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July 6, 2020
STOCKS – AMZN, ZM, ROKU
MACRO – SPY, QQQ,
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S&P 500 Futures
Stocks had a strong day, finally breaking above the critical level of resistance around 3150. It was a strange day because primarily the futures pretty much never traded higher than the morning session, just flatlining around 3170. It doesn’t mean much, other than the index appears to found its next level of resistance.
It also doesn’t tell us much about the downtrend that is overhead around 3190.
ISM
The ISM Data was much stronger than expected, but I’m beginning to believe the ISM data at this point is worthless in this environment. All it is telling us is that the services sector improved versus last month, and it doesn’t take much to improve versus the previous month.
Repo’s
Also, the NY Fed’s repo activity was $0. Repurchase agreements continue to decline, which means less liquidity for the banks to play with.
S&P 500 (SPY)
We can also see that the S&P 500 cash index rose to resistance at 3,180. It fills a gap that was created on June 10. So again, we can ask the question of what happens from here. Typically when a gap is filled, it resumes the prior trend, which in this case is lower. So if we can push beyond 3,180, the S&P 500 has a clear shot of getting back to 3,230. If it fails, it likely results in a drop below 3,150.
Ultimately, we will find out if the pattern in the chart represents an island reversal at the beginning of June. So the next day or two will be telling about the future direction of the overall index. For now, the path of least resistance appears to be up.
NASDAQ (QQQ)
The Qs are back to the upper end of their trading range again, and usually, that means one thing. A reversal back to the lower end of the trading range, what is the 6th or 7th time we have seen this pattern since April.
Amazon (AMZN)
Amazon appears to be following the same pattern it had in April, with a massive run-up ahead of results. The valuation on Amazon is getting stretched here, and I get it; the company is the dominant force today. But this company spends a lot and cares very little about meeting the market’s expectations. So just keep that in mind.
That pattern in the chart is a rising wedge, and I know it looks like it broke, but many times I have seen the same thing happen in the past only for a stock to turn lower and push back through the lower end of the wedge. So be careful, 2,450 is still possible. With an RSI of 80, the stock getting way ahead of itself.
Zoom (ZM)
Zoom didn’t participate in today’s rally and continues to fail around the lower bound of the rising wedge pattern. I’m not sure that much has changed here at all. Volume levels today were materially higher. Lower still seems about right.
Roku (ROKU)
Roku is very close to a big breakout should it get above $135.50, and on its way to $150.
Thanks all for today.
-Mike
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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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