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4/19/22
STOCKS – NFLX, DIS
MACRO – SPY, QQQ, TIP
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- RTM Exclusive: Apple May Be Heading Sharply Lower (Short-Term Options Idea)
- RTM: Stocks Haven’t Been This Expensive To Bonds In A Long Time (Daily Update)
- RTM: Rallies Should Be Short-Lived (Daily Update)
- RTM Exclusive: Banks Set A Negative Tone To Earnings Season
- RTM Tactical Update: The Fed Will Drain The Stock Market Of Excess Liquidity
- RTM Exclusive: Betting JPMorgan’s Decline Aren’t Over [Short-Term Options Idea]
- RTM Exclusive: Walmart Shares May Pullback Amid Weak Consumer (Short-Term Option Idea)
The S&P 500 rose by 1.6%, I couldn’t tell you what the catalyst was, but that is what happened. The only thing that made sense was that the turn was expected to happen given the options cycle playing out, which I mentioned over the weekend.
Typically we can rally for a few days or consolidation sideways following OPEX. Still, we have a lot of events coming up over the next two weeks that should require investors to look to buy puts, specifically ahead of the FOMC meeting on May 4.
S&P 500 (SPY)
On top of that, the S&P 500 rose to around 4,470 and found some stiff resistance. That resistance happened to be on the Fib grid. This resistance region is on the same trend line that has acted as resistance/support at the end of January, the end of February, the beginning of March, and now. So if we stop here, it makes total sense.
Anyway, the pattern in the S&P 500 is very unstable, and in fact, I think the algo’s are on repeat mode, as the chart shows below. If so, this whole rally should vanish with a push back down to 4,380 over the next day or so.
Real Yields
The 10-Yr TIP hit 0% today, and it probably has to go much higher than that. On Thursday, there will be a 5-yr TIP auction, which will help to push these rates even higher.
TIP ETF (TIP)
Meanwhile, the TIP ETF fell to $120.53 today and the lowest level since June 2020. I don’t see why this ETF can’t drop to $117. What was even stranger was that the TIP ETF was down sharply, and the QQQ was up sharply. Someone was way off base here today, and my guess is it wasn’t the bond market.
Netflix (NFLX)
The market is trading much lower after hours following Netflix’s horrible results. At this point, we can say the growth story is over. The company reported a new loss of 200k subscribers during the first quarter; estimates were for gains of 2.5 million. Meanwhile, the guidance was worse, guiding for a loss of 2 million subscribers in the second quarter versus forecasts for an increase of 2.4 million. It just doesn’t look good at this point; subscribers seem to be rejecting the recent price hikes. The stock is trading down 25% post-earnings.
Last week, I noted that the stock looked weak and that the second quarter is typically their worse quarter. But these results and guidance even exceeded my bearish expectations. The stock is currently trading at technical support at $260, and it seems highly likely this stock is going to fill the gap from January 2018 at $227. All gaps get filled, I guess.
Disney (DIS)
Disney is trading lower in symphony with Netflix as it should. It probably has further to fall as the stock is falling below support at $127, which I mentioned last night, and should now be on its way to $117.
Anyway, until 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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