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Stocks Plunge On January 13 As Rate Hike Talks Heat Up

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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1/13/2022

STOCKS – AMZN, NVDA, MSFT

MACRO – SPY, QQQ

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MICHAEL KRAMER AND THE CLIENTS OF MOTT CAPITAL OWN MSFT

On Thursday, stocks fell sharply, with the S&P 500 falling by 1.4% to close at 4,650. Meanwhile, the NASDAQ 100 fell by 2.4%. The index started the day strong, but tumbled as more Fed governors seem to be joining the hawkish bandwagon for multiple rate hikes in 2022 to combat the rising inflation rates.

Despite all of this hawkish from the Fed governors bond markets are struggling to push yields higher. The big problem here is the message the bond market is sending is not easy to discern. The first reason is that rates globally are low and very much impact US rates.

The spread between the US and German 10-yr right now is 1.8%, and that makes owning a US 10 yr very attractive to a European investor. This was the primary reason I felt so strongly that the 10-year rate would not break above 1.77%. So far that has been the right call.

I tend to think we see will see a further curve flattening, and the 10-yr head back to 1.63%.

S&P 500 (SPY)

Anyway, the S&P 500 continues to work within the diamond pattern and today we got the drop that was needed to maintain that pattern. Tomorrow we get retail sales and it is forecast at 0.0% month over month, which is surprising to me considering it’s December’s reading. What is more surprising to me, is that the retail sales number is not adjusted for inflation, so a 0.0% is not good at all. I still think the S&P 500 is heading to 4,570 and then lower, eventually to 4,350.

Once the bottom of the diamond breaks the selling will accelerate dramatically.

Nasdaq (QQQ)

The Qs actually closed below the March 2021 uptrend for the first time. Following through tomorrow is bad news, with the next support level now at $372.

Microsoft (MSFT)

Microsoft fell 4% today, and I will be honest, I wasn’t able to watch this one today. My 7yr old daughter has COVID, and the older daughter is remote learning. So we are all quarantined in the house, I’m getting pulled in different directions throughout the day. The drop in Microsoft was surprising. The stock closed below the uptrend and once support breaks at $305 it will be on its way to $285.

Amazon (AMZN)

Amazon continues to trend lower along the downtrend. The long-term uptrend is firmly broken at this point, and the stock still has further to fall. I have a fair value of this stock around $2,800 based on a free-cash-flow multiple. That doesn’t seem out of the question.

 

Nvidia (NVDA)

Nvidia is just one giant descending triangle ready to break and fall to $230. It just needs to happen already. The RSI says it will.

-Mike

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