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STOCKS – INTU, AMZN, AMD, MSFT, NVDA, ZM
MACRO – SPY
- RTM: Not Even Close To A Bottom Yet
- RTM: Stocks Tumble Under Weight Of Bad Jobs Report [Daily Update]
- RTM: Replay Live Q&A Session
- Final Notice: Zoom Details For Today’s Q&A Session
- RTM First Look: The Stock Rally May Be Finished
- RTM: Post FOMC Rally Arrives On Schedule [Daily Update]
- RTM: S&P 500 4300 Key Resistance [Pre-FOMC Update]
Michael Kramer and the clients of Mott Capital own MSFT and AAPL
The S&P 500 fell sharply today by 3.2% to close at 3,991. I know people are looking for answers and think that we must be near the lows. Unfortunately, I don’t believe that is the case. As I discussed in today’s video for subscribers, we have been trained to buy the dip for over a decade, but we need to remember the critical difference between now and the last decade. Over the last decade, the Fed was there to support markets. Now the Fed is on a path to drain liquidity from the market, so the Fed isn’t there to change the narrative and boost asset prices. So yes, prices could have much further to fall because the Fed hasn’t even started to reduce its holdings.
Another thing that may be happening here is that the market is trying to find the point at which it breaks the Fed, as it has done so many times in the past. Unfortunately, I think the Fed’s pain is not what it used to be. In the past, the Fed could cave to the market’s demands because growth was always front and center, with inflation never being an issue. But with CPI at 8%, the Fed will not be able to cave. The market is yet to realize that the FED’s pain point is now CPI, which means the markets are no longer the center of attention, and like any 2-year-old toddler that doesn’t get its way, it means more pain until the market breaks the Fed into giving in.
S&P 500 (SPY)
I hear a lot about the market being oversold at this moment, but I do not see it that way. The RSI on the S&P 500 daily chart is now at 33.4, which is not oversold. Meanwhile, the S&P 500 sits just a touch below its lower Bollinger band. So I think there could be more downside risk to the market than people think.
The VIX is nowhere near capitulation-like levels, with it trading at 34.7.
Even the put to call ratio is too low at under 1.3; I typically like to see it above 1.35 for a capitulation moment.
Based on what I have seen, I don’t think any rebound will be long-lasting either. Reserve balances that have been drained have not come back; they are gone. The drop in reserve balance typically is 2-weeks ahead of the S&P 500, and so any rebound we get will likely be small by comparison and not very long-lasting.
S&P 500 (SPY)
So back to the S&P 500. After 3,960, there is minimal support. That next support region may not come until 3,700. One area that may try to make a stand is at 3,860, but that doesn’t look strong to me.
The worst part about this is that Apple hasn’t even broken yet. It is still holding support, and we know that a long-term bottom can not be in place until Apple begins to drop and finds a bottom.
Microsoft is breaking, though, which is crucial because it probably means Apple isn’t far behind. I think Microsoft is now below support in the mid-260s, with a gap to fill in the mid-240s.
Tesla hasn’t broken either yet but is very close to breaking with support in the low $770s. After another support region in the $730s, there appears to be nothing until the $620, in my opinion.
That’s all for tonight!
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. 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.