Stocks Fall on February 18 And May Be Forming A Trend Reversal

February 18, 2021

STOCKS – WMT, ROKU, AMD, UVXY, BA

MACRO – SPY,

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Today was nearly a repeat of yesterday. However, today the S&P 500 couldn’t make it back to the flat line. Instead, the index finished the day lower by 44 bps to close at 3,913. The index fell by as much as 1% at one point but found some support around 3,890 which has been a solid level since the beginning of the month.

The big question is if the series of lower highs and lower lows is the start of something bigger. It is notable, and another down day tomorrow could really start to form a trend. A drop below 3,890 certainly puts us closer to my target of 3,780 over the near-term.

VIX ETF (UVXY)

The UVXY continues to see its market value rise, which is the most bizarre thing. This isn’t the type of product you “buy and hold”; it is really meant for short-term trading, maybe hedging. But you can see the market value is now over $2.5 billion, and it is rising despite the VIX direction.

Again, you can see from the chart below that going buy and hold isn’t a good idea. So again, maybe people think they are playing long volatility, and they are if you think it will happen over the next couple of days. Otherwise, it is decaying asset value. All of these levered ETFs have the same issue; they have a decay component because they are repriced overnight. I don’t know all the details, but that much I know.

Roku (ROKU)

Roku reported really stunning results on both the top and bottom lines. The guidance seems to be the problem, with the company noting tougher year-over-year comps in the second half. We have heard this type of commentary from a number of other companies this quarter, and the market doesn’t seem to like it. So the stock isn’t trading higher in the after-hours; it is just flat. However, that also makes me think that the stock is more than likely to trade lower tomorrow once it opens. It seems that the stock is likely to head lower to the trend line at $427.

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Boeing (BA)

Boeing has failed to break out, and at this point, it needs to be watched for a decline back to $196.

AMD (AMD)

AMD had another bad day and tested support at $87.10 again. The stock is likely not finished falling and is working towards completing its 5 wave pattern, perhaps to the gap fill at $75.20.

Walmart (WMT)

Walmart looked like it was trying to break out yesterday, which blew up this morning following some cautious commentary on the earnings call. The stock fell by 6.5% and is testing support at $137.95. A dip below that support level would likely indicate a drop back to the $129 to $132 region.

Have a great night.

Mike

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