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Stocks May Be Stuck In An Algo Feedback Loop

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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9/8/22

STOCKS – MSFT, JPM

MACRO – SPY, TIP, 2-YR

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN MSFT

The Algo’s may be on repeat.

It is strange how the S&P 500 looks very much like it looked between April 21 and May 4. Is it exactly the same? No. It is very similar, though.

If it is the same pattern, I had believed in April it had been a bear flag, and it is again a bear flag now, then this consolidation is near its end. There are three touches of the top line and two touches of the bottom line, just like in April. This would suggest that the next touch of the bottom, should one, would result in a lower break and put the S&P 500 on a path to the low 3,700s.

If we look at it another way, taking the S&P 500 of today and pushing it back to line up with the S&P 500 of April and overlay the two chart lines, you can see the similarities, and it is worth thinking hard about this because what came next in April and May was a 10% drop.

We need the S&P 500 to rise above 4,025 to invalidate this pattern tomorrow.

TIP

The TIP ETF made another new low today and is worth noting, as the gap between the QQQ and the TIP is growing again. This leaves us left to wonder if the QQQ will ever catch down to the TIP.

2 Year

The 2-yr rate is stuck at 3.51%, around the highs, where it has been since September 1. It looks like it is merely consolidating before making its next move up.

JPMorgan (JPM)

JPMorgan has had two powerful trading sessions, as banks generally were up today. I’m unsure if it was due to a rise in rates or the flattening yield curve. But they were up. I don’t see where JPM is going. It can’t break down, it can’t break out, and there is still a month to go until earnings. Maybe it is just stuck between $110 and $123 for the time being.

Microsoft (MSFT)

Oddly, Microsoft is trading not that far off its June lows, while the Nasdaq 100 is trading comfortably above its June lows. Is this an indication that Nasdaq sell’s off further? Or is it that Microsoft is oversold? It is tough to say, but the stock has only touched oversold levels on its RSI once to this point; it is probably the case that Microsoft still has further to drop before finding a bottom.

-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 investment.