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The S&P 500 dropped today by 1.13% to 3,901 and at the 3,900 gamma level, where the most open puts sit. Index options will expire on the open tomorrow, so a lot of that option gamma that has helped to support the market will be gone at the opening. That means if the sellers show up in force tomorrow, there could be enough for the index to finally break that 3,900 support and begin another drop to around 3,835. That is where the next big gap to fill in the market rests.
Additionally, today we did manage to close below the ascending broadening wedge, which I would consider a bearish development.
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Additionally, real yields continue to increase, sending the TIP ETF lower. The TIP closed at a new low today, which is not a good signal for the QQQ. The TIP ETF continues, in my opinion, to be the best leading indicator for where this market is heading, and as long as the TIP ETF keeps making new lows, the QQQ will fall. The key here is that higher real yields mean that the present value of long-duration growth assets becomes worth less.
The Chinese yuan continues to weaken versus the dollar; today, it crossed the critical 7 level. That has been an essential level in the past. Given the Fed tightening cycle and the easing path that the Chinese are taking, it seems possible that the yuan could head towards 7.1 from a technical standpoint. The PBOC may look to defend that 7 level. However, that may be a positive development for our inflation problem. The more the yuan devalues versus the dollar, the cheap it becomes to import goods from China.
Adobe fell sharply by 17% to close around $309; the company announced an acquisition of Figma for $20 billion while also reporting results. The stock is down a lot, and $280 looks reasonably possible. It isn’t clear, at this point, what the results of this deal will be and how it will change the revenue and earnings forecast, which makes the shares iffy. Until there is more clarity, the stock could see further downside, with $280 being the next meaningful level of support.
Amazon is again testing support around $126, with a gap to fill around $123. Should it get to that price, it would have erased all of its post-earnings gains. Not only that, but if support at $123 should break, there is another lower gap to fill at $116 and $110.
FedEx is down after hours; the company had soft first-quarter results and pulled full-year guidance. This stock went straight up throughout most of 2020 and 2021, and now the shares are falling, and they could fall sharply. The stock is already trading below a support level at $183, and if that price isn’t recovered over the next few days, it could result in the stock filling the gap at around $136.
Gold broke support, and with rates rising and the dollar growing stronger, the odds of gold slipping to $1565 increased.
That’s all for today.
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 investment.