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Stocks Brace For Impact On August 8, 2022

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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8/8/22

STOCKS – MSFT, NVDA, NFLX

MACRO – SPY, QQQ, VIX, VVIX, DOW

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MICHAEL KRAMER AND THE CLIENT OF MOTT CAPITAL OWN MSFT

The S&P 500 had risen by nearly 1% to start the day, but by day’s end, all the gains were gone, with the index finishing 12 bps. There are now two bearish trading patterns in the index that I am noticing, given today’s weak close. The first is the rising wedge pattern, which I have repeatedly pointed out. The second is the 2b topping pattern that appears to be present in the S&P, Dow, and NASDAQ QQQ ETF.

The rising wedge in the S&P 500 is easy to see, and we tested support again today. The index attempted to take out the highs from August 3, was promptly rejected, and then closed below the August 3 price of 4155.17. That sets up what I think is that 2b Topping Pattern.

Nasdaq (QQQ)

The same pattern is present in the QQQ ETF, when the ETF tried to take out the highs from August 4 and was promptly rejected.

Dow

The same pattern is present in the Dow Jones Industrials as well.

These 2b patterns can be invalidated if the market can clear these prior highs. If not, then the 2b pattern sends that potential reversal signal. This diamond pattern in the S&P 500 futures and the rising wedge also speaks to a possible reversal in the market to come.

VIX/VVIX

Additionally, we saw the VIX to VVIX ratio drop again today, most notably because the VVIX index rose by around 3.3% today, while the VIX rose by 60 bps. The declining ratio and the rising VVIX index tell me that very quietly implied volatility is starting to rise again in this market.

Nvidia (NVDA)

Nvidia pre-announced its quarter, posting disappointing results and a significant revenue miss. The news was surprising, especially since it was Nvidia, a company that doesn’t miss very often. Today’s news killed whatever upward momentum Nvidia had, dropping it below a short-term uptrend. I’m surprised it was down by just 6%.

Microsoft (MSFT)

Microsoft also looks like it may have that rising wedge pattern in it presently. Additionally, a bearish divergence is taking place with its hourly RSI. That big gap needs to get filled at some point, too, all the way down around $252.

Netflix (NFLX)

Netflix rose today, something I didn’t think was likely, but it also looks more evident that that stock has a rising flag pattern. Flag patterns that rise are reversal patterns and tend to result in a drop back to the origin, in this case, around $175.

Have a good night.

-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.