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May 18, 2021
STOCKS – SQ, AMZN, HD, ZM
MACRO – SPY, IWM
Mike’s Reading The Markets (RTM) Premium Content – FREE 2-WEEK TRIAL
- RTM – Volatility Is About To Pick Up In A Massive Way
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- RTM Tactical Update – It May Be Time To Look For “Value” Among Growth Stocks
- Live Webcast Friday, 5/21 @ 1PM ET
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Stocks finished the day lower, with the S&P 500 declining by around 80 bps and the Qs finishing down about 70 bps. It was a tranquil day until 3:40, and then the market just took a pounding, ahead of a $1.3 billion sell imbalance going into the final 10 minutes. The S&P 500 dropped almost 70 bps in that time.
The big thing today was the index falling below the March 2020 uptrend again. I think this is a big negative and likely to see more follow-through lower tomorrow. You can see in the chart that we fell below that trend line around 2:30 and then snapped higher, retesting it. Once it failed, it would be lights out for the index, which is why I think we see more selling pressure tomorrow.
Russell 2000 (IWM)
Additionally, the Russell 2000 looks fragile, with a big broadening wedge pattern that failed at the worst possible time. This does not bode well for the small-cap index.
Square (SQ)
It seems like Square is still melting, the stock was up more than 3%, yet it managed to finish flat on the day. Maybe it is just a pause in the melting, but once support at $200 breaks, it should result in a decline to $173.
Amazon (AMZN)
I’m messing around with this idea that Amazon has completed its first wave lower and that we are just about finishing up wave 2. If that is the case, the next leg lower could be a decent size drop, pushing the stock down to 2,870.
Home Depot (HD)
The chart for Home Depot doesn’t look good at all, sitting on major support at $316. Once that support level breaks, long holders better hope that $308 doesn’t crumble. If it does, there is a long-very long way down.
Lumber
Lumber reminds me a lot of when I use to trade in exotic parts of the world, like Sri Lanka or Kenya. Lumber has that feel to it, thin markets; everyone knows a big buyer or seller is in the market. Lumber is a thin market, no doubt, but if the 50-day moving average does not hold, then the decline will likely continue. Somebody wants out and is having a tough time. Reminds me of Pakistan in 2009. Every day the market would open for 15 minutes, and as soon as the main index was down 5% or something to that effect, the exchange would close for the day. Trying to sell in that type of environment isn’t easy.
Zoom (ZM)
Zoom is back over $300. The only problem is that the stock appears to be facing a strong level of resistance, around $325.
Anyway, that’s it for today.
-Mike
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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.
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