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1/2/24
#Stocks – $NVDA, $AAPL
#Macro – $SPX, #Rates
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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN $AAPL
Stocks finished lower, with the S&P 500 down about 60 bps, led mostly by mega-cap tech and Apple. Specifically, it was downgraded by Barclays today, noting sluggish iPhone sales in China. It is no surprise there for multiple reasons. Nike reported horrible China results a few weeks back, and there have been rumors of bans on iPhone sales in China for some time.
But it mattered not heading into year-end because it was all about getting every last drop of performance out of the stock market. The volatility sellers were clearly in control those final weeks, and for the most part, the trade wouldn’t work unless Apple and the other big 7 seven names weren’t involved.
The implied volatility dispersion trade was on full display in the year’s final weeks, with the 1-month implied volatility of the Mag 7 50 delta IVs climbing while the S&P 500 IV fell.
Meanwhile, the 1-month implied correlation index was falling, indicating that the S&P 500 and the top 50 stocks in the index were seeing IV moving in opposite directions.
Today’s carnage in the market was saved at the last minute with a massive $7.4 billion buy imbalance, which sent the market ripping higher in the final 10 minutes of trading. Throughout most of the day, the activity, from several vantage points, looked like parts of the market are unwinding the end of the 2023 rally, and the data this week will largely determine if that trend accelerates. This could have merely been due to some kind of start-of-year inflow.
The S&P 500 fell below 4750 today, the zero gamma level, and below the 10-day Exponential moving average. So, the move into negative could surely increase volatility if it persists, meaning the move below the 10-day EMA could indicate a change in trend is forming. Additionally, as of last week’s close, we have broken the rising wedge pattern.
If the data this week pushes the dollar and rates higher, then yes, I think the sell-off in the equity will intensify. Because once again, the “market” has overreached on its rate cuts narrative. The massive easing of financial conditions could easily be a stimulative force to the economy and result in better-than-expected data points to come across the board this week.
The 10-year rate certainly increased today, climbing above its 10-day EMA and testing its long-term downtrend. Better data tomorrow from the JOLTS or ISM could lead to a move up in the 10-year that pushes the rate above the downtrend while also reversing the downward momentum in the RSI.
Nvidia (NVDA)
It isn’t just Apple that struggled today, with Nvidia trading down almost 3%. This is now the third time the stock has tested the $500 price range and the third time it has been rejected. More immediately appears to be a double top pattern, with the neckline around $455, while a bigger triple top is potentially forming with a neckline around $405. A break of $455 sets up a test of $405, and a break of $405 sets up a test of a gap fill at $305.
Have a good one.
-Mike
Charts used with the permission of Bloomberg Finance L.P. 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. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. 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.