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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August 9, 2020
Stocks – 700HK, AMZN, NFLX, TSLA
Macro – SPY, QQQ, DXY, SLV, GLD
Mike’s Reading The Markets (RTM) Premium Content – NOW WITH A 2 WEEK FREE TRIAL
- Key Guages To Watch For The Week Of August 10
- Earnings Trends Continue To Improve – Positive For Stocks
- Big Levels To Watch – Midday
- The Unwind Of Risk-On Has Started
- Don’t Blink – Morning Commentary Transcript
- Forget The Jobs Data, Focus On Tencent
- A Long-Term Chart Of The Nasdaq Worth Seeing – Midday
- Morning Call – Transcript
- There Are Too Many Stars Aligning- Morning Call
- The Mother Of Bull Bets?
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN TSLA
Friday marked what could be the start of a significant shift in the market following the jobs report. The dollar index rallied sharply and appeared to have put in a double bottom. The index has found a significant level of support around 92.50, and should it rally beyond 94; it would likely confirm that double bottom pattern and set up a run to around 96. The RSI also hit very sold levels around 17.50 and is now beginning to show signs of a reversal of the trend.
If this is the case, it could market the unwind of the risk-on trade. (Premium RTM Content – The Unwind Of Risk-On Has Started)
Copper was smashed on Friday, falling by over 4% and breaking some crucial support around the $2.86 level. Additionally, the RSI suggests the metal still has further to fall, perhaps to around $2.70 from its current price of approximately $2.79.
Copper prices and the NASDAQ 100 have been highly correlated since the March lows, and either the two will now diverge, or copper is sending a horrible warnings sign for the NASDAQ 100.
Nasdaq 100 (QQQ)
One can also see how closely related the NASDAQ 100 and the dollar index have been over the past few months. Remember, a weak dollar acts as a tailwind to equity prices because it will help to boost revenue and corporate profits of multi-nationals, a strong dollar –well does the opposite.
A strong dollar will also be a killer for the gold and silver trade as well, with the potential for gold to fall back to $1,925.
And the potential for Silver to fall back to $22.50.
S&P 500 (SPY)
Don’t think it stops there because the S&P 500 has also seen a little boost from the short-dollar trade too.
Two bearish patterns have formed in the S&P 500 one at the gap from February 24, and the second is a rising wedge, as I said on Friday to members if I had to pick a place and time for a pullback in the market it would be here and now. A drop below 3,260 on the S&P 500 could trigger a sell-off and gap fill in the index down to 2,860. (Premium RTM content – Big Levels To Watch – Midday)
Tencent (700 HK)
It isn’t just a rebounding dollar that could derail the risk-on trade, but Tencent in Hong Kong could be a weight too, as discussed in Friday’s morning call. The stock has now failed three times at 564HKD, and a break of 512 could send the shares sharply lower to around 434. (Premium RTM content – Forget The Jobs Data, Focus On Tencent)
Why do we care so much about Tencent? Well, look at the overlay of the chart with Amazon, and you will see why. A breakdown in Tencent could trigger a decline in the entire global technology stock trade. (RTM Premium Content- Don’t Blink – Morning Commentary Transcript)
Amazon has struggled to advance despite strong quarterly results, and a break of that uptrend at $3,066 sends the stocks even lower to $2,685.
Netflix came very close to testing its uptrend on Friday, and a break of support at $495 gets that trend line broken, and the potential for a move back to $450.
Tesla could be in trouble here too, already falling below its uptrend, and the potential for the stock to fall and fill a gap around $1,225.
Anyway, that’s all for this week!
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.