Stocks Drop On July 26, One Day Before The Fed

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7/26/22

STOCKS – MSFT, GOOGL, SHOP, ADBE

MACRO – SPY, DXY

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN SHOP, MSFT, AND GOOGL

Stocks fell sharply on the day before the FOMC meeting. The S&P 500 was lower by 1.15%, while the Qs dropped by almost 2% due to a stronger dollar, and the earnings pre-announcement by Walmart. Adding to the pressure, Shopify announced it was laying off 10% of its workforce.

It would appear that the S&P 500 head and shoulder pattern was correct, the index fell below the neckline, and that line held as resistance the rest of the day. I think the index continues to go lower to fill the gap at 3,830.

VIX

The VIX did finally move up today and managed to close around 24.7. It is not surprising to see the VIX rise today, given that there is an FOMC meeting. Honestly, I would have expected it to be much higher. Going into every FOMC meeting this year, it has been above 29. This is by far the lowest closing price for the VIX this year, one day before an FOMC meeting.

Dollar

The DXY is in an interesting position heading into tomorrow’s FOMC, sitting below resistance at $107.20. It would be interesting to see what happens tomorrow and where the dollar goes. If it clears resistance and holds it, I think the dollar could go back to its recent highs.

Alphabet (GOOGL)

Alphabet reported results that came in below expectations but weren’t a disaster, so the shares rose slightly. But the stock is reeling at the bottom of the flag pattern I pointed out the other day. I’m not sure these results change much. The company is noting FX headwinds, tough comps, and a pullback in ad spending as potential third-quarter headwinds.

Shopify (SHOP)

Shopify will report results tomorrow morning but announced it was cutting 10% of its workforce today. That sent the stock sharply lower, back towards support. The stock has been trading sideways for months, and the RSI is powering higher, creating a bullish divergence. As long as the stock can stay above $29.5, I think the stock is building a base. If that support breaks, then I don’t know.

Adobe (ADBE)

Adobe has been consistently rising in a trading channel over the past few weeks. But overall, a long-term channel is falling and a longer-term downward trend in the RSI. If the stock can hold on to $380, it can churn higher. If not, the shares may fall towards the lower end of the long-term channel.

Microsoft (MSFT)

Finally, Microsoft is trading higher after the company said it was looking for full-year double-digit revenue growth; expectations were about 14%. The company downgraded its outlook for the fiscal first quarter based on analysts’ expectations, but shares jumped. It makes zero sense to me, but after-hours trading is a joke most of the time anyway. So let’s see if it holds tomorrow.

Have a good one.

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.