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Stocks fell sharply on Friday, with the S&P 500 down 1.5% and 2.9% for the week. It left the S&P 500 trading at a new 52-week of 3,585. Yes, the RSI is back below 30, but the technicals look pretty bad on the S&P 500, and it seems possible at this point that we may have started a wave five down.
It would seem that the S&P 500 has finished a period of consolidation, which could result in the index dropping to about 3,500. However, if this is the start of a wave five lower, we could see the index decline to around 3,200, which would also be around the September 2020 lows.
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NASDAQ QQQ ETF (QQQ)
The QQQ is not all that different, with short-term support of around $260. If this is the start of a wave five down, it could result in the QQQ falling back to its pre-pandemic highs of approximately $237.
QQQ to TIP relationship
While there is no perfect way to measure the relationship between the TIP ETF and the QQQ, at least based on a ratio, we can tell that the QQQ hasn’t completely caught up to the TIP yet. The ratio of the QQQ to the TIP is currently 2.55, and it had been at 2.37 at the June lows. This tells us that the QQQ still needs to fall further, and with the TIP trading at $104.90, the QQQ probably needs to fall to around $248 to bring that ratio back to the June lows of 2.37.
Shopify still has its RSI trending higher, and as long as the RSI is trending higher, it gives me hope that there is a momentum shift from bearish to bullish occurring. No, the technicals do not look great, with the stock flirting with breaking a downtrend, but again as long as the shares can hold that trend line and the RSI can remain upward sloping, I think the stock is still in a bottoming process.
Tesla has surprisingly held up very well throughout most of the carnage, and the company should be announcing third-quarter deliveries today or tomorrow. But upward momentum is broken. The stock has stalled and fallen below an uptrend, leading to the stock falling to around $246 and filling the gap.
Alphabet has struggled and has fallen below support at $95. While the stock doesn’t look great over the short-term, the long-term outlook remains strong, in my opinion, and so even if the shares should fall back to, say, $83 and fill the gap, I do not think the long-term prospects have been damaged.
Meta, on the other hand, in my opinion, is in a very different position, and while this stock is breaking down and could even be heading back to its 2018 lows of $123. The longer-term outlook is not strong, given the increased competition from Tik Tok and Apple privacy headwinds. I have never liked Meta because these social media platforms tend to be faddish, and while those fades can last for years, they are always just one new competitor away from becoming obsolete; look up MySpace and Friendster.
Have a great 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 investment.st