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.
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September 8, 2020
STOCKS – TSLA, AMZN, PYPL, TWLO, ZM
Macro – QQQ, SPY, UUP, GLD
Mike’s Reading The Markets (RTM) Premium Content – NOW WITH A 2 WEEK FREE TRIAL
- Stocks Teetering At Key Levels
- When Adjusting For Growth The S&P 500 Is It Most Expensive In 40 Years
- Market Getting Slammed
- For The Week Of Sept. 8, Plus New Theme Tracker
- This Pullback May Be Different
- We Will Find Out Fast What Happens Next
- A Drop To 2860 On The S&P 500 Is A Real Possibility
- AMD May Fall 11% More
MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN TSLA AND MSFT
MICHAEL KRAMER HAS QQQ PUTS
There is nothing like watching a month of gains evaporate in 3 days. It is just brutal to be in these markets. The algo’s seemed to have flipped, and the danger now is that we have reversed on gamma as well. The flip zone on the SPY came and went today at $338. That means the lower the S&P 500 falls; the more short dealers have to get; it is the exact opposite of what we just went through.
That nice tailwind of long gamma is gone, and that can become a significant issue in the future if a lot of call buying doesn’t return to this market soon.
For today, that was not the case with the put volume outweighing the call volume in the SPY. It means as investors/traders buy puts, dealers are short puts, and that means they need to hedge by going shorting futures. The lower the market falls, the more they need to short.
The other problem is that there are no fundamentals to support this market, none. Please don’t kid yourself into thinking second-quarter results were betting then expected, and that other garbage you have been spoon-fed or how low rates expand multiples infinitely, they don’t. Even if the S&P 500 prints $163 in earnings next year, the S&P 500 was trading at 21 times earnings. Adjust those numbers for long-term earnings growth expectations, and we are more expensive now than at any point in 40 years. Yes, that includes the 2000 bubble. (Premium content – get the first 2-weeks free – When Adjusting For Growth The S&P 500 Is It Most Expensive In 40 Years)
S&P 500 (SPY)
From a technical perspective, you can’t like the setup either, the S&P 500 is now well below the uptrend, and I think at this point, that trend is broken. We also closed below support at 3,340, and that likely sets up a further drop to 3,260. The RSI is still at 43, so we haven’t even reached oversold levels yet.
Nasdaq 100 (QQQ)
The NASDAQ 100 Futures also broke their uptrend, and at the moment, are hanging around the 50-day moving average. I don’t think it holds, with a potential push down to 10,444.
The VIX hardly budged, don’t let it fool you into thinking there is “no fear” in the market. The VIX is already high and is telling you that it expects volality to remain high for the next month. For the VIX to move higher from here, you going to have to see the daily movement in the S&P 500 increased over 3%, then we can get a VIX approaching 40.
To add a little salt in the wound, the dollar is very close to a big break out at 93.50; it is testing it right now. If that happens, the safe haven, otherwise known as gold, will be big trouble.
There is must be someone just standing there buying gold at $1925. It is so apparent. They clearly are not a good trader either, because with the dollar rising, and what appears to be a lot of selling pressure, one would think they step out of the market for a little bit and let gold come in.
Tesla fell 21% today, on a really bad day, just glad I sold more of it last week. Elon Musk is probably happy he sold $5 billion worth too. The problem now is that you have $5 billion worth shares that are trading underwater, and they are just being flipped. The only good news is that the stock found some support around $330 and the 50-day moving average. Don’t be surprised if you see $275 next.
Amazon broke its strong uptrend and is holding on to support at $3,100. Probably not for much longer, though, with the potential to fall to around $2,800.
Zoom probably can still fall further from here, with that gap to fill at $325.
It would be something to see Twilio’s gap get filled at $123.
The same thing with PayPal at $125.
Have a good one!
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.