1/24/2022

STOCKS – NVDA, NFLX, ISRG

MACRO – SPY, QQQ

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• RTM- Market Is Repricing Risk
• RTM Long-Term Update- Adding Altria
• Tactical Update: The Fed Put Is Dead
• RTM: Thoughts On The Sell-Off
• ICYMI: LIVE Q&A SESSION –REPLAY
• RTM: Real Yield Spike Causes Market Reversal
• RTM Exclusive: PayPal’s Next Leg Lower Is Near

A pretty rough day in the market, with the S&P 500 dropping just about 4% through the morning and finishing the day higher by 28 bps, a huge reversal. Days like today will not help the case of the markets to see the Fed become less hawkish, had the market stayed down, maybe. But a big rebound like this, coupled with some follow-through tomorrow, will not persuade the Fed to lighten up. There is very little the Fed can do to change paths. It will take a more significant correction to get the Fed to change course. I think do think the Fed wants assets prices to come while they still have QE running to ensure there is enough liquidity and markets don’t start freezing. 

S&P 500 (SPY)

The gap down and the significant drop seemed to be way overdone. An inverse head and shoulder pattern formed mid-day and was completed in the late afternoon. After that, the market went for the gap fill. 

NASDAQ (QQQ)

The Qs may show everything a bit better, as it appears we may have just wrapped up wave three and are in the middle of or near completion of a wave four higher. This means there is one more wave five lower yet to come. Based on some preliminary numbers, it looks like that could end up dropping to around $300.

VIX

The VIX reached 40 today before reversing and finishing the day at 29.9. So that tells you what led to the big market rally, as people closed put positions, which created a short-covering rally.

But I think what is important to remember here is that the market is in the middle of repricing, and repricings can be very violent, and that is what this looks like to me. You can see this clearly with the PE ratio breaking down and falling below 20 over the past few trading sessions.

Nvidia (NVDA)

Many stocks appeared to put in short-term bottoms, like Nvidia. It fell to nearly $207, which is a support level. Additionally, the shares reached oversold conditions based on the RSI. I don’t think it means the declines are over, longer-term for this one.

Intuitive Surgical (ISRG)

Intuitive Surgical may have also put in a short-term bottom as well.

Netflix (NFLX)

I would hope Netflix has too. The decline in this stock has been jaw-dropping.

I expect volatility to remain high tomorrow as people position for the Fed, but it would not surprise me if we finished little changed. It’s Wednesday afternoon that concerns me.

-Mike