October 1 – Stock mentions SPY, IWM, NFLX, TSLA, SHOP, TWTR, FB

Michael Kramer and the clients of Mott Capital own TSLA, NFLX

MACRO

S&P 500 (SPY)

Stocks had a miserable day with the S&P 500 falling by about 1.2% following the weaker than expected ISM manufacturing report. The S&P 500 fell to as low as 2,938 refilling the entire gap created from the September 5 break out.

The number of stocks above their 50 day-moving average plunged today too to around 48%.

Russell (IWM)

The Russell also had a terrible day falling by nearly 2%. The index dropped below support 1521 and fell out of bed. 1485 is the next big level to watch for the index.

From the looks of it there may be some more to fall or at the very least a retest of today’s low.

There is no way to put a positive spin on the ISM report today. Still, it isn’t a recessionary number, indicating a growth rate of 1.5% for the third quarter on an annualized basis. GDPNow is tracking at a 1.8% growth rate for the third quarter as well.

If there is one silver lining, it is that now the market is increasing the odds of an October rate cut to 65% from 40% yesterday. My hunch is that if we get a weak Jobs report on Wednesday, which seems possible given the weak ISM employment data, the Fed will likely look to cut rates again in October, with the potential for a fourth cut in December.  We can think about this more on Friday.

Interestingly though, the PMI manufacturing index came in at 51.1 ahead of expectation of 51. So which reading is right? I don’t know. But the market will always lean more to the dark side of things.

STOCKS

Netflix (NFLX)

Netflix had a good day, rising to nearly $270, surprisingly bucking the trend. Still, $273 is the level the stock needs to clear.

Facebook (FB)

Facebook looks broken, and if the stock falls below $173, it likely falls to $166.

Tesla (TSLA)

Tesla will be releasing its delivery results sometime in the next day or so. I’m not sure just how much the stock will move on the news. Expectations have already been ramped up, and the focus will then move to how profitable the company may or may not be when they report results.

The stock continues to act well, and I wouldn’t be surprised to see it rise back to $300 before year-end.

Twitter (TWTR)

Twitter looks like it is about to break down. Shares are on support at $40.25 and break lower pushes the equity back to $36.50.

Shopify (SHOP)

Shopify continues to amaze me. There is someone just sitting with an order to sell around $316. The stock can not stay above that price. The seller appears to be trading as if they want to unload the stock before it moves lower. It is starting to look more as if the stock is going to retest $285.

That’s all

-Mike