This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
Otherwise, enjoy the column!
Subscribe to the Monster Stock Market Commentary and join the 2,481 subscribers getting it for FREE every day!
STOCKS – NVDA, ADBE, LRCX
MACRO – SPY, VIX, QQQ
- RTM: Powell Targets Financial Conditions [Daily Update]
- RTM: Bonds Hidden Message? [Daily Update]
- Visa And Mastercard Inflation Hedges? [Video]
- RTM Exclusive: Apple May Be Heading Sharply Lower (Short-Term Options Idea)
- RTM: Stocks Haven’t Been This Expensive To Bonds In A Long Time (Daily Update)
- RTM: Rallies Should Be Short-Lived (Daily Update)
- RTM Exclusive: Banks Set A Negative Tone To Earnings Season
- RTM Tactical Update: The Fed Will Drain The Stock Market Of Excess Liquidity
- RTM Exclusive: Betting JPMorgan’s Decline Aren’t Over [Short-Term Options Idea]
- RTM Exclusive: Walmart Shares May Pullback Amid Weak Consumer (Short-Term Option Idea)
It would seem investors have been too complacent about the upcoming FOMC meeting, which will need to change. As I explain below, that means more puts will need to be bought and that will weigh heavily on stock prices.
S&P 500 (SPY)
Today was ruthless. The S&P 500 started higher by more than 1% and finished the day down by more than 1.4%, a 2.6% Intraday reversal in a nearly a straight line drop. The index gave back all of the gains from Tuesday and closed at 4,393. The next level of support I am looking for is 4,350.
It was much worse for the NASDAQ, with the Qs trading higher by almost 2%, and finished the day down almost 2.1% to close at $334. Ultimately the Qs failed four times at the $348 level and then just melted through support at $336. The next support level appears to be around $327.
It seems odd that heading into Powell speaking, the VIX was trading down to start the day. It didn’t take long for that to change. Once the VIX traded up, it was over. The VIX is too low, heading into one of the most pivotal FOMC meetings. From listening to Powell today, the odds of a 50 bps rate hike seem like the base case. On top of that, the Fed is likely to announce the beginning of QT. So it would seem that investors will need to put hedges in place going into this meeting, which means the VIX will rise.
A rising VIX will weigh on stocks, and as I explained in this free article, I wrote on the SpotGamma website if we are entering the time where people start putting hedges back on, the market has further to fall.
Nvidia was crushed today, and it fell below that significant support level at $207. The RSI is still trading around 33.7, which means there is further to go here. Whether the RSI makes a lower low or not will have a lot of meaning. We know a bottoming process has started if the RSI makes a higher low. If it makes a lower low, the stock is nowhere near a bottom. I would look for support for $180.
I cautioned about Adobe and support around $415. It is very close to breaking that support now. Once that support fails, $390 is the next logical spot. But after $390, there could be a massive drop.
Lam Research (LRCX)
Lam Research had results last night; they missed just about everywhere I saw. I know there are supply issues for them, but still. The stock is at a point where things may be about to get a whole lot worse. It has been hanging around the $470 level forever, with a break sending shares to the $350s.
That’s all for today.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.