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Stocks had a rough Friday after a failed rally attempt on Thursday. The S&P 500 fell by more than 2% on Friday to close the week lower by more than 1.5%. The bearish rising cup and handle pattern I had pointed out on Thursday followed through on Friday and resulted in the index close at 3,583, which took it back to Wednesday’s level.
Typically, a rising cup and handle pattern returns to the cup’s lows, around 3,500. Additionally, the decline on Friday serves as a rejection of the Thursday rally, and typically Friday sell-offs follow through into Monday.
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The NYSE Advance-Decline made a new low on Friday, perhaps leading the way to a new low in the S&P 500. It would suggest that the lows on Thursday were not a capitulatory event, and the lows for the market are probably not in.
Additionally, rates continue to rise, and it’s hard for me to think that we could continue to see rates rise and equity prices bottom. So, as long as rates continue to make new highs, then stocks should continue to make new lows. The 10-Yr yield made a new closing high from Friday, finishing the day at 4.02%. A forecast of the more recent move higher off the October 4 lows suggests the 10-yr could climb to around 4.4%.
Well, so much for ARKK rallying. The ETF continues its descent, as the RSI suggested the other day. At this point, one can only hope it finds some support at the lower end of its trading channel at approximately $31.50.
Tesla will report results this week, and the chart looks awful, as it trades just slightly below support at $205. If that support level breaks, there is nothing until $180, and of course, there is that gap at $137, that still needs to be filled.
With Amazon giving back all of those summertime gains, it might as well retest the lows around $102. I think we will find out that $102 is not the bottom.
Netflix looks like it is in a distribution pattern, suggesting the shares return to where the rally started at $170.
Twilio keeps melting as well, and with support now in play at $63, the drop to $44 becomes a possibility.
We can finish off with one of my favorites. Roku is just melting away, trading at levels not seen since 2019, and with a gap to fill at $34, I think there is still a good chance it will get there.
Good Luck this week
Charts used with the permission of Bloomberg Finance LP. 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 investments.