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The S&P 500 finished the day lower by 53 bps, which was better than the intraday low when it was down by more than 1%. More importantly, the index closed below the wedge trendline. Perhaps this means nothing, and the index gaps higher tomorrow and reclaims the trend. Or perhaps this marks the beginning of a sharper decline.
Based on the pattern, it appears that the S&P 500 could initially return to 6,550; what happens thereafter remains to be seen. I will note that the S&P 500 has had numerous opportunities to break out and move higher, but has been unable to do so. The index is essentially unchanged since the end of October, whether one likes it or not.
It is really the same for the NASDAQ, and if the index has finally broken the diamond pattern, then we should be on a path that undercuts the November low. In the end, this is an index that is still below its October highs, not the definition of a “melt-up”, that’s for sure.
As noted previously, the setup in today’s market looks very similar to that seen at the start of 2022 and 2025. At least to me it does.
Equity financing costs are telling the same story today as they did in 2022 and 2025.
Unfortunately, when we look at the CDS of Oracle and Meta, they appear to be spreads that are likely to widen after a few weeks of consolidation. If credit spreads on these stocks begin to rise due to AI Capex, it won’t be a positive development for the overall market.
Keeping it short today.
-Mike
Glossary by ChatGPT
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AI Capex: Capital expenditures dedicated to artificial intelligence infrastructure, including data centers, hardware, and software investments.
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Basis Points (bps): A unit of measurement equal to one-hundredth of a percentage point, commonly used to describe small changes in yields or returns.
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CDS (Credit Default Swap): A financial derivative that provides insurance against the risk of default by a borrower.
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Credit Spreads: The yield difference between corporate debt and comparable risk-free securities, reflecting perceived credit risk.
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Diamond Pattern: A technical chart formation characterized by widening and then narrowing price ranges, often signaling a potential trend reversal.
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Melt-Up: A rapid and often speculative rise in asset prices driven more by investor behavior than fundamentals.
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Wedge Trendline: A technical pattern formed by converging trendlines that can indicate a potential breakout or breakdown in price.
Disclosure
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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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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