10/11/22

#STOCKS – $MSFT, $TSM, $JPM, $ROKU

MACRO – $SPY, #RATES

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN MSFT

Stocks finished the day lower, with the S&P 500 dropping 65 bps. It was a volatile session, with markets selling off to open, rallying mid-day, and selling off into the close. The focus will shift tomorrow to the FOMC minutes, which have been lost in the shuffle between rising rates and a significant CPI report on Thursday.

I do not think there will be any surprises in the FOMC minutes this time, as it seems pretty clear what the Fed’s intentions are here. The only thing I will be paying attention to is the mention of rates potentially heading beyond 4.6% and how many times the word recession comes up.

The market fell late today after Governor Andrew Baily of the Bank of England warned pension funds that the bond-buying program will end in three days, and they should finish rebalancing their positions by then.

Stocks didn’t like this because the news that the BOE would be buying bonds was seen initially as the first central bank caving in. That is not the case and never was the case, and once reality set in today, it led to the index dropping into the close.

S&P 500 (SPY)

Nothing on the chart from today makes me think that anything has changed in view, with the potential for the S&P 500 to fall to between 3500 and 3520 over the next few days. The 3,580 support region on the S&P 500 futures is essential because it marks the September 2020 high, and once that level breaks, there is a path to reach 3,220, which could be reasonably quick. When the market rallied in November 2020 after the election, it did so in a straight line, and sometimes those straight-line type rallies can be almost like gaps and fill fast once they come back into play.

What is sort of a concern is that the 2008 analog chart, which I have shared previously, also suggests we are in the middle of such a drop. Once 3,580 support breaks, things could quickly deteriorate with the CPI report coming Thursday, the FOMC minutes Wednesday, and the BOE intervention ending Friday, the ingredients for a 10% plunge in the market between now and the end of October are there.

Roku (ROKU)

Roku continues to melt, and the RSI continues to melt. The RSI tells you the slide in shares isn’t over. While it might be hard to see on my chart, there is a gap to fill from January 2019 at $34, and that may be where this stock is heading.

JPMorgan (JPM)

JPM will report results this Friday morning; the stock is acting poorly heading into that report. The shares broke down today, falling below support at $102. At this point, the next significant level of support comes at $96.

Microsoft (MSFT)

Microsoft also looks very weak, with support at $225 now in question. If that support level breaks, there is nothing until $211. I am a long-term believer in Microsoft. I have been for years, but things can get dicey should $200 break.

Taiwan Semi (TSM)

Taiwan Semi fell sharply today after the ordinary shares reopened in Taiwan last night after a holiday. The stock played catch-down to the rest of the sector’s weakness, and $58.80 appears to be a place shares may be heading. But more importantly, TSM can be a good indicator of the direction of the S&P 500 over time.

-Mike

Charts used with the permission of Bloomberg Finance LP. 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 investments.