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Stocks Drop On December 13 As The Mega-Cap Rally May Be Toast

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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12/13/21

STOCKS – AAPL, NVDA, AMZN

MACRO – SPY

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MICHAEL KRAMER AND THE CLIENTS OF. MOTT CAPITAL OWN AAPL

Markets were weak on December 13, with the S&P 500 dropping by 91 bps and the Qs dropping by 1.44%. Stocks dropped right after the open today and tried to recover late in the session, but a significant sell imbalance of nearly $3 billion sealed the deal for the index, with the S&P dropping by almost 40 bps in the final 15 minutes of the day to close at the session lows.

The intraday chart indicates that this may be the start of a wave three down, and we could see the index drop back to 4,600 and either fill the gap from last Tuesday or come close to it over the next day or at most two. We have also completed on the a bearish megaphone pattern and started what looks to be a five wave impulse lower. I think ultimately we return to the lows established the first week of December around 4,500.

The daily chart of the S&P 500 has that bigger megaphone broaden wedge pattern that appears to suggest we ultimately get a move back to 4,400. Additionally, we can see the trend for the RSI turned lower. With the big PPI print tomorrow, the FOMC on Wedensday, and Quadruple witching on Friday, this week will be much more volatile.

But more important, is that the big megacaps stock are the ones that have been propping this market up over the past couple of weeks, and there are signs that it may be over. If these big stocks start to turn lower, there will nothing left to keep the market afloat.

The number stocks making new highs minus new lows are extremely weak across the entirety of the US markets. Today there were 311 new lows more than new highs, along with a weaken trend.

Apple (AAPL)

Apple had a big day rising to resistance around $182, and then reversing lower to finish down by 2% at $175. The stock is extremely overbought here, with an RSI that is around 70, and now with a broken uptrend, and tons of gap to fill down to $162.

Amazon (AMZN)

Amazon fell sharply today, despite what I thought was a really big positive after Cowen named it a Best Idea for 2022. Very surprising price action. The uptrend is broken along with the weak price action doesn’t bode well for the direction of the stock. I still see 3,200 coming.

Nvidia (NVDA)

Nvidia fell nearly 7% today, and the stock is very close to breaking support at $281 and likely on its way to filling the gap at $230.

That’s all for today.

-Mike

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. Past performance is not indicative of future results.