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STOCKS – NFLX, TWLO, HD, AMD, FB
MACRO – SPY
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- Proceed With Caution – Morning
- S&P 500 May Test 3000 Before Days End Again
- MARKETS MELTS – BE CAREFUL
- A Quick Fade Or The Start Of Something More?
- The Market Appears To Be Playing With Fire
- Bets The NASDAQ 100 Falls
- Starbucks Warns, May Be First Of Many
- Stock Remain Overbought SHORT-TERM Based On Indicators
Apologies for the silent treatment yesterday, it was one of those days, where everything was reshuffled. Regardless, I’m back today, with some thoughts on yesterday. It certainly wasn’t the most impressive rally, given Thursday’s steep decline.
S&P 500 (SPY)
The index in typical fashion gapped higher by about 2.5% to start the day, only to give it back by mid-morning. The goods news is that the index did test that critical 3,000 level a couple of times throughout the day and held that level for now. A buy imbalance of about $2 billion for the closing cross helped to boost the index into the close and saved the day.
What I do find kind of interesting is how the S&P 500 managed to retest the uptrend it broke on Thursday and then failed. That could be a sign a further move lower lies ahead. Additionally, the RSI uptrend broke as well, and that is never a good sign.
Fundamentally, there is nothing to support this market from a valuation perspective. From a liquidity perspective, it seems that QE will continue at a much slower pace then policy outlined in March. That really can spell trouble for an index trading at very high valuation levels. From a pure PE perspective, assuming a 17 multiple on my 2021 earnings estimates of $157.63, the index may only be worth 2,680.
Remember, this is not 2019, where we entered the year with a below-average market multiple, and an economy that was growing nicely. This is a market that is trading with a very high earnings multiple, in a very uncertain economy. Even worse, is that there is a tremendous amount of uncertainty around those earnings estimates.
The S&P 500 enters what could be a wild week, with quadruple witching and the S&P 500 rebalancing. There is a giant gap to fill at 2,860.
Netflix (NFLX)
Netflix does appear to be forming that head and shoulders pattern, which I noted at the end of the week. The stock still needs to fall below $400 to confirm the pattern, but it could open up a more significant move lower towards $360.
Facebook (FB)
Facebook appears to have formed a double top pattern and needs to fall below $218 for confirmation.
AMD (AMD)
I had thought there was a chance that AMD was forming a cup and handle pattern, and it had seemed the stock broke out on Wednesday. But then it failed at resistance and moved back to support around $52. Now, it could just as easily be forming a descending triangle, and the potential for the shares to fall to $49.
Twilio (TWLO)
When is this Twilio just going to break already, and move lower? It just keeps hanging around.
Home Depot (HD)
Home Depot’s pattern broke on Thursday, and the next stop could easily be $220.
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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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