Stocks May Drop Sharply on May 20, 2022

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5/19/22

STOCKS – AAPL, FB

MACRO – SPY, TIP

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Michael Kramer and the clients of Mott Capital Own AAPL

The S&P 500 finished the day lower by around 60 bps to make a new closing low in this downdraft at 3900.78. At this point, it seems like the market makers are just pinning the index to that round number for the opening print for tomorrow’s options expiration. Then after that, all hell can break loose; I’m joking to some degree.

S&P 500 (SPY)

The technical setup does not look favorable, and I wouldn’t say I like the consolidation candle today. There have been six occasions of this candle happening. Four of those times, the day after, the candle saw a big move in the same direction as the day before the consolidation/Doji candle. It doesn’t have to be a big down day, but I wouldn’t say I like the odds of it not being a down day.

Additionally, another flag pattern has formed on the S&P 500 5-minute chart. That would also point to lower prices and break below 3,860. I think based on the projection of the first leg down, it could even result in the index ultimately bottoming out around 3,700. That doesn’t mean it has to happen in one day, of course, but over a couple of weeks.

I also think we are now in Wave 5 down, as I noted yesterday, and based on that wave count; I think we are now starting a minor wave 3 of that wave five down.

TIP (TIP)

Based on what I saw, the 10-Year TIP auction didn’t appear to be strong, which caused the yield to surge. That sent the TIP ETF into reverse today after starting the day higher. The only good news for the bulls is that TIP ETF has been holding firm, offering a potential bright spot. However, the chart does not look good at this point.

Apple (AAPL)

Apple fell 2.5% on the day and closed below that $139 area I mentioned yesterday. The chart shows that the stock rallied with minimal interruption from June 3, 2021, to July 14, 2021, and that region where the stock moved higher doesn’t offer much in the way of technical support, which makes me think that those low $120 is likely to be the most likely stop.

Facebook (FB)

Facebook has been consolidating for months and has formed a diamond pattern on the daily chart. Typically diamonds are reversal patterns, but I’m not sure that is the case for Facebook. Sometimes these patterns can also be continuation patterns in my experience. We should know very soon because the shares are very close to breaking the uptrend, and if that happens, the stock will head for new lows.

So we will have to see what happens tomorrow.

-Mike

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. 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.