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9/3/24
#MACRO: $SPX, $NDX, $USDCAD
#STOCKS: $NVDA, AVGO
- RTM: Stocks Slide To Start September On Weak Data, Nvidia Breaking Down
- Time For The Dust To Settle
- RTM: The Final Act?
- RTM: Yield Curve Steepening Continues
- RTM: Bulls May Be Too Optimistic On Broadcom’s AI Prospects Heading Into Earnings
- RTM: Long-Term Cycles Are Calling For A Major Market Top
- Live Sessions To Restart 9.6.24 At 8:15 AM ET, For Job Report
Stocks fell sharply today, with the S&P 500 down more than 2% and the NASDAQ dropping 3%. These declines aren’t entirely unexpected, and some of the drop is due to the end-of-day surge we saw on Friday, driven by an end-of-month buy imbalance. By 10 a.m. today, the S&P 500 had erased all those Friday gains after gapping lower at the open. The drop created a significant gap from a bullish perspective, and its structure suggests it could quickly be filled. If you’re bearish on the market, being cautious is essential given this risk, precisely because of the straight-line drop at today’s open following that straight-line rally from Friday’s close.
From a bearish standpoint, if the index can gap below 5,500 today, it could fill the gap at 5,450, which opens the possibility for various outcomes to play out.
Structurally, the NASDAQ 100 had a similar gap opening, presenting the same opportunity for a gap fill. However, the NASDAQ has already broken through several support levels, making it look much weaker at this point compared to the S&P 500.
Nvidia contributed significantly to today’s decline. Nvidia appears to be completing a diamond reversal pattern, a typically very bearish formation, but a return to that August 5 low can’t be ruled out. We’ll need to see how this pattern plays out. Additionally, there are headlines indicating that the Department of Justice has subpoenaed the company as part of an antitrust probe.
Broadcom is set to report results next week, and it appears to have broken a support level, which is not a positive sign for a company heading into earnings. The other concern is that the next level of support isn’t until around $130.
Meanwhile, the CDX high yield spread index was higher today, which helped to bring the small-cap IWM ETF lower by 3%. Remember, the IWM has a very strong correlation with the credit spread, so it is entirely possible for rates to fall and the IWM to fall, too, because spreads are widening. Perhaps the easiest thing to do is just watch the HYG; if the HYG is falling, the IWM will follow.
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The USDCAD moved higher today as the U.S. dollar strengthened. Wednesday’s Bank of Canada meeting could significantly impact the direction of the USDCAD. We pay attention to the USDCAD because of its inverse relationship with the S&P 500. If the USDCAD is bottoming and moving higher, it could signal a short-term top in the S&P 500. Additionally, as I mentioned to members in a video on Friday, I was fortunate that despite the sharp drop in the USDCAD, the S&P 500 merely churned sideways—a rare occurrence. This could have been a significant clue that the rally had no real momentum, even as the Canadian dollar strengthened significantly against the U.S. dollar.
Sure enough, not only did the U.S. dollar strengthen today, but sellers also showed up, with S&P 500 futures contract volume surging from its August slumber.
As I mentioned a couple of weeks ago, I believe the “higher for longer” trade is over. While it may show signs of resurfacing occasionally, I think it’s primarily finished. We’ll see what tomorrow and the coming days bring, but things will only get more challenging incrementally from here.
-Mike
Charts used with the permission of Bloomberg Finance L.P. 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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Charts used with the permission of Bloomberg Finance L.P. 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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