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.
Otherwise, enjoy the column!
Subscribe to the Monster Stock Market Commentary and join the 2,533 subscribers getting it for FREE every day!
February 3, 2021
STOCKS – MSFT, ADBE, DOCU
MACRO – SPY, VXX
- Midday – Here We Are Again, The Top And Bottom Of The Range
- MORNING NOTE: RATES AND THE DOLLAR ARE HEADING HIGHER
- Midday Note: This May Be The Top End Of The Range For Stocks
- Morning Note: Back To The Grind
- Earnings Analysis: Amazon’s Stocks May Struggle As AWS Disappoints
- Earnings Preview: PayPal
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN MSFT
So here we are again. The VIX is back to 21.8, basically the very bottom of the range. Meanwhile, the S&P 500 is back at the top of the range. No pause in between, just a vacuum in both directions. The market’s behavior is beyond strange; it functions in one of the mechanical, algorithmic manors I can remember.
The amount of options volume that trades daily is jaw-dropping. But that is what keeps implied volatility levels and skew extremely high when looking across all stocks. All of this options volume will make it very difficult for the VIX to return to pre-pandemic levels because Implied volatility will remain high for dealers to properly account for all the added risks they are taking on.
So with the VIX at 21.8, maybe it drops to 20. I doubt it drops back to 14, and if that is the case, how much further can the S&P 500 index rise? It a tough question, but clearly, much of the energy the S&P 500 index generates is from implied volatility levels falling. If the VIX is at the bottom of the range, then implied volatility levels aren’t falling.
The S&P 500 filled the gap yesterday along with a weak close. Today, the index was able to move right thru that 3,850 level like a hot knife through butter. So it means the next level to towards would come around 3,890 to 3,900. That is where the trend line was broken late last week. That would be the place the index could pause.
DocuSign has been trading in a very well defined trading channel. Whether the stock should be valued here or not is a separate question, but the upper end of the range is around $275, and that is probably where it will head over the short-term.
Adobe might have a pretty bullish pattern forming. It needs to clear about $500 for a breakout.
Microsoft still has a fairly good shot of making it to $255.
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.