8/18/22

STOCKS –  AMZN, TWLO, TSLA

\MACRO – SPY, QQQ, TIP

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Stocks managed to finish the day slightly higher, by 23 bps on the S&P 500. It was one of the more dull sessions of the summer, with the index pinned with the monthly options expiration tomorrow. The index options will expire on the opening, while stocks and ETFs will expire on the close. Most of the gamma, from what I can tell, will expire on the open with the S&P 500 index options. This should unleash the S&P 500 and the entire market to move more freely, from this static state.

I believe the S&P 500 is due to revert and see a significant portion of these gains vanish. There is a rising wedge pattern in the S&P 500 that has overstayed its welcome, in my opinion, and all we need is a solid move lower tomorrow to have that wedge break. I am targeting 3,950 for a number of reasons, including the massive gap that exist in that region, along with the now 61.8% retracement level that has been produced from the rally.

NASDAQ (QQQ)

A similar pattern is also present in the QQQ ETF, but instead of a rising wedge, there is a massive channel. Again, the QQQ is very close to breaking that lower bound of the channel, which could set up a steep decline to around $300, again at 61.8% retracement.

 

TIP

The TIP ETF moved up today after a strong 30-Yr TIP auction. The when-issued rate was 97 bps, and the high yield went out at 92 bps, so that caused the TIP yield curve to drop, which pushed the TIP ETF higher. That also helped to give technology sector and the NASDAQ a bit of a bid in the late afternoon.

Amazon (AMZN)

Amazon is trapped between its 200-day moving average and its ten day exponential moving average. Additionally, there is a very tough level of resistance, around $145. The RSI has turned lower, suggesting a loss of momentum, and the 200-day moving average should offer a stronger resistance level over the 10-Day EMA. It would be nice to see Amazon fill that gap at $123 over the next few weeks.

 

Tesla (TSLA)

There is a potential 2b top reversal pattern in Tesla. On August 16, the stock tried to take out the August 4 highs, and was rejected. Additionally, the RSI has turned lower as well, with the implication for the stock to fall back to roughly $750 over time.

Twilio (TWLO)

Twilio is very close to breaking a major support level at $80. I think Twilio could be a sign of what is to come if this stock breaks support. If support at $80 breaks, I think it can go to around $65, and it would probably signal the start of the next leg lower for the entire market, because there are number of once high-flying stock in a very similar position.

-Mike