11/28/22

#STOCKS – $CAT, $IBM, $ZM

#MACRO – $SPY, $DXY $VIX

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Moving on, the S&P 500 declined by around 1.6% today and dropped down to around 3,960.  There is a gap that is there that still needs to be filled at 3,950 from November 22.

With that, I think my “C” wave is complete, and we have started the next impulse leg lower.

I think a reversal in the market was pretty much due. It was evident from the rise in the VVIX and SKEW index last week that something was changing in the market, and given the hawkish Fed minutes and now Jay Powell coming up on Wednesday, traders are starting to think about their tail risk again. Also, a pretty hard reversal today in the dollar index.

Higher implied volatility and a stronger dollar point towards tightening financial conditions, and I hate to say, but as I have been saying, that is what the Fed wants. So it could be that the market is anticipating a hawkish Powell.

Most notably, the Markit CDX High Yield Spread Index increased today, a sign of tighter financial conditions. Given the amount of easing, if this is the market’s wake-up call, then the process has only begun.

Part of the rally in the dollar today had to do with the events in China, its zero COVID policies, and the protest. The dollar did gain notably today against the Chinese yuan. I would think that without a reopening policy in China, the yuan continues to weaken versus the dollar and should help support the DXY to some degree.

Dow Jones (DIA)

What is also notable today is that Dow fell sharply too, and the Dow has been a monster leading the market higher. It broke a pretty significant trend line today and has a big gap to fill down to around 32,500.

IBM (IBM)

The same thing happened today on IBM. Again, we have been watching IBM because it has been a market leader of late. But you can see the trend line for IBM is broken, and that would suggest that there could be a short-term pullback in the stock, which has the potential for the shares to drop back $136.

Caterpillar (CAT)

Caterpillar has also been a market leader of late. This one appears to be making a double top. As I have previously noted, the RSI is trending lower. However, the stock must fall below $224 to confirm the double-top pattern. Should that happen, it would suggest the shares of CAT could drop back to $208.

Zoom (ZM)

Zoom made a new closing low, which is very important. As I have observed, when Zoom makes a new low, the broader NASDAQ 100 is not far behind. So we will need to watch this one closely. If it starts to break down materially and drops below $70, it could be a significant warning sign for what’s to come next for the entire market.

Have a great night

Mike

Charts used with the permission of Bloomberg Finance LP. 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. Past performance of an index is not an indication or guarantee of future results. It is not possible to invest directly in an index. Exposure to an asset class represented by an index may be available through investable instruments based on that index. 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.