Stocks Plunge As The Machines Go Wild, With More Pain on The Way
Stocks fell sharply lower on August 5 as the machines go wild. If one thing seems clear, there is likely more pain on the way.

Stocks Plunge As The Machines Go Wild, With More Pain on The Way

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.

Otherwise, enjoy the column!

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August 5 – Stock mentions: SPY, AMZN, AAPL, BABA, AMD, BA

Michael Kramer and the clients of Mott Capital own AAPL

And the machines go wild!

How much of today’s sell-off was a machine-driven algo’s gone wild sell-off versus true China trade war concerns we will never know. But what I do know is that the market moves faster than ever and what used to takes weeks and months, now takes hours and days. While it may be hard to believe the S&P 500 was around 3,020 just last Monday, today it touched almost 2,820.  That is nearly a 6.2% decline in a week. Premium content: Retest Of June Lows Seems Possible

For as beautiful as ETF and index investing is, today’s wild move lower can be the result.  It is a vicious negative cycle: the ETF’s NAV goes lower; therefore the ETF sells stocks; then stocks fall, then the NAV of the ETF falls, then the ETF sells stocks, and so on.  Not to mention that Algo’s rule the land, and they all follow some kind model, so if the model says to sell, that is what happens. I guess you have to ask yourself if you agree or disagree with the “model.”

The good news is that the S&P finished the day down about 3%, and that means we need to fall about 4.25% more to see a 10% correction. Which at this pace could be by mid-week. Not outside of the realm of possibility. I had noted earlier today in a mid-day update that a close below 2,880 likely sets up a retest of the June lows of around 2,730.

S&P 500 (SPY)

At the moment, 2,730 seems possible. Hey, it gets us to 9.7% off the July high.

spx, S&P 500


The VIX broke above resistance today at 22, and that likely means it goes higher towards 26.  It means more downside risk for equities. vix

Apple (AAPL)

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AAPL fell today, as it should. Now that AAPLfell below $194, we need to think that perhaps $182 is possible.

apple, aapl


Under normal circumstances, AMD appears it has formed a double or even triple top. The stock fell below support at $28.50, and it could be ready to move much lower, perhaps to $25.70.

My one hesitation is that today doesn’t seem as if it was normal.

AMD, amd

Amazon (AMZN)

AMZN did fall below support at $1,770, and that means $1,700 could be coming.

Amazon, amzn

Alibaba (BABA)

Alibaba needs to hold $151, or it could fall to around $141. I don’t see how it will hold $151, but you never know.

alibaba, baba

Boeing (BA)

Boeing uptrend appears broken, and now $317 is coming.

boeing, ba

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

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