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12/11/21
STOCKS – AAPL, NVDA, AMD, GOOGL
MACRO – SPY, XBI, XLK, XLU
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MICHAEL KRAMER AND THE CLIENTS OF. MOTT CAPITAL OWN AAPL, GOOGL
Stocks had a monster come back his week, but what is becoming clear is that fewer stocks are leading the charge, especially in the NASDAQ Composite. The NASDAQ composite remains strong on an index level, but the percentage of stocks above their 50 and 200 day moving average is at 24% and 29%, respectively, very low levels. This tells us there are very few stocks participating in the NASDAQ rally.
Also, the cumulative look of the number of new highs minus new lows has rolled over with the number of stocks rising regularly. It has only happened during periods the overall index was moving lower.
The look for the stocks trading on the NYSE doesn’t seem as bad, but still, we see the cumulative New Highs minus New Lows has also started to roll over.
Also, there are signs of sentiment shifting from the more aggressive parts of the market to the safer parts. The XLU/XBI ratio shows that the XLU appears to be breaking out against the XBI, with utility outperformance over biotech only having begun.
Additionally, the Utilities have never underperformed Technology by this much EVER. That means XLK is worth more relative to the XLU than even in the dot.com period.
Additionally, this chart shows a bullish divergence in the RSI has formed, which would suggest that utilities soon begin to outperform technology. On top of that, there is a falling wedge pattern, which also supports the bullish narrative for utilities. Of course, this doesn’t mean utilities rise; it could also mean they drop less.
S&P 500 (SPY)
The S&P 500 has a bearish divergence of its own, which formed, and I think we see lower prices in the days and weeks ahead.
Apple (AAPL)
Looking at Apple, we can see that the stock is currently very overbought and in a gamma squeeze. The stock should have some strong resistance around $181.25, and with an impulsive move higher nearly complete, I think the stock is likely to reverse back towards $145.
Alphabet (GOOGL)
Alphabet has a bearish divergence pattern with an RSI in decline as the stock increases. I could see this stock trading lower to around $2,500 by the middle of January.
Nvidia (NVDA)
What if Nvidia of today turns out to be nothing more than Cisco of 2000. It is an interesting question. The charts are stunningly similar going back to then and comparing to now. When you look at the following chart, ask yourself, and be honest. Would you be a buyer of Nvidia at these levels?
AMD (AMD)
Now another ironic stock is AMD. The AMD of today seems to be following the path of Intel in the late 1990s very closely as well. I find this to be amusing.
S&P 500 (SPY)
But then again, you can make the same case for the S&P 500 of today versus the S&P 500 of the late 1990s. The paths are just amazingly similar.
It isn’t just the price charts that copy each other. It is the PE ratio too. The PE ratio for the NTM, for the S&P 500 of 1998 and today, follow a similar path for today. In both cases, the past charts tell us we are on the other side now, and over the peak, and that we are now entering the phase of multiple compression.
Anyway, have a great weekend!
-Mike
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. Past performance is not indicative of future results.
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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.
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