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 – T, SPLK, AVGO, UNH, PYPL
MACRO – SPY, DIA,
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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SPLK
The S&P 500 had a pretty dull day again on the year’s final trading day, with the drop again occurring in the last minutes of trading. The S&P 500 finished lower by 26 bps, while the Qs finished the day down 62 bps.
S&P 500 (SPY)
Trading volume was very low for the entire week. The chart below shows that when volume returned in the final 30 minutes of the trading day, it led to lower prices in the S&P 500. Starting on December 23 and ending on December 31, there was only one day that saw a positive final 30 minutes of trading, which was on December 28. It may indicate that when volume returns on Monday it brings the sellers with it.
The actual structure for the S&P 500 index looks very weak and shows that once the index broke support at 4,780, it was unable to recapture that level. That means that support at 4,740 will be critical for the bulls and the level that must hold next week. Once broken, I think the selling can quickly grow with the potential to get back to 4,700 by January 5.
Dow Jones (DIA)
The Dow did not see that big red candle on Friday I would have liked to have seen, but that’s ok; there was still a down day. Ideally, we need a sharp drop early in the week to keep the 2b topping pattern intact. I still think that pattern is in force and is strong.
AT&T has been battered; maybe it is deserving, maybe it’s not. But the stock appears to have formed a bullish flag pattern, suggesting the equity continues to push higher, perhaps even over $26.
Splunk may be bottoming, it appears to be forming an inverse Head And Shoulders pattern, and it does have that giant gap to fill up at $168. That sure would be a great way to start the year for me to make that type of move higher.
PayPal hasn’t been able to bounce, but it has consolidated, and I hate to say it, but I think it is getting ready to take yet another leg lower. The RSI is back to 43, and the pattern looks an awful lot like a pennant, meaning the next stop may be at $175, maybe even the gap fill at $130.
The run-up in Broadcom may be over, with the stock falling out of the rising wedge pattern and the MACD very close to crossing negatively over. Additionally, the RSI has been trending sideways, a bearish divergence against the increasing stock price, with a giant to fill at $582 and ultimately at $483.
United Health (UNH)
The pattern in United Health is very similar to Broadcom with a huge massive rising wedge and a MACD that is negatively crossing over, with the potential for a gap fill at $403.
Have a good Sunday.
Mott Capital Management, LLC is a registered investment adviser. 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. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.