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September 28, 2021
Stocks – MU, GOOGL, AMD
Macro – SPY, YIELDS, VIX
Mike’s Reading The Markets (RTM) Premium Content – $45/MONTH OR $400/YEAR
- RTM: The Market Is The Middle Of Preparing For A More Hawkish Fed
- RTM – Value May Now Outperform Growth
- RTM Tactical Update: Nike And FedEx Fire The First Warning Shots
- Live Q&A Session Today At 1 PM ET
- RTM: VIX Crush Sending Stocks Up
- RTM Exclusive- GE Maybe Poised For A Big Rebound
- RTM- The Taper Is Coming “Soon”
- RTM Exclusive – AMD Nears A Massive Break Of Support
Not a great day for stocks with the S&P 500 falling by 2% and the Qs dropping 2.8%, even the Russell fell by 2.25%. The drop is all about the reality of last week now settling in, which centers around the Fed. The market is now adjusting to a Fed that will be removing QE over the next few months and, based on projections, could begin to tighten rates before the end of next year.
All you have to do is look at the big move higher in the 2-year, which is now trading at 30 bps. That says it all there. The further it rises, the more painful it will be in the stock market. The market now will need to reset to a tighter Fed, and given where valuations are; it could be significant and unpleasant.
More importantly, the market may even grow concerned that Fed is taking away QE as the economy slows, and that could become an all-out rejection of the Fed’s desire to cut back QE, creating a showdown similar to that of 2018. Except for this time, the market has to think about inflation concerns too.
Add to that what could be an earnings downgrade cycle, which has now started to show its head from companies like FedEx and Nike. Now you can throw in Micron too, which gave guidance that was much lower than expected. Suppose earnings estimates start turning more down and the PE multiple starts dropping. This creates a very painful experience as the market will need to fall faster than earnings revisions to bring the PE ratio down.
VIX (VIX)
It seems crystal clear that last week’s rally was a complete illusion driven by the crush in implied volatility. That did not happen today, at least; the VIX jumped by 24% to finish at 23.2, which, based on today’s close, is probably too low, and why you probably did get that end of implied crush. So there is plenty of room for the VIX to push higher if these drops in the S&P 500 continue at this pace.
S&P 500 (SPY)
It would appear that the S&P 500 has started its wave 3, and if that is correct, then the drop is far from over and could have a lot further to go based on the size of wave 1. For now, I’m watching for a dip to 4,320, with the potential of it dropping to 4,240.
Micron (MU)
Micron gave pretty bad fiscal first-quarter guidance. The stock is trading down to around $70. It needs to break $69 to see more downside. Based on the weak guidance, I think it would break $69, setting up a drop to $58.
AMD (AMD)
AMD was destroyed, falling nearly 7%, and back to support at around $101. A break of support sets up a drop to $94.50.
Alphabet (GOOGL)
Alphabet fell nearly 4% today and, more importantly, fell below an uptrend that started in January. There is some support around $2,570.
See you tomorrow.
Mike
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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.
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