July 11, 2021
STOCKS – AAPL, AMZN, SNOW, CMCSA, CSCO
MACRO – SPY, RSP, YIELDS
- The Technology Sector Is Historically At A Peak Valuation And Will Not Be Immune To Slowing Growth
- Slower Growth Should Lead To PE Multiple Compression – 7.4.21- FREE
- Earnings Growth Will Decelerate in the 2H’21 Potentially Leading to A Lower PE Ratio 6.26.21 – FREE
Michael Kramer and The Clients Of Mott Captial Own Apple
Hey everyone, so the good news is my surgery has been pushed back to Friday of this week, so we have all week to do afternoon write-ups.
S&P 500 EW (RSP)
The S&P 500 managed to eke out another record close this week, but the internals continue to look weak, and if not for a strong rotation into the biggest stocks, things might look a bit different. In fact, the equal-weight S&P 500 ETF (RSP) has been range-bound now since May 10. The RSI and the MACD have been trending lower, too, a bearish divergence. This could be a sideways consolidation, setting up for the next leg higher. But it is most certainly telling us that the market is not nearly as strong as it would appear to be.
Right now, the RSP is flirting with its 50 day-moving average, and a drop below support at $145.50 would be very negative and confirmation of what appears to be a head-and-shoulders topping pattern.
S&P 500 (SPY)
Friday’s close on the S&P 500 makes it a candidate for it being the end of this recent run-up. We can see in the chart below how wave 3 is now equal to wave 5. A retracement of this move higher off the May 12 lows would bring the index back to the 4,170 level.
Additionally, the S&P 500 is more than 10% away from its 200-day moving average. Historically speaking, that is a lot; while it doesn’t have to mean bad things are about to happen, it usually does. Of course, the two most recent periods we saw this happen were January of 2018 and February of 2020.
This week, we will get the PPI and CPI data, and while it’s easy for these numbers to come in hotter than expected, it is even easier for them to come in below expectations because expectations are so high. The 10-year is clearly struggling and telling us we should be concerned about growth rates in the future.
Apple has seen its RSI run-up above 80, and at least in the past, when the RSI got this high, it marked a top in the stock. I don’t see any reason this time would be different.
Just like Apple, when Amazon has seen its RSI surge above 75, it too has marked a short-term top in the stock.
Comcast is trying really hard to break out here at $58. The pattern is bullish and called an ascending triangle. A breakout is likely to lead to a push higher to $68.5.
Snow appears to have an inverse head and shoulder pattern formed over the last several weeks. A push of $275 sets up a further advance to around $325.
Cisco has also been trying to make a move higher in recent weeks. It wouldn’t be surprising to see Cisco move higher into earnings as it usually does, and then it gives it back when they disappoint on guidance like they usually do. A push to $58 seems possible in the interim.
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