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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STOCKS – AAPL, RBLX, NFLX, MO, SQ, ISRG
MACRO – SPY, QQQ, XBI, 5-YR REAL
- RTM Tactical Update: The S&P Faces A Two Front Assault
- RTM: Technical Breakdowns
- RTM: Where’s The Growth? The Whole Thing Has Been An Illusion
- RTM: The Looming Recession
- RTM Technical Update: Watching The SPX Reversal Pattern
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN AAPL, RBLX
Stocks finished in mixed fashion on Friday, January 14, with the indexes all plunging following the massive miss on the retail sales number. However, the indexes managed to rally back sharply into the close, resulting in the Qs finishing the day higher by around 60 bps and the SPX up around six bps.
S&P 500 (SPY)
The chart for the SPX is looking more and more like a diamond pattern. Additionally, the index has been directionless since November 5, while a downtrend is starting to form, with a lower high, but to this point, there has been no lower low. There can’t be a downtrend until the S&P starts making lower lows. For that to happen, the index needs to fall below 4,500.
The RSI has been trending lower since that November 5 timeframe, coupled with the price action, is a bearish divergence.
The 5-yr TIP Rate (Real Yield) pushed up, closing at -1.27%. It is getting to a significant resistance level of around -1.22%. If that resistance level breaks at -1.22%, then there is nothing to stop the real yield from rising to -50 bps, which will inflect a world of hurt on equity markets.
This week’s premium commentary noted that the changes in real yields and the S&P 500 earnings yield are highly correlated over the last five years. The further back in time one goes, the weaker the correlation gets. But in recent times, this has impacted the S&P 500. An increase in the 5-yr tip of nearly 70 bps would push the S&P 500 earnings yield from its current 4.8% to 5.5%. It doesn’t seem like much, but that would cause the PE (NTM) to rise from 20.8 to around 18.1, or 15% lower, or 3960. (Premium content, sign-up for a two-week free trial – RTM Tactical Update: The S&P Faces A Two Front Assault)
We will have to be on head-and-shoulders watch this week for Apple. The volume profile and the RSI all support the bearish reversal pattern. For confirmation, the stock needs to break support at $167.
Intuitive Surgical (ISRG)
Intuitive Surgical formed a triple top pattern and all but confirmed it on Friday when the stock gapped below a crucial support level at $311. The sell-off could be steep, too, with its potential fall back to $270 if the stock does not rebound over $311 in the next few days.
Altria looks like it may be trying to break out. If that’s the case, this one could rally to around $58.50.
Netflix will raise prices, and this announcement comes ahead of the company’s quarterly results this week. In my experience with Netflix, they raise prices ahead of earnings when they have substantial subscriber growth numbers. That could be the case again this time. In the meantime, as I explained in a video on Friday for subscribers. This stock is oversold currently and is due for a bounce. It could be a big bounce, too, probably to around $580. (Premium content, get the first two weeks free – RTM: Technical Breakdowns)
Roblox filled the gap at $77.70, and I’m hoping that is it for this one. I like this stock, and I bought it back in November. I have often likened this to Netflix in the early days, and I think it has that kind of growth potential. If the gap doesn’t prove to be support, a sturdy uptrend should also act as support.
Square broke support on Friday at $133, and believe it or not, there is a slight gap that never filled around $115. It sounds crazy, but that is probably where the stock is heading. I still think this is overvalued from a fundamental perspective too. They should have just left the name Square.
If you can believe this, the XBI touched its February of 2020 levels before COVID. Not 2021, 2020. That is crazy. I hate to say it, but it has a gap to fill at $86, probably the ETF’s next stop.
Anyway, it is risk-off based on our XLU/XBI ratio, and based on that inverse Head And Shoulders pattern, it could be risk-off for a while.
Have a good day off.
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.