options cycle may choose to kick in. The chart below shows the QQQ ETF and that typically 5 to 8 days before options expiration, we tend to see a reversal of the market trend that carries into options expiration. It is not a perfect cycle, but it has worked well enough to suggest that any strength in the markets we have seen will turn and reverse lower around Wednesday and continue to move down into options expiration next week.
This options expiration cycle is similar to the March cycle, with the FOMC meeting on June 15 and OPEX on June 17. The only difference is that heading into the March FOMC meeting, the QQQ was trading at its lows, so the trend reversal led to a big move higher. This time the market is moving higher, so the change in the trend may very lead to a post FOMC sell-off. But I will focus on this more as we get closer to the end of this week.
The other key difference is that on March 14, the VIX was trading at nearly 32 and not at 25. Therefore, there will not be as much fuel for a potential Vanna rally left in the market as in March. Any bad news is likely to send the VIX higher, especially into the FOMC meeting.
From a technical standpoint, there appears to be a nearly perfect bear flag formed in the QQQ. It still needs to be confirmed by falling below $304, but if it does, it should lead to the start of the next leg down in the ETF and the broader stock market.
It may not look like a bear flag to some, but I think it is, especially when you run a regression channel against the trends, the pattern comes to life. Given the CPI data and the options cycle that is likely to kick in at the end of this week, I think we have good odds of finding out if this bearish trend starts this week or not.
ARKK ETF (ARKK)
The same technical pattern is present in ARKK, with a giant bear flag. If you aren’t sure, invert the chart because if there is a bear flag, there should be a bull flag when flipped, and sure enough, there is.
Facebook appears to have a bearish diamond reversal pattern in the hourly chart. This is a bearish pattern and would suggest the stock moves lower, back to technical support, and the move higher, which started on May 23.
Peloton has a very bearish descending triangle present, with a critical level of support around $12.25. A break of that support level would confirm the bearish descending triangle and that lower prices lie ahead for the stock.
A bear flag has formed in Block too, and the support region for this stock comes at $79.50. Like the others, a break of this price region would be very bearish and signal that significantly lower prices for Block are coming.
Anyway, that is all for today, have a good Sunday and see you all tomorrow.
This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice.Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.