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Stocks slid intraday, filling the gap created by Monday’s rally, as outlined earlier this week. I don’t have a strong conviction about what happens tomorrow — the index could realistically move in either direction. However, it does appear that the S&P 500 is now forming a potential double-top pattern, with the neckline around 6,550.
If we are putting in some kind of topping pattern, where a steeper decline may be setting up, it’s not unusual to see this type of churning action near the highs. In fact, we observed similar behavior in 2021 and early 2022, as well as in January and February 2025, both of which were accompanied by bearish divergence on the RSI. So, it doesn’t look all that dissimilar.
If we’re to believe the 1966 analog, the same thing happened back then, too, with a similar topping pattern and formation. So, technically, one could argue that from the market’s current position, there’s a good opportunity for a larger pullback to develop.
Tomorrow marks another $23 billion Treasury settlement date, with an additional $26 billion set to settle next Tuesday. The point is that this process is going to continue for a while. When we have Treasury settlement dates, we tend to see usage at the Standing Repo Facility increase — $3 billion was used at the SRF on Tuesday’s settlement date.
Funding rates didn’t see much relief today, and they probably won’t see any tomorrow either. I would expect them to trade higher.
Liquidity is tight and will likely remain that way as long as the Treasury continues issuing debt and the Fed keeps contracting its balance sheet. Still, as long as conditions remain manageable and the SRF is being used, I don’t see a reason for the Fed to end QT in October — though I could see it wrapping up by December.
Tesla
Tesla reported results today. I don’t follow the company as closely as I used to when I owned it from 2014 until early 2022, but earnings were weak while revenue was strong, suggesting a margin problem somewhere in those numbers. In any case, the options positioning was so bullish that it’s actually bearish. The key level to watch is $420 — if Tesla breaks below that, it could face a significant drop. My guess is the market is waiting for the conference call to conclude before making up its mind.
Netflix broke below its descending triangle pattern, and if you project the roughly $200 drop from the peak by another $200 from the point of the breakdown, that would put the stock in the low $900s.
-Mike
Glossary by ChatGPT
Bearish Divergence – A technical signal where prices rise to new highs while momentum indicators, such as RSI, fail to confirm, often preceding a downturn.
Double Top – A chart pattern indicating a potential reversal after two failed attempts to break above the same resistance level.
QT (Quantitative Tightening) – A Federal Reserve policy of reducing its balance sheet to withdraw liquidity from the financial system.
RSI (Relative Strength Index) – A momentum indicator measuring the speed and change of price movements to identify overbought or oversold conditions.
SRF (Standing Repo Facility) – A Federal Reserve tool allowing eligible institutions to borrow cash overnight in exchange for Treasury securities, helping stabilize short-term funding markets.
Treasury Settlement Date – The date when Treasury securities are exchanged for payment, often impacting short-term funding and liquidity conditions.
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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