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Stocks Drop On October 12, 2022, Ahead Of The CPI Main Event

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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10/12/22

#STOCKS – $MSFT, $ABNB, $UPS

MACRO – $SPY, #RATES, $VIX, $MOVE

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN MSFT

Michael Kramer will be on Fox Business – Making Money with Charles Payne Tomorrow Afternoon around 2:15 PM ET.

Tomorrow is the big CPI report, and I have nothing more to add here. Most of the data indicate consensus estimates are too low. But again, all we can try to do is look at the data and make the best-educated guess we can. The PPI report was mainly in-line, too hotter; core PPI was the only metric that came in lower at 7.2% less than the 7.3% estimate.

The market didn’t care much about the PPI report and finished lower by around 33 bps to close at 3,577. The pattern on the SPX looks pretty bearish at this point; with a descending triangle pattern and a gap lower tomorrow, I would think things get into motion for a test of 3,520 and potentially a drop to around 3,220.

To be honest, I’m unsure how I got to this point of looking for such a significant drop in the index. But this is what I am seeing and where the data have led me.

 

Volatility

The ICE BofA Move index, which measures bond market volatility today, reached a new high, while the VIX finished the day lower. The gap between the MOVE index and the VIX is quite large at this point, which is not usual.

 

What is interesting is that when you take the spread between the Move and the VIX indexes, you can see just how wide the spread is, and the last time this happened was in the 2008 and 2009 time frame.

2-Yr

The 2-year looks as if it’s ready to race higher, too, with a bull flag within a bull flag.

Microsoft (MSFT)

Microsoft today fell to support, closing around $225. This has been a significant area of support. If support breaks, it probably speaks poorly not only for Microsoft but the market as well because there would be no technical support until around $212, about 7% from here.

UPS (UPS)

UPS appears to have a head and shoulder pattern and a broadening wedge. Both of those patterns seem bearish to me, and for now, the UPS is finding support at $155. Should the $155 support break, the next significant support level comes at $134.

Airbnb (ABNB)

Airbnb appears to have formed a double top and, to this point, has found support around $105. But there is a clear downtrend in the RSI, suggesting the decline isn’t over. If the stock breaks support at $105, there is further downside to around $92.

Have a good one.

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. 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 investments.